1. What it is
Long guts: buy a lower-strike call and a higher-strike put at one expiration. Short guts: sell both. The strikes overlap rather than leave a gap.
2. Why use it
Combine an in-the-money call and put, embedding intrinsic value in the entry price.
3. How the numbers work
View example
- Buy 1 × Call · Strike 95
- Buy 1 × Put · Strike 105
All option legs have the same expiration.
- Option premium paid
- 13
- Expiration breakeven
- 92 / 108
- Maximum expiration profit
- Theoretically unlimited
- Maximum expiration loss
- 3
- Underlying at expiration 100 → Loss 3
- Underlying at expiration 110 → Profit 2
4. How it changes
The long version has positive gamma and vega and usually negative theta. Its large premium includes intrinsic value and should not be confused with all-at-risk time value.
5. What to watch for
For long guts, maximum expiration loss is debit minus the strike gap. Short guts has unlimited upside loss and large downside exposure.
In-the-money short options may be assigned early. The strike gap explains why the long version's maximum loss is smaller than the gross premium.
Examples use illustrative entry prices and amounts per underlying unit, before costs. Contract amounts require the contract multiplier. Expiration payoffs assume the illustrated legs remain intact; earlier position values and exercise or assignment outcomes can differ.