CMI Strangle Strategy
CMI (Cummins Inc.), in the Industrials sector, (Industrial - Machinery industry), listed on NYSE.
Cummins Inc. is a global innovator in power solutions, responsible for the design, manufacturing, distribution, and maintenance of a broad array of diesel and natural gas engines, alongside cutting-edge electric and hybrid powertrains, and associated components. Its operations are strategically divided into five segments: Engine, Distribution, Components, Power Systems, and New Power. The company's extensive engine portfolio, available under the Cummins brand and others, powers a vast range of heavy and medium-duty applications, including commercial trucks, buses, recreational vehicles, light-duty automobiles, construction and mining equipment, marine vessels, railway systems, oil and gas operations, defense, and agriculture. Complementing these engines, Cummins provides both new and remanufactured parts and comprehensive servicing. Beyond its core engine offerings, Cummins delivers sophisticated power generation systems, high-horsepower engines, and specialized application engineering. It also offers custom-designed assemblies, retail and wholesale aftermarket components, and expert repair services conducted both in-shop and on-site.
CMI (Cummins Inc.) trades in the Industrials sector, specifically Industrial - Machinery, with a market capitalization of approximately $88.02B, a trailing P/E of 32.44, a beta of 1.25 versus the broader market, a 52-week range of 389.52-737.76, average daily share volume of 982K, a public-listing history dating back to 1947, approximately 67K full-time employees. These structural characteristics shape how CMI stock options price implied volatility around earnings windows, capital events, and macro-driven sector rotations.
A beta of 1.25 places CMI roughly in line with broader market moves, so the strategy payoff and realized volatility track the index-equivalent baseline. CMI pays a dividend, which adjusts put-call parity and shifts the ex-dividend pricing across the listed chain.
What is a strangle on CMI?
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.
CMI snapshot
As of August 14, 2026, spot at $631.75, ATM IV 32.70%, IV rank 35.19%, expected move 9.37%. The strangle on CMI below is built from the August 14, 2026 end-of-day chain, with strikes snapped to listed contracts and premiums pulled from the bid/ask midpoint at a 35-day expiry.
Why this strangle structure on CMI specifically: CMI IV at 32.70% is mid-range versus its 1-year history, so strategy selection should anchor more to the directional thesis than to the IV regime, with a market-implied 1-standard-deviation move of approximately 9.37% (roughly $59.23 on the underlying). The 35-day window matched to the front-month expiry keeps theta exposure bounded while still capturing the post-snapshot move; longer-dated CMI expiries trade a higher absolute premium for lower per-day decay. Position sizing on CMI should anchor to the underlying notional of $631.75 per share and to the trader's directional view on CMI stock.
CMI strangle setup
The CMI strangle below is built from the August 14, 2026 end-of-day chain, with each option leg priced at the bid/ask midpoint of its listed strike. With CMI at $631.75 on that close, the first option leg uses a $660.00 strike; additional legs (when the strategy has them) anchor to spot-relative offsets. Premiums come from the bid/ask midpoint on the listed CMI chain at a 35-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 CMI shares for the stock leg in covered calls and collars).
| Action | Type | Strike / Basis | Premium (est) |
|---|---|---|---|
| Buy 1 | Call | $660.00 | $14.25 |
| Buy 1 | Put | $600.00 | $11.90 |
CMI strangle risk and reward
- Net Premium / Debit
- -$2,615.00
- Max Profit (per contract)
- Unbounded
- Max Loss (per contract)
- -$2,615.00
- Breakeven(s)
- $573.85, $686.15
- 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.
CMI strangle payoff curve
Modeled P&L at expiration across a range of underlying prices for the strangle on CMI. 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% | +$57,384.00 |
| $139.69 | -77.9% | +$43,415.77 |
| $279.37 | -55.8% | +$29,447.54 |
| $419.06 | -33.7% | +$15,479.31 |
| $558.74 | -11.6% | +$1,511.08 |
| $698.42 | +10.6% | +$1,227.16 |
| $838.10 | +32.7% | +$15,195.39 |
| $977.79 | +54.8% | +$29,163.62 |
| $1,117.47 | +76.9% | +$43,131.85 |
| $1,257.15 | +99.0% | +$57,100.08 |
When traders use strangle on CMI
Strangles on CMI 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 CMI chain.
CMI thesis for this strangle
The market-implied 1-standard-deviation range for CMI extends from approximately $572.52 on the downside to $690.98 on the upside. A CMI 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 CMI IV rank near 35.19% is mid-range against its 1-year distribution, so the IV signal is neutral; the strangle thesis on CMI should anchor more to the directional view and the expected-move geometry. As a Industrials name, CMI options can move on sector-level news flow (peer earnings, regulatory updates, industry-specific macro data) in addition to CMI-specific events.
CMI 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. CMI positions also carry Industrials sector concentration risk; news flow inside the sector (peer earnings, regulatory shifts, supply-chain headlines) can move CMI alongside the broader basket even when CMI-specific fundamentals are unchanged. Always rebuild the position from current CMI chain quotes before placing a trade.
Frequently asked questions
- What is a strangle on CMI?
- A strangle on CMI is the strangle strategy applied to CMI (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 CMI stock at $631.75 on the August 14, 2026 close, the strikes shown on this page are snapped to the nearest listed CMI chain strike and the premiums come straight from that session's bid/ask midpoint.
- How are CMI 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 CMI strangle priced from the August 14, 2026 end-of-day chain at a 30-day expiry (ATM IV 32.70%), the computed maximum profit is unbounded per contract and the computed maximum loss is -$2,615.00 per contract. Live intraday quotes will differ as the chain moves through the trading session.
- What is the breakeven for a CMI strangle?
- The breakeven for the CMI strangle priced on this page is roughly $573.85 and $686.15 at expiration, derived from the August 14, 2026 end-of-day chain's premiums. Breakeven is the underlying price at which the strategy's P&L crosses zero ignoring transaction costs and assignment risk. The CMI market-implied 1-standard-deviation expected move in the same options snapshot is approximately 9.37%; if the move sits well outside the breakeven distance, the structure's risk-reward becomes correspondingly tighter.
- When should you consider a strangle on CMI?
- Strangles on CMI 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 CMI chain.
- How does current CMI implied volatility affect this strangle?
- CMI ATM IV is at 32.70% with IV rank near 35.19%, which is mid-range against its 1-year history. Strategy selection depends more on directional thesis and expected move than on a strong IV signal.