Short Strangle

A Short Strangle involves selling a call option and a put option at different strike prices but the same expiry. It profits from minimal price movement within the range.

• Ideal for low-volatility conditions, where the price is expected to stay range-bound.
• Selling OTM options balances premium income and risk.
• Risk is significant if the price moves beyond the range of the strike prices.
• Profits are limited to the combined premium received.

Example:

• NIFTY trading at 18,000.
• Sell 18,200 Call at ₹100 and 17,800 Put at ₹90 (lot size = 50).
• Outcome:
  1. If NIFTY stays between 18,200 and 17,800 at expiry:
     • Both options expire worthless.
     • Net profit = ₹9,500.
  2. If NIFTY rises to 18,400 at expiry:
     • Call loss = ₹200 × 50 = ₹10,000.
     • Put expires worthless.
     • Net loss = ₹10,000 − ₹9,500 = ₹500.
  3. If NIFTY falls to 17,600 at expiry:
     • Put loss = ₹200 × 50 = ₹10,000.
     • Call expires worthless.
     • Net loss = ₹10,000 − ₹9,500 = ₹500.