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Short Straddle
oscillateShort Straddle is a range bound strategy that aims to make money from sideways market and falling volatility
Example:
| Instrument | Qty | Price |
|---|---|---|
| SELL NIFTY 30-Jun-26 24100 CE | 65 | 101.25 |
| SELL NIFTY 30-Jun-26 24100 PE | 65 | 108.2 |
When To Execute?
Short Straddle is a range bound strategy. It�s idle to execute Short Straddle for near month expiry in order to benefit from faster time decay
Trade
Sell 1 lot ATM Call and Sell 1 lot ATM Put with same expiration
Advantages
Ideally profitability is higher from range bound stock. Comparatively high yielding income strategy
Disadvantages
Uncapped Risk on either side
Hedging cost would be high if stock gives any directional movement
Maximum Profit
Maximum Profit is limited to total premium received. Its maximum at the strike where Short Straddle is created.
Maximum Loss
Short straddle is open to unlimited risk if the stock moves above higher BEP( Strike +total premium) or below lower BEP ( Strike - total premium)