ALRM Strangle Strategy
ALRM (Alarm.com Holdings, Inc.), in the Technology sector, (Software - Application industry), listed on NASDAQ.
Alarm.com Holdings, Inc. provides cloud-based solutions for smart residential and commercial properties in the United States and internationally. It operates in two segments, Alarm.com and Other. The company provides interactive security solutions to control and monitor their security systems, as well as connected security devices, including door locks, motion sensors, door locks, garage doors, Internet of Things, thermostats, and video cameras; and video monitoring solutions, such as video analytics, live streaming, video doorbell, video clips, video alerts, continuous high definition recording, and commercial video surveillance solutions. It also offers intelligent automation and energy management solutions comprising scenes button; smart thermostat schedules; responsive savings; precision comfort; energy usage monitoring; heating, ventilation, and air conditioning monitoring services; whole home water safety solutions; geo-services; and demand response programs. In addition, the company provides commercial solutions, such as daily safeguards, commercial grade video, energy savings, protection for valuables and inventory, temperature monitoring, multi-site management and access control, early identification, simple to use, professionally supported, and easy to maintain. Further, it offers service provider solutions, including a permission-based online portal that offers account management, sales, marketing, training, and support tools; sales, marketing, and training services; and home builder programs, as well as wellness solutions.
ALRM (Alarm.com Holdings, Inc.) trades in the Technology sector, specifically Software - Application, with a market capitalization of approximately $2.09B, a trailing P/E of 16.38, a beta of 0.79 versus the broader market, a 52-week range of 41.49-60.25, average daily share volume of 482K, a public-listing history dating back to 2015, approximately 2K full-time employees. These structural characteristics shape how ALRM stock options price implied volatility around earnings windows, capital events, and macro-driven sector rotations.
A beta of 0.79 places ALRM roughly in line with broader market moves, so the strategy payoff and realized volatility track the index-equivalent baseline.
What is a strangle on ALRM?
A long strangle buys an OTM call and an OTM put at offset strikes, cheaper than a straddle but requiring a larger underlying move to profit since both wings start out-of-the-money.
Current ALRM snapshot
As of May 15, 2026, spot at $42.54, ATM IV 41.30%, IV rank 13.65%, expected move 11.84%. The strangle on ALRM below is built from the same end-of-day chain, with strikes snapped to listed contracts and premiums pulled from the bid/ask midpoint at a 217-day expiry.
Why this strangle structure on ALRM specifically: ALRM IV at 41.30% is on the cheap side of its 1-year range, which favors premium-buying structures like a ALRM strangle, with a market-implied 1-standard-deviation move of approximately 11.84% (roughly $5.04 on the underlying). The 217-day window matched to the front-month expiry keeps theta exposure bounded while still capturing the post-snapshot move; longer-dated ALRM expiries trade a higher absolute premium for lower per-day decay. Position sizing on ALRM should anchor to the underlying notional of $42.54 per share and to the trader's directional view on ALRM stock.
ALRM strangle setup
The ALRM strangle below is built from the end-of-day chain, with each option leg priced at the bid/ask midpoint of its listed strike. With ALRM near $42.54, the first option leg uses a $45.00 strike; additional legs (when the strategy has them) anchor to spot-relative offsets. Premiums come from the bid/ask midpoint on the listed ALRM chain at a 217-day expiry; the cross-strike IV skew is reflected directly in the per-leg values rather than approximated. Quantity sizing assumes one contract per option leg (or 100 ALRM shares for the stock leg in covered calls and collars).
| Action | Type | Strike / Basis | Premium (est) |
|---|---|---|---|
| Buy 1 | Call | $45.00 | $4.53 |
| Buy 1 | Put | $40.00 | $3.05 |
ALRM strangle risk and reward
- Net Premium / Debit
- -$757.50
- Max Profit (per contract)
- Unbounded
- Max Loss (per contract)
- -$757.50
- Breakeven(s)
- $32.43, $52.58
- Risk / Reward Ratio
- Unbounded
Upside max profit is unbounded; downside max profit is bounded at the put strike minus the combined debit (reached at zero). Max loss equals the combined debit times 100 (reached anywhere between the two OTM strikes). Two breakevens at call-strike plus debit and put-strike minus debit.
