Long and short strangles
The straddle's cheaper cousin — OTM call plus OTM put. Wider, cheaper, needs a bigger move.
A straddle with the strikes pulled apart
A straddle uses one strike for both legs. A strangle uses an OTM call above the market and an OTM put below it. Both are cheaper than ATM options, so the whole trade costs much less.
| Leg | Action | Option | Price |
|---|---|---|---|
| 1 | Buy | 22700 CE (OTM) | ₹127.35 |
| 2 | Buy | 22100 PE (OTM) | ₹91.25 |
| Total cost | ₹218.60 |
Long strangle
If NIFTY ends at 22,400, you lose ₹14,209.
Straddle vs strangle
Long straddle (22400)
- Costs ₹29,682 per lot.
- Breakevens 21,943 / 22,857 (±457 points).
- Starts making money sooner.
Long strangle (22100/22700)
- Costs ₹14,209 per lot — less than half.
- Breakevens 21,881 / 22,919 (about ±519 points).
- Needs a bigger move, but loses less if nothing happens.
Same idea, different trade-off: pay less, need more.
Short strangle
Sell both instead, and you collect ₹218.60 (₹14,209 per lot). Your view: "NIFTY will stay between 22,100 and 22,700."
If NIFTY ends at 22,400, you make ₹14,209.
| NIFTY at expiry | Short strangle P&L (1 lot) |
|---|---|
| 21,600 | −₹18,291 |
| 21,900 | +₹1,209 |
| 22,100 – 22,700 | +₹14,209 (full credit) |
| 22,900 | +₹1,209 |
| 23,200 | −₹18,291 |
The short strangle is one of the most popular trades among option sellers: a wide flat zone where you keep everything. Pick the strikes using the bell curve — for example, sell strikes about 1σ away for a higher-premium, higher-risk trade, or further out for higher odds and smaller premium.
Quick check
Why does a long strangle cost less than a long straddle on the same underlying and expiry?