Module 6 Option Strategies

Chapter 12

The Long & Short Strangle


12.1 – Background

If you have understood the straddle, then understanding the ‘Strangle’ is quite straightforward. For all practical purposes, the thought process behind the straddle and strangle is quite similar. Strangle is an improvisation over the straddle, mainly to reduce the cost of implementation. Let me explain this further.

Consider this – Nifty is trading at 5921, which would make 5900 the ATM strike. If you were to set up the long straddle here, you would be required to buy the 5900 CE and 5900 PE. The premiums for both these options are 66 and 57 respectively.

Net cash outlay = 66 + 57 = 123

Upper breakeven = 5921+123 = 6044

Lower breakeven = 5921 – 123 = 5798

Therefore to set up a straddle, you spend 123 and the breakeven on either side is 2.07% away.  As you know the straddle is delta neutral, meaning the strategy is insulated to the directional movement of the market. The idea here is that you know that the market will move to a large extent, but the direction is unknown.

Consider this – from your research you know that the market will move (direction unknown) hence you have set up the straddle. However the straddle requires you to make an upfront payment of 123.

How would it be if you were to set up a market neutral strategy – similar to the straddle, but at a much lower cost?

Well, the ‘Strangle’ does just that.


12.2 – Strategy Notes

The strangle is an improvisation over the straddle. The improvisation mainly helps in terms of reduction of the strategy cost, however as a tradeoff the points required to breakeven increases.

In a straddle you are required to buy call and put options of the ATM strike. However the strangle requires you to buy OTM call and put options. Remember when compared to the ATM strike, the OTM will always trade cheap, therefore this implies setting up a strangle is cheaper than setting up a straddle.

Let’s take an example to explain this better –

Nifty is trading at 7921, to set up a strangle we need to buy OTM Call and Put options. Do note, both the options should belong to the same expiry and same underlying. Also the execution should happen in the same ratio (missed this point while discussing straddle).

Same ratio here means – one should buy the same number of call option as that of put option. For instance it can be 1:1 ratio meaning 1 lot of call, 1 lot of put option. Or it can be 5:5, meaning buy 5 lots of call and 5 lots of put option. Something like 2:3 is not considered strangle (or straddle) as in this case you would be buying 2 lots of call options and 3 lots of put options.

Going back to the example, considering Nifty is at 7921, we need to buy OTM Call and Put options. I’d prefer to buy strikes which are 200 points either way (note, there is no particular reason for choosing strikes 200 points away). So this would mean I would buy 7700 Put option and 8100 Call option. These options are trading at 28 and 32 respectively.

The combined premium paid to execute the ‘strangle’ is 60. Let’s figure out how the strategies behave under various scenarios. I’ll keep this discussion brief as I do believe you are now comfortable accessing the P&L across various market scenarios.

Scenario 1 – Market expires at 7500 (much below the PE strike)

At 7500, the premium paid for the call option i.e. 32 will go worthless. However the put option will have an intrinsic value of 200 points. The premium paid for the Put option is 28, hence the total profit from the put option will be 200 – 28 = +172

We can further deduct for the premium paid for call option i.e. 32 from the profits of Put option and arrive at the overall profitability i.e. 172 – 32 = +140

Scenario 2 – Market expires at 7640 (lower breakeven)

At 7640, the 7700 put option will have an intrinsic value of 60. The put option’s intrinsic value offsets the combined premium paid towards both the call and put option i.e. 32+28 = 60. Hence at 7640, the strangle neither makes money nor losses money.

Scenario 3 – Market expires at 7700 (at PE strike)

At 7700, both the call and put options would expire worthless, hence we would lose the entire premium paid i.e. 32 + 28 = 60. Do note, this also happens to be the maximum loss the strategy would suffer.

Scenario 4 – Market expires at 7900, 8100 (ATM and CE strike respectively)

Both the options expire worthless at 7900 and 8100. Hence we would lose the entire premium paid i.e. 60.

Scenarios 5 – Market expires at 8160 (upper breakeven)

At 8160, the 8100 Call option has an intrinsic value of 60, the gains in the call option would offset the loss incurred against the premium paid towards the call and put options.

