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Short Guts
oscillateShort Guts is a range bound Strategy wherein you don�t expect any movement in stock or fall in volatility
Example:
| Instrument | Qty | Price |
|---|---|---|
| SELL NIFTY 30-Jun-26 21100 CE | 65 | 3007.25 |
| SELL NIFTY 30-Jun-26 27100 PE | 65 | 0 |
When To Execute?
Short Guts is exposed to unlimited risk if the underlying give explosive movement. It entails huge net credit as we are selling booth ITM call & ITM Put
Trade
Sell 1 lot ITM Call and Sell 1 lot ITM Put with same expiration. Its idle to choose near term option as time decay gain will be maximum
Advantages
Profit from Range bound stock
High yielding income strategy
High premium as both options are ITM.Time decay is beneficial to Guts
Time day accelerates exponentially in last week of expiry
Disadvantages
Uncapped Risk on either side
Hedging cost would be high if stock gives any directional movement
Maximum Profit
Maximum Profit is limited to the net credit received for selling the call and Put minus the difference between the strike
Maximum Loss
Maximum risk on the strategy is unlimited if the stock rises above the breakeven point or falls below the breakeven point