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Short Strangle
oscillateShort Strangle is a range bound strategy that aims to make money from sideways market and falling volatility
Example:
| Instrument | Qty | Price |
|---|---|---|
| SELL NIFTY 06-Oct-26 22500 CE | 65 | 106.9 |
| SELL NIFTY 06-Oct-26 22400 PE | 65 | 99.3 |
When To Execute?
Short Strangle is a range bound strategy. Its idle to execute Short Strangle for near month expiry in order to benefit from faster time decay
Trade
Sell 1 lot OTM Call and Sell 1 lot OTM Put with same expiration.
Advantages
1.Profit from range bound stock 2. Comparatively high yielding income strategy but less than Short Straddle3. Provides broader range of profitability 4. Time decay is beneficial
Disadvantages
1. Uncapped Risk on either side 2. Hedging cost would be high if stock gives any directional movement
Maximum Profit
Maximum Profit is limited to total premium received. Profit is maximum between both the strike
Maximum Loss
Short Strangle is open to unlimited risk if the stock moves above higher BEP( Strike +total premium) or below lower BEP ( Strike - total premium)