A three-pronged currency option combination that involves the simultaneous buying of an at-the-money call and selling of both an out-of-the-money call and an out-of-the-money put. All three options typically have the same maturity date and one notional amount in a specific currency.

This option strategy is almost costless as the purchase of the at-the-money option is financed by selling the out-of-the-money options. Sometimes, the strike prices may need to be adjusted to fine-tune the risk-reward requirements. The short seagull allows investors to participate in a declining currency while avoiding losses within a specific trading range. However, the holder of this option gives up all potential benefits of currency depreciation below the short put’s strike. Furthermore, this option exposes the holder to unlimited losses if the currency trades above the short call’s strike.

This strategy is opposed to a long seagull strategy as two of the three legs are sold and just one is purchased.