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Guts
eitherwaysLong Guts like Strangle is a volatility strategy that aims to make money either ways from a stock/index soaring up or plummeting down
Example:
| Instrument | Qty | Price |
|---|---|---|
| BUY NIFTY 30-Jun-26 21100 CE | 65 | 3007.25 |
| BUY NIFTY 30-Jun-26 27100 PE | 65 | 0 |
When To Execute?
Outlook is Directional Neutral in Guts. You are looking forward for increasing volatility with stock price moving explosively in either direction
Trade
Buy 1 lot ITM Call and Buy 1 lot ITM Put with same expiration. Expiry is at distant away to avoid exponential time decay that happens as expiration approaches.
Advantages
Being Directional Neutral, you can participate in either ways volatility jumps
Ideal to trade Guts would be when you are expecting wider movement in stocks
Disadvantages
Time decay is harmful to Guts
Time day accelerates exponentially in last week of expiry
Its expensive to built Guts as both options are ITM
Maximum Profit
Maximum Profit is unlimited beyond Lower BEP (Put Strike minus total premium) or Higher BEP (Call Strike plus total premium).
Maximum Loss
It is Net debit Strategy as you have bought both Call & Put. Maximum Loss is limited to total premium paid