ALRM strangle payoff curve
Modeled P&L at expiration across a range of underlying prices for the strangle on ALRM. Each row is one sampled price point from the computed payoff curve; the full curve uses 200 price points internally before being summarized into 10 rows here.
| Underlying Price | % From Spot | P&L at Expiration |
|---|---|---|
| $0.01 | -100.0% | +$3,241.50 |
| $9.41 | -77.9% | +$2,301.03 |
| $18.82 | -55.8% | +$1,360.56 |
| $28.22 | -33.7% | +$420.08 |
| $37.63 | -11.5% | -$520.39 |
| $47.03 | +10.6% | -$554.14 |
| $56.44 | +32.7% | +$386.33 |
| $65.84 | +54.8% | +$1,326.81 |
| $75.25 | +76.9% | +$2,267.28 |
| $84.65 | +99.0% | +$3,207.75 |
When traders use strangle on ALRM
Strangles on ALRM are the cheaper cousin of the straddle - traders use them when they want a large directional move but are willing to give up the inner-strike sensitivity in exchange for a lower up-front debit on the ALRM chain.
ALRM thesis for this strangle
The market-implied 1-standard-deviation range for ALRM extends from approximately $37.50 on the downside to $47.58 on the upside. A ALRM long strangle is the OTM cousin of the straddle: lower up-front cost but the underlying has to travel further past either OTM strike before the position turns profitable at expiration. Current ALRM IV rank near 13.65% sits in the lower third of its 1-year distribution, where IV often re-expands toward the mean; this favors premium-buying structures and disadvantages premium-selling structures on ALRM at 41.30%. As a Technology name, ALRM options can move on sector-level news flow (peer earnings, regulatory updates, industry-specific macro data) in addition to ALRM-specific events.
ALRM strangle positions are structurally neutral / high-volatility (long premium, OTM); the modeled P&L assumes European-style exercise at expiration and ignores early assignment, transaction costs, dividends paid before expiry on the stock leg (when present), and the bid-ask spread on the listed chain. ALRM positions also carry Technology sector concentration risk; news flow inside the sector (peer earnings, regulatory shifts, supply-chain headlines) can move ALRM alongside the broader basket even when ALRM-specific fundamentals are unchanged. Always rebuild the position from current ALRM chain quotes before placing a trade.
Frequently asked questions
- What is a strangle on ALRM?
- A strangle on ALRM is the strangle strategy applied to ALRM (stock). The strategy is structurally neutral / high-volatility (long premium, OTM): A long strangle buys an OTM call and an OTM put at offset strikes, cheaper than a straddle but requiring a larger underlying move to profit since both wings start out-of-the-money. With ALRM stock trading near $42.54, the strikes shown on this page are snapped to the nearest listed ALRM chain strike and the premiums come straight from the end-of-day bid/ask midpoint.
- How are ALRM strangle max profit and max loss calculated?
- Upside max profit is unbounded; downside max profit is bounded at the put strike minus the combined debit (reached at zero). Max loss equals the combined debit times 100 (reached anywhere between the two OTM strikes). Two breakevens at call-strike plus debit and put-strike minus debit. For the ALRM strangle priced from the end-of-day chain at a 30-day expiry (ATM IV 41.30%), the computed maximum profit is unbounded per contract and the computed maximum loss is -$757.50 per contract. Live intraday quotes will differ as the chain moves through the trading session.
- What is the breakeven for a ALRM strangle?
- The breakeven for the ALRM strangle priced on this page is roughly $32.43 and $52.58 at expiration, derived from end-of-day chain premiums. Breakeven is the underlying price at which the strategy's P&L crosses zero ignoring transaction costs and assignment risk. The current ALRM market-implied 1-standard-deviation expected move is approximately 11.84%; if the move sits well outside the breakeven distance, the structure's risk-reward becomes correspondingly tighter.
- When should you consider a strangle on ALRM?
- Strangles on ALRM are the cheaper cousin of the straddle - traders use them when they want a large directional move but are willing to give up the inner-strike sensitivity in exchange for a lower up-front debit on the ALRM chain.
- How does current ALRM implied volatility affect this strangle?
- ALRM ATM IV is at 41.30% with IV rank near 13.65%, which is on the low end of its 1-year range. Premium-buying structures (long call, long put, debit spreads) are relatively cheap in this regime; premium-selling structures collect less credit per unit risk.