Scenarios 6 – Market expires at 8300 (much higher than the CE strike)

Clearly at 8300, the 8100 call option would have an intrinsic value of 200 points; therefore the option would make 200 points. After adjusting for the combined premium paid of 60 points, we would be left with 140 points profit. Notice the symmetry of payoff above the upper and below the lower breakeven points.

Here is a table which contains various other market expiry scenarios and the eventual payoff at these expiry levels –

Image 1_payoff table

We can plot the strategy payoff to visualize the payoff diagram of the strangle –

Image 2_graph

We can generalize a few things about the ‘Strangle’ –

  1. The maximum loss is restricted to the net premium paid
  2. The loss would be maximum between the two strike prices
  3. Upper Breakeven point = CE strike + net premium paid
  4. Lower Breakeven point = PE strike – net premium paid
  5. Profit potentially is unlimited

So as long as the market moves (irrespective of the direction) the profits are expected to follow.

12.3 – Delta and Vega

Both straddles and strangles are similar strategies, therefore the Greeks have a similar effect on strangle and straddles.

Since we are dealing with OTM options (remember we chose strikes that are equidistant from ATM), the delta of both CE and PE would be around 0.3, or lesser. We could add the deltas of each option and get a sense of how the overall position deltas behave.

  • 7700 PE Delta @ – 0.3
  • 8100 CE Delta @ + 0.3
  • Combined delta would be -0.3 + 0.3 = 0

Of course, I’ve just assumed 0.3 for both the options for convenience; however both the deltas could be slightly different, hence we could not be delta neutral in a strict sense. But then the deltas will certainly not be too high such that it renders a directional bias on the strategy. Anyway, the combined delta indicates that the strategy is directional neutral.

The volatility has similar effect on both straddles and strangles. I’d suggest you refer Chapter 10, section 10.3 to get a sense of how the volatility impacts the strangles.

To summarize the effect of Greeks on strangles –

  1. The volatility should be relatively low at the time of strategy execution
  2. The volatility should increase during the holding period of the strategy
  3. The market should make a large move – the direction of the move does not matter
  4. The expected large move is time bound, should happen quickly – well within the expiry
  5. Long strangle is to be setup around major events, and the outcome of these events have to be drastically different from the general market expectation

I suppose you understand why long strangles have to be set up around major market events; we have discussed this point earlier as well. If you are confused, I’d request you to read Chapter 10.

12.4 – Short Strangle

The execution of a short strangle is the exact opposite of the long strangle. One needs to sell OTM Call and Put options which are equidistant from the ATM strike. In fact you would short the ‘strangle’ for the exact opposite reasons as to why you go long strangle. I will skip discussing the different expiry scenarios as I assume you are fairly comfortable with establishing the payoff by now.

I’ve used the same strikes (the one used in long strangle example) for the short strangle example. Instead of buying these options, you would sell these OTM options to set up a short strangle. Here is the payoff table of the short strangle –

Image 3_payoff

As you can notice, the strategy results in a loss as and when the market moves in any particular direction. However the strategy remains profitable between the lower and upper breakeven points. Recall –

  • Upper breakeven point is at 8160
  • Lower breakeven point is at 7640
  • Max profit is net premium received, which is 60 points

In other words you get to take home 60 points as long as the market stays within 7640 and 8160. In my opinion this is a fantastic proposition. More often than not market stays within certain trading ranges and therefore the market presents such beautiful trading opportunities.

So here is something for you to think about – identify stocks which are in a trading range, typically stocks in a trading range form double/triple tops and bottom. Setup the ‘strangle’ by writing strikes which are outside the upper and lower range. When you write strangles in this backdrop make sure you watch closely for breakouts or breakdowns.

I remember setting up this trade over and over again in Reliance couple of years ago – Reliance was stuck between 850 and 1000 for the longest time.

Anyway, here is the payoff graph of the short strangle –

Image 4_graph

As you can notice –

  1. The payoff of the short strangle looks exactly opposite of the long strangle
  2. The profits are restricted to the extent of the net premium received
  3. The profits are maximum as long as the stock stays within the two strike prices
  4. The losses are potentially unlimited

The breakeven point calculation is the same as the breakeven points of a long strangle, which we have discussed earlier.

