KRP Strangle Strategy
KRP (Kimbell Royalty Partners, LP), in the Energy sector, (Oil & Gas Exploration & Production industry), listed on NYSE.
Kimbell Royalty Partners, LP, together with its subsidiaries, acquires and owns mineral and royalty interests in oil and natural gas properties in the United States. As of December 31, 2021, it owned mineral and royalty interests in approximately 11.4 million gross acres and overriding royalty interests in approximately 4.7 million gross acres. The company's mineral and royalty interests are located in 28 states and include ownership in approximately 122,000 gross wells, including approximately 46,000 wells in the Permian Basin. It serves as the general partner of the company. The company was founded in 2013 and is based in Fort Worth, Texas.
KRP (Kimbell Royalty Partners, LP) trades in the Energy sector, specifically Oil & Gas Exploration & Production, with a market capitalization of approximately $1.45B, a trailing P/E of 19.17, a beta of 0.28 versus the broader market, a 52-week range of 11.31-15.65, average daily share volume of 805K, a public-listing history dating back to 2017, approximately 23 full-time employees. These structural characteristics shape how KRP stock options price implied volatility around earnings windows, capital events, and macro-driven sector rotations.
A beta of 0.28 indicates KRP has historically moved less than the broader market, dampening realized volatility and producing tighter expected-move bands per unit of dollar exposure. KRP pays a dividend, which adjusts put-call parity and shifts the ex-dividend pricing across the listed chain.
What is a strangle on KRP?
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 KRP snapshot
As of May 14, 2026, spot at $15.30, ATM IV 14.00%, IV rank 5.64%, expected move 4.01%. The strangle on KRP 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 35-day expiry.
Why this strangle structure on KRP specifically: KRP IV at 14.00% is on the cheap side of its 1-year range, which favors premium-buying structures like a KRP strangle, with a market-implied 1-standard-deviation move of approximately 4.01% (roughly $0.61 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 KRP expiries trade a higher absolute premium for lower per-day decay. Position sizing on KRP should anchor to the underlying notional of $15.30 per share and to the trader's directional view on KRP stock.
KRP strangle setup
The KRP 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 KRP near $15.30, the first option leg uses a $16.07 strike; additional legs (when the strategy has them) anchor to spot-relative offsets. Premiums come from the bid/ask midpoint on the listed KRP 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 KRP shares for the stock leg in covered calls and collars).
| Action | Type | Strike / Basis | Premium (est) |
|---|---|---|---|
| Buy 1 | Call | $16.07 | N/A |
| Buy 1 | Put | $14.54 | N/A |
KRP strangle risk and reward
- Net Premium / Debit
- N/A
- Max Profit (per contract)
- Unbounded
- Max Loss (per contract)
- Unbounded
- Breakeven(s)
- None on modeled curve
- Risk / Reward Ratio
- N/A
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.
KRP strangle payoff curve
Modeled P&L at expiration across a range of underlying prices for the strangle on KRP. 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.
When traders use strangle on KRP
Strangles on KRP 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 KRP chain.
KRP thesis for this strangle
The market-implied 1-standard-deviation range for KRP extends from approximately $14.69 on the downside to $15.91 on the upside. A KRP 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 KRP IV rank near 5.64% 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 KRP at 14.00%. As a Energy name, KRP options can move on sector-level news flow (peer earnings, regulatory updates, industry-specific macro data) in addition to KRP-specific events.
KRP 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. KRP positions also carry Energy sector concentration risk; news flow inside the sector (peer earnings, regulatory shifts, supply-chain headlines) can move KRP alongside the broader basket even when KRP-specific fundamentals are unchanged. Always rebuild the position from current KRP chain quotes before placing a trade.
Frequently asked questions
- What is a strangle on KRP?
- A strangle on KRP is the strangle strategy applied to KRP (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 KRP stock trading near $15.30, the strikes shown on this page are snapped to the nearest listed KRP chain strike and the premiums come straight from the end-of-day bid/ask midpoint.
- How are KRP 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 KRP strangle priced from the end-of-day chain at a 30-day expiry (ATM IV 14.00%), the computed maximum profit is unbounded per contract and the computed maximum loss is unbounded per contract. Live intraday quotes will differ as the chain moves through the trading session.
- What is the breakeven for a KRP strangle?
- The breakeven for the KRP strangle priced on this page is no defined breakeven on the modeled curve 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 KRP market-implied 1-standard-deviation expected move is approximately 4.01%; if the move sits well outside the breakeven distance, the structure's risk-reward becomes correspondingly tighter.
- When should you consider a strangle on KRP?
- Strangles on KRP 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 KRP chain.
- How does current KRP implied volatility affect this strangle?
- KRP ATM IV is at 14.00% with IV rank near 5.64%, 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.