Short Straddle

A Short Straddle involves selling a call option and a put option at the same strike price and expiry. It profits from minimal price movement.

• Ideal for low-volatility conditions, where price movement is expected to remain stable.
• Selling ATM options maximizes premium income.
• Risk is unlimited if the price moves significantly in either direction.
• Profits are limited to the combined premium received from the options.

Example:

• NIFTY trading at 18,000.
• Sell 18,000 Call at ₹200 and 18,000 Put at ₹150 (lot size = 50).
• Outcome:
  1. If NIFTY stays at 18,000 at expiry:
     • Both options expire worthless.
     • Net profit = ₹17,500.
  2. If NIFTY rises to 18,400 at expiry:
     • Call loss = ₹200 × 50 = ₹10,000.
     • Put expires worthless.
     • Net loss = ₹10,000 − ₹17,500 = ₹7,500.
  3. If NIFTY falls to 17,600 at expiry:
     • Put loss = ₹200 × 50 = ₹10,000.
     • Call expires worthless.
     • Net loss = ₹10,000 − ₹17,500 = ₹7,500.