SOFI strangle: the breakevens nobody quotes

Both legs are pure extrinsic value, so the strangle is a leveraged bet that SOFI travels further than 50% implied vol says it will over 27 days. Between the strikes at expiry, both expire worthless and you lose the entire $71.

The payoff is a valley: flat max loss between $15 and $18, then linear gains once past the breakevens at $14.29 and $18.71. Max profit is unlimited.

Compared with the straddle at the same expiry, you pay less and need more. That is not a free improvement — it is a different bet, with a lower probability of profit (34% here) and a bigger multiple when it works.

Gamma is lower than a straddle's while the stock sits between the strikes, so the position responds sluggishly to the first part of a move and then accelerates. Traders consistently underestimate that lag.

Max loss $71 is the base case, not the tail. The stock finishing anywhere between $15 and $18 — the range it spends most of its life in — wipes out the position.

Double theta with no offset: two long options bleeding simultaneously. Over 27 days that decay is the single largest determinant of the outcome if the move is late.

The decay is relentless and it is front-loaded against you in exactly the window most retail traders hold. A long-vol position with no exit plan is a slow, fully-predictable loss.

Cheap in dollars, expensive in vol points. A straddle costs little enough that position sizing is never the constraint, which is exactly how traders end up with far more vega than they intended across a dozen contracts.

SOFI's Aug 28 strikes are $0.5 apart near the money (3.07% of spot). Coarse enough that the strike you want frequently does not exist, and the nearest rung is a different trade. 49k contracts of open interest on Aug 28 is workable around the money and thin in the wings — width costs more here than the ladder suggests. 20 strikes on that expiry — 48% of the board — carry prints that agree with their own implied volatility and hold up across the ladder, and those are the strikes priced here. Adequate at the near strikes, thin beyond them; the bid-ask is a large fraction of the premium at every strike.

Skew is inverted: the 25-delta CALL implies 6.0% more vol than the put. That is the market pricing upside risk above downside risk — a squeeze, a takeover rumour, or a crowded short. Owning upside on an inverted skew means paying the expensive side of the surface, which is worth knowing before you buy the call. The term structure is in contango: the back month implies 2.2% more vol than the front. Calm now, uncertainty later — which rewards selling the front month and makes the back month an expensive thing to own outright.

At 50% ATM implied vol, the Aug 28 options are pricing a one-standard-deviation move of $2.22 over 27 days — roughly −13.6% to +13.6%, or $14.09 to $18.53. The implied move is the market's bid for the exact thing this structure is long. Buying it at fair value and hoping is not a strategy.

The SOFI-specific failure mode: Ignoring costs. A $0.02 slip on a $0.15 credit is thirteen percent of the trade, and no delta table shows you that.