Short straddle
Sell the call and the put at the same strike. Collect a big premium if the market stays put — with unlimited risk.
Lesson 8 of 126 min read
The other side of the trade
The short straddle is the long straddle flipped: you sell the 22400 call and the 22400 put, and pocket both premiums. Your view: "NIFTY will stay close to 22,400 and volatility will cool down."
| Leg | Action | Option | Price |
|---|---|---|---|
| 1 | Sell | 22400 CE | ₹256.20 |
| 2 | Sell | 22400 PE | ₹200.45 |
| Total credit | ₹456.65 |
Max profit
₹29,682
Only if NIFTY ends exactly at 22,400
Profit zone
21,943 – 22,857
Between the breakevens
Max loss
Unlimited
Either direction
22,400
If NIFTY ends at 22,400, you make ₹29,682.
| NIFTY at expiry | Net P&L (1 lot) |
|---|---|
| 21,600 | −₹22,317.75 |
| 22,000 | +₹3,682.25 |
| 22,200 | +₹16,682.25 |
| 22,400 | +₹29,682.25 |
| 22,600 | +₹16,682.25 |
| 22,800 | +₹3,682.25 |
| 23,200 | −₹22,317.75 |
Why traders like it
- Theta works double for you. Two sold options, two lots of time decay, every day.
- Short vega. If IV falls (say, after an event passes quietly), both legs shrink at once.
- A wide profit zone. NIFTY can wander about ±2% and you still make money at expiry.
Why it's dangerous
Most experienced sellers don't run a naked short straddle. They buy far OTM "wings" on both sides, which caps the loss. A short straddle with wings is called an iron butterfly; the strangle version is the iron condor — two lessons ahead.
Quick check
Which scenario is best for a short straddle seller?