Key takeaways from this chapter

  1. The strangle is an improvisation over the straddle, the improvisation helps in the strategy cost reduction
  2. Strangles are delta neutral and is insulated against any directional risk
  3. To set up a long strangle one needs to buy OTM Call and Put option
  4. The maximum loss in a long strangle is restricted to the extent of the premium received
  5. The profit potential is virtually unlimited in the long strangle
  6. The short strangle is the exact opposite of the long strangle. You are required to sell the OTM call and put option in a short strangle
  7. The Greeks have the same effect on strangles and straddles

Download Long Short Strangle Excel Sheet


  1. sastry says:


    Can you kindly inform some more stocks which are trading range bound of 200 points that are suiatable for short strangle . Also can I take into account NIFTY and Bank NIFTY index. Kindly reply. Regards,
    R V N Sastry

    • Karthik Rangappa says:

      Yes, you can apply short strangle to indices. Btw, I’ve not checked for stock in this range recently, so I’m afraid I cannot be of much help here.

  2. Sastry says:

    Sir, Please inform me what is the probable range of IV and DELTA range to execute short strangle at a distance of 200 points from ATM strike . Can we also take into account India VIX if so at what range please. Thanks,sastry

    • Karthik Rangappa says:

      1) The delta should approximately add up to zero
      2) The IVs should be low, for example if you are trading on Nifty, look for IV values sub 18-17%
      3) India ViX can be used for Nifty

  3. sastry says:

    My doubt is , if I enter into a short strangle strategy of NIFTY INDEX at distance of 200 points from ATM strike of NIFTY with Delta Neutral when the IV of Nifty is in a range of 17-18%, and latter if the IV of NIFTY increases and the premiums of call and Put will be increased . The idea of selling call and put options at a premium of High and buying the same at premium of low and thereby gaining money. If I am wrong please correct me with your advice. whether the Iv range of 17-18% is sufficient or it should be higher to enter into short strangle trade. This is my doubt as well as my confusion. I earnestly request you to be sympothyse towards me and may be put forthing my known and unknown knowledge before you for which I beg an appology openly for your valuable advice for my guidance in future. Thanking you, Kind Regards, R V N Sastry

    • Karthik Rangappa says:

      Mr.Shastry, you are embarrassing me by saying such things. This forum is meant to discuss and ask questions, only then everyone here will learn and evolve. In fact I’ve learnt so many things here myself.

      Anyway, the IV of 17-18% is great if you want to set up a “long Strangle/straddle”…and you should also expect the IVs to increase (within the expiry period) after you set up the long position. However if you are looking to short a Strangle/straddle then the IVs should be high and should be expected to cool off before expiry.

      Since Strangle/straddle are delta neutral, you need not worry about direction…your call should be on the volatility.

  4. sastry says:

    Dear sir,
    Thank you very much for your friendliness for which I am always grateful. please advise me at what High Range of Nifty Index IV, can I enter into a short strangle with Delta Neutrai strategy. Is above 19% Iv is good.Thanking you, Regards, R V N Sastry

  5. R P HANS says:

    Hello Sir,
    I heard of adjustment point in case of short strangles. It like: the delta will not remain neutral if the index move by some point in any direction so to make it again neutral some positions are closed and new positions are created for 1 leg. This was not very clear to me and second thing was it consumes lots of brokerage. Can give your advice on this please.

    R P HANS

    • Karthik Rangappa says:

      Very true. When you initiate a delta neutral, the position is delta neutral at the point of taking the position…but when markets move in either direction the position is no longer delta neutral. To keep it delta neutral you will have to hedge the delta to keep it delta neutral always. This is called ‘Delta Hedging’. You can do delta hedging by employing futures. Yes, delta hedging requires constant tweeks to the position and therefore attracts higher brokerage charges. However if you are with Zeordha, this should not matter I guess 🙂

  6. keshav says:

    For short strangle using normal distribution method is it really a good idea?

  7. Khyati Verdhan says:

    Hi kartik
    Commodity module is how far ???

    • Karthik Rangappa says:

      One more chapter in this module, after which I’m off for few days on a holiday. Will start Commodities as soon as I come back!

  8. keshav says:

    Thank u sir..

  9. Sastry says:

    Sir, I request you to kindly add a chapter in this options strategies module on Delta Hedging with Futures in continuation of Long and short strangle strategy. Thanks and regards, R v n sastry

  10. hemal parikh says:

    what is the name of strategy where one is seling calls and puts both at a gap of 100 points from profitable and risky it is ?

  11. Ratan says:

    Can you please explain about nifty reverse iron condor ?

  12. Jyoti Biswal says:

    Sir ,
    I just want to know how much distance between strike price & OTM is better for strangle strategy. Means if nifty is at 7900 how much strike price i have to take for put & call for long option.

    • Karthik Rangappa says:

      There is no hard and fast rule here…I generally prefer strikes 5% eitherways from ITM strike.

  13. sastry says:

    Dear Sir,
    Am I correct if I consider 5% of ITM strike price of Nifty Future if I want to trade in Nifty Index OTM strikes of call and put which roughly workout 400 points range at present ie either side 200points of call and put from ATM strike . Please explain if I am wrong. thanks & Regards, Sastry

  14. Sushant P says:

    Karthik sir,

    I dont remember. but somewhere in the comments in some modules you said about something about Module on Mutual Funds. Is that Going to come or not? I am waiting for that. so before that can u suggest me some link for studying mutual funds. so that I can start investing in it. I had in my mind SBI blue chip fund.


    • Karthik Rangappa says:

      The current module has last one more chapter…after this we are starting work on currencies and commodities. MF will be after this module! Not sure about SBI Blue chip, I personally prefer the Kotak 50 fund, which is also a blue chip, large cap fund.

  15. sastry says:

    Dear Sir,
    (1)What will be the effect in profit/loss and also in the GREEKS position, if I choose 300 points away equi-distance OTM strikes from ITM to play delta neutral short strangle strategy in Nifty Future. (2) In your view which one is most benificial whether 200points or 300points away from ITM strike of Nifty Future. Kindly advise me for guidance. Thanks & Regards, Sastry

  16. Sastry says:

    Dear Sir, Can we execute a combined Long and short strangle nifty options strategy at an equidistance of 300 and 200 points respectively from ITM strike price by making DELTA Neutral. Please guide me. Thanks and Regards. Sastry

    • Karthik Rangappa says:

      Not sure how feasible this would be. However you can build an excel model to figure out the eventual payoff and even study its characteristics.

  17. Rishi says:

    If I keep changing the delta of my position to zero, how would I earn any profit?

  18. Sastry says:

    Dear Sir, To play delta neutral nifty call and put options short strangle strategy after fifteen days of series start in current month, in the absence of same or more or less same delta, at what maximum delta difference of call and put o t m nifty strikes of 200 points from ATM strike, we can consider to execute strategy. And can we also consider different OTM strikes to make delta neutral. Thanks and regards.

    • Karthik Rangappa says:

      Yes, you can create a delta neutral with other strikes…but the ratio of calls and puts wont be equal. Not sure what you mean by maximum delta, can you please elaborate a bit more? Thanks.

  19. Sastry says:

    Dear Sir, My query is to form delta neutral nifty options short strangle, in case the deltas on call and put are not exactly equal, then at what difference in deltas on call and put side, we can create delta neutral. I suppose that on call side delta is 0.30 and put side delta is 0.25. In this situation, can I create delta neutral short strangle. If can be accepted, the maximum difference will be how much to be waived to delta neutral. Thanks and regards

    • Karthik Rangappa says:

      I get it now! I would suggest not more than 0.05. Also, always add up the deltas…if it is anywhere between -0.05 to 0.05 consider it delta neutral.

  20. sastry says:

    Dear Sir,
    To understand better, I would like to repeat your suggestion to my query regarding short strangle nifty delta neutral strategy- ” Add up Deltas… if it is anywhere between -0.05 to 0.05 consider it delta neutral” which I understand that I can add up deltas after executing strategy upto the difference between call and put deltas not exceeding -0.05 to 0.05. If the difference exceeds this limit, I can exit from strategy. Please correct me if my understanding is wrong in any way. Thanks & Regards, sastry

    • Karthik Rangappa says:

      Yes, also please make sure you dont end up adding deltas of two different underlyings like Nifty and Infy. You can add deltas belonging to the same underlying.

  21. sastry says:

    Dear Sir,
    Can you please advise me when i can enter during trading day into a delta neutral short strangle nifty options strategy trade to safe guard the distance from ATM strike to otm strikes which are going to be entered as delta neutral.Because I learnt that it would be better to enter after the US market is opened and depending on its trend our market gets changed. please advise me.thanks&Regards,

    • Karthik Rangappa says:

      You can create a delta neutral position at any point, the idea in delta neutral is to capture a spread and hedge away the directional risk. So the best time to do this is when you post the opportunity!

  22. sastry says:

    Dear Sir,
    Is it compulsory to wait upto 15days completion from start of month series to excute nifty delta neutral nifty options short strangle or can excute if opportunity arises at a distance of 200points of nifty spot. Thanks & Regards, sastry

  23. ajay saha says:

    Respected sir.
    I am ajay.from kolkata. sodepur. i am new in stock market.i want to teade in option. can u tell me pls. how i am selecting right call put .

  24. vishwa says:

    Sir, if we set up a strangle or straddle, do we need to wait till expiry. if our price conditions are met than can we exit before expiry.

  25. Akshay says:

    sir if we exit before expiry will the profits remain the same ? considering the sbi results are today how wise is it to setup the short strangle today and exit after the market move ? Can we use this for sideways market as they will always remain within the range ?

  26. roshan says:

    Can we get PDF for Option Strategies.

  27. Eshwar K says:

    I feel Short Strangle is safer for indices (If no game changer news to be expected)
    Can you post a case study for short strangle, And please suggest If i sell Call & Put option on first day (18/08/16) & can i square off on the second day(19/08/16) with premiums with which buyers bought.

    P.S: I am new to Options 🙂

  28. srikantheswar says:

    Hi Karthik,
    I would like to personally thankyou & Zerodha & also on behalf of many others like me who have gained knowledge out of Varsity. I have a doubt on short strangle , If someone is going to short strangle, he is going to get low magnitude of profits when compared to short straddle but the risks are unlimited on both short straddle & strangle, is shorting a straddle better than a strangle considering this? or is there anything else beneficial to strangle seller apart from the benefit of the broad range itself eg: margin required,slippage, liquidity etc ?


    • Karthik Rangappa says:

      Thanks for the kind words 🙂

      Well, its always a trade off between risk and reward. Although the short strangle offers lower reward, the chance of retaining the profits is higher. In case of a short straddle, profits are higher but the probability of retaining is slightly lower.

  29. Sunil Tyagi says:

    I created a short Strangle today with NIFTY 8900CE and 8100PE both short. I was hoping that it would remain delta neutral but to my surprise both positions lost money as NIFTY spot traded between 8585 to 8573.
    Why it happened ? As spot price decreased then call option was expected to decline but it increased instead and at same time the put option premium also increased.
    Is volatility to be blamed for this ?

  30. SONJOE JOSEPH says:

    Dear Karthik,

    Do include some more strategies like Long Butterfly Calls, Long Butterfly Puts, Iron Condor, Iron Butterfly, Long Call Ladder, Long Put Ladder, Short Guts, Synthetic short Stock, Short Put Ladder, Strip, Strap, Long Guts, Reverse Iron Butterfly, Reverse Iron Condor, Short Butterfly Calls and Short Butterfly Puts.


    Sonjoe Joseph

  31. srikantheswar says:

    Hi Karthik,
    For Options , Is Volume shown on the intraday charts represents the total lots or the lotsize*No of Lots eg: NIFTY options If the chart volume bar shows 7500 is this 7500 lots transaction or (7500/75) 750 lot transaction?

  32. pawan says:

    how can use short strangle is USDINR ? Do we need to calculate IV & Delta to write USDINR call & put ? What is the good IV level to initate short in USDINR?

    • Karthik Rangappa says:

      I’ve not checked historical IVs of the USDINR pair. I’d suggest you calculate the historical volatility and compare it with the current volatility and get a sense on where the vol really is. You can use a standard B&S calculator for calculate the IV.

      The execution of a short strangle is similar to equities – no change here.

  33. Subbu says:

    Dear Sir,
    First, my heartfelt gratitude to u for educating us with such high quality content at absolutely free of cost. It is good that I have seen varsity before registering for any expensive course.
    My doubt is this. Suppose I buy a put option, if the underlying increases, then the premium should decrease and if volatility increases, premium should increase. If both happen at the same time, i . e, volatility increases and underlying also increases, then what will be the direction of premium?

    • Karthik Rangappa says:

      Glad you liked the content here Subbu.

      If both Volatility and spot increases, then really depends on the rate at which they are increasing. For example if the increase in Vol is dramatically high, then it would have a greater impact than the spot. However, if increase in spot is quick and fast, then the impact of spot is higher.

      All else equal, usually spot has a larger impact on option premiums.

  34. seshu babu says:

    dear mentor,
    I downloaded spreadsheet of strangle but there is no short strangle calculation in it . actually sheet 3 is named as short strangle but when open it the heading is shown as long straddle. kindly give me clarity

  35. Hi Karthik,

    I have doubt on call option premium, for example today IOC trading at 395 but CE 360 was trading at 26. Ideally it should trade above or equal to spot price and it nearly 10 rupees discounted to spot price. All I could find out is dividend they are issuing and ex dividend date is 9th Feb, so for this reason it is getting discounted that after ex dividend date it will fall ?

    Jagadish Kolanu.

  36. Promit Banerjee says:

    HI Karthik,

    Just to clarify one doubt of mine, Except Short Strangle and Straddle, the increase in Volatility will be beneficial for all strategies (more beneficial for some if executed in the second half) be it bearish or bullish.

    Thanks a ton again to Team Zerodha for preparing all this modules !!

    • Karthik Rangappa says:

      As a thumb rule, an increase in volatility leads to increase in premium. This means you will benefit from increased volatility if you are long on option. Exact opposite for short options.

  37. rohit sharma says:

    Sir I have question regarding short strangle.
    Is it necessary otm of call and put must be equidistant from current price

  38. uma says:

    “Going back to the example, considering Nifty is at 5921, we need to buy OTM Call and Put options. I’d prefer to buy strikes which are 200 points either way (note, there is no particular reason for choosing strikes 200 points away). So this would mean I would buy 7700 Put option and 8100 Call option. These options are trading at 28 and 32 respectively.”
    Small correction, it should be 7921here

  39. Rahul says:

    considering Nifty is at 5921 —> this should read as 7921 I believe.

  40. trader says:

    Hi Karthik,

    Thanks alot for explaining option strategies so clearly. My question is, are there any particular option strategies which cannot be applied in Indian markets under SEBI laws?? For example protective puts, iron condor, iron butterfly etc? I am asking coz some where i read that traders cannot short stocks and buy calls option of the same stocks? is this true? or is it that any option strategy which is available in books/online can be applied in Indian markets?

    thanks in advance

  41. Sunil Tyagi says:

    Dear Mr Rangappa,
    I executed a Short Strangle stretegy today. I shorted NIFTY 9100 PE and 10250 CE.
    NIFTY spot moved very little, today’s close was 9,736.40 and Prev. Close was 9,735.75.
    Strangely, both my positions lost money and I can’t understand why as the Volatility has remained low.
    Could you please explain this strange phenomenon.
    Sunil Tyagi

    • Karthik Rangappa says:

      Well, you seem to have answered it yourself 🙂

      Spot has not moved much, so the effect of Delta is low. However, since the vol was low (and increased) the premiums also increased for both calls and puts. Remember, when you short any options, you need to make sure the volatility is high.

  42. Pintu says:

    Can u pls tell me why there are always some anomaly in bank nifty option chain for few strike price, e.g today after moody rating change all the call option LTP increases(from 23000 to 26600) bt LTP decreases for 26700,26800,26900 to 27100… banknifty change was +275 points…

  43. swamy says:

    Sir,Pls clarify me on the below trade

    NIFTY currently at – 10153
    i’m SELL CALL 10200 @82.1 & SELL PUT 10000 @36.05 1 LOT each
    10 more days to Contract Expiry…

    Now i close the trade ( may be 10 min latter ) at NIFTY is say 10160 my profit is 8861.25 ( which was full premium received since i SELL call & PUT …75*82.1 + 75*36.05 )

    • Karthik Rangappa says:

      Yes, the premiums can vary on an intraday basis.

      • swamy says:

        So while take a entry of SHORT on CALL & PUT then after the very next second also i can close the trade with profit like i’m explained in my previous query….
        so i cant wait upto the expiry to claim my profit correct?

        pls clarify me…if the above is correct mean why don’t i repeatedly do it the copy trade some more time to increase my profit


      • swamy says:

        From the above trade i explained … i have the below 2 main doubts ..pls clarifying me…

        1) am exit the trade very next minute
        2) hope my profit calculation is correct

        • Karthik Rangappa says:

          1) yes
          2) your profit will be the difference between the premium buy price and sell price multiplied by the lot size.

          • swamy says:


            1) So in the SHORT (CALL or PUT) trade we have to wait until the expiry for enjoying the full premium credits , if we want to leave the trade in the middle mean profits will be calculated by difference of the PREMIUM..

            2) the same will be applicable also for combination of SHORT CALL & SHORT PUT too…

            is my above understanding is correct ?

          • Karthik Rangappa says:

            1) Yes, that is right
            2) Yes, that is correct again.

  44. Prakhar says:

    Cam we say that effect of increase in volatility will be more in strangles as compared to straddles as we are buying out of the money options in this.
    Also will this strategy work for deep out of money strikes.

  45. karthikjayasimha says:

    Dear Sir,

    Nifty is trading between 10450 and 10500 for the past one week. I have the following doubts regarding Short Strangle:
    1. Can we use this Short Strangle strategy now on Nifty, because you have mentioned that not to short options during the first half of the expiry series.
    2. Can we use the short strangle option like an intraday trade, that is every day and more than once a day.

    Kindly clarify the above doubts. Thanks in advance.

    • Karthik Rangappa says:

      1) Yes, you can – as long you can justify the trade
      2) Not advisable as these strategies work best if left to expiry.

  46. Dr.Rajesh says:

    Excellent explanation.The way of teaching is super. Thanks a lot. I am new to this, please clear my doubt.
    in general when we initiate a trade. The position gets activated only when we hit that price
    1) suppose when a nifty spot is 7500 I took call option on strike 7700. Whether position gets activated when I hit 7700 or directly starts from 7500 itself?
    2) whether options have stop loss(i mean in a predefined way)?
    kindly reply

    • Karthik Rangappa says:

      1) The position gets active when you initiate a buy or sell on the option’s premium, and not really the strike
      2) No, you will have to set them yourself

  47. karthikjayasimha says:

    Dear Sir,

    Can we trade in Nifty using Bracket Order? Is there any demo video on how bracket orders are placed and executed on indices?
    Kindly help us out with one.

  48. Vijay says:

    There is a mistake in the 5th paragraph of “Strategy Notes” section below:

    “Going back to the example, considering Nifty is at 5921”

    5921 should be corrected as 7921

  49. Ganesh Parameswaran says:

    Dear Mr. Karthik,

    I do not have a doubt here but would like to express my gratitude and sincere thanks towards your invaluable advice on option strategies. I have been very very comfortable with executing the strategies and am able to get an 80-85% success in my execution.

    I feel really indebted to you and Zerodha for this invaluable study material and I wish you and yours the best in everything.

    Thank you
    Ganesh P

    • Karthik Rangappa says:

      Thank you so much for the kind words, Ganesh. I’m very happy to note that you are able to execute the trades well. Good luck and happy learning!

  50. Ankit saini says:

    Hello sir,
    I want to know about long strangle that :
    Let say for a otption
    CAMP: X (Underlying)
    OTM CALL= X+3 @138/-
    OTM PUT = [email protected]/-
    In this case how to keep lot equal for both call and buy. If I do that value of the trades differ and due to that p&l will differ.And loss if incurred at put side it will be bigger than call side loss
    Thank you

    • Karthik Rangappa says:

      In a long or short strange or for that matter, straddle, you need to ensure the lot sizes on both the legs are equal. Variation in lot sizes will lead to a skew in P&L and therefore the risk.

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