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Is the following table for a short (top) straddle correct?

$K\equiv \text{Strike price}$

$S_T\equiv \text{Stock price at time T}$

\begin{array}{c|c|c|c} \text{Range of} & \text{Payoff} & \text{Payoff} & \text{Total}\\ \text{stock price} & \text{from call} & \text{from put} & \text{payoff}\\ \hline S_T\le K & S_T-K & 0 & S_T-K\\ S_T\gt K & 0 & K-S_T & K-S_T \end{array}

Bernhard Listing
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1 Answers1

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No, you lose $S_T-K$ on the short call when $S_T >K$ and lose $K-S_T$ on the short put when $S_T<K.$ The total payoff can be written more compactly as $-|S_T-K|.$

spaceisdarkgreen
  • 58,508