Sl.No. Strategy Name Market Outlook Primary Objective Risk Level Profit Potential Loss Potential Strike Price…
Long Strangle
A Long Strangle involves buying a call option and a put option at different strike prices but the same expiry. It profits from significant price movement in either direction.
- Ideal for high-volatility conditions, where a large price move is expected but at a lower cost than a straddle.
- Buying OTM options reduces the upfront premium cost.
- Risk is limited to the premium paid for both options.
- Profits occur if the price moves beyond the breakeven points on either side.
Example:
- NIFTY trading at 18,000.
- Buy 18,200 Call at ₹100 and 17,800 Put at ₹90 (lot size = 50).
- Outcome:
- If NIFTY rises to 18,400 at expiry:
- Call gain = ₹200 × 50 = ₹10,000.
- Put expires worthless.
- Net profit = ₹10,000 − ₹9,500 = ₹500.
- If NIFTY falls to 17,600 at expiry:
- Put gain = ₹200 × 50 = ₹10,000.
- Call expires worthless.
- Net profit = ₹10,000 − ₹9,500 = ₹500.
- If NIFTY stays between 18,200 and 17,800:
- Both options expire worthless.
- Net loss = ₹9,500.
- If NIFTY rises to 18,400 at expiry: