Module 5   Introduction to Options Trading (Video Series)Chapter 14

The Straddle

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14.1  – Understanding Delta neutral Option Strategies

As a trader, you’ll have plenty of trades where you do a lot of homework and have the conviction that a trade will work, but it goes against you. This is the obvious risk of directional trades, where you expect a stock to go up or down and trade that with options. But you can also use specific option strategies that don’t depend on the market direction and work regardless of how the market moves. Such option strategies are known as “delta neutral” strategies. In this video, we look at a delta-neutral strategy—the straddle.

We recommend reading this chapter on Varsity to learn more and understand the concepts in-depth.

Key takeaways from this chapter

  1. Short straddle requires you to Sell the ATM Call and Put option simultaneously. The options should belong to the same underlying, same strike, and same expiry
  2. By selling the CE and PE – the trader is placing the bet that the market won’t move and would essentially stay in a range
  3. The maximum profit is equal to the net premium paid, and it occurs at the strike at which the long straddle has been initiated
  4. The upper breakdown is ‘strike + net premium’. The lower breakdown is ‘strike – net premium.’
  5. The deltas in a short straddle add up to zero
  6. The volatility should be relatively high at the time of strategy execution
  7. The volatility should decrease during the holding period of the strategy
  8. Short straddles can be set around significant events, wherein before the event, the volatility would drive the premiums up, and just after the announcement, the volatility would cool off, and so would the premiums.


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  1. Kunguma Karthik says:

    Please make videos on options strategies.. Eager to learn… and do share intraday strategies… for equity trading…

  2. Malik says:

    Hi Karthik,
    Can we please get Zerodha Varsity app for iPad also ? I think it is really really required.

  3. Dr Abhijit Biswas says:

    Congratulations, and many thanks for an excellent presentation. You addressed the subject with command, clarity and understanding. Many of us now understand the intricacies of options trading and how to deal with it much better. I especially appreciated your examples and the rule points you applied to each. I wish you success in your efforts to educate learners like me. Your slides and infographics made a convincing arrangement. Thank you for your careful preparation. Please let me know the names of the software packages that you have used for preparing this presentation.

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