OTM strangle with re-entry
This intraday short strangle sells a NIFTY call and put two strikes away from the money each morning and manages them as one position. The pair is closed when its combined premium falls 20% (the target) or rises to 1.5 times what was collected (the stop). After either exit a fresh strangle can be sold once more, so a day can hold up to two trades.How it trades
Results
PRE-BUILT · DEFAULTSWhere it made and lost money
This is a pure range trade and the evidence shows it clearly. Quiet sessions with a range under 0.75% made ₹1,04,439 over 156 trades with an 83% win rate, because both strikes decayed and the 20% target was reached early. Trend days that closed near their high or low lost ₹78,023 over 104 trades: one leg gains value faster than the other loses, the combined premium hits 1.5 times the credit, and the re-entry sells again into the same move. Expiry days earned ₹25,049 over 102 trades, helped by fast decay. Sessions that closed below their open lost ₹23,597, as put premiums jump in falls.
About this strategy
- At 09:20, find the ATM strike of the nearest NIFTY weekly expiry.
- Sell one lot of the call two strikes above ATM and one lot of the put two strikes below (100 points each way on NIFTY's 50-point strikes).
- Track the combined price of both legs against the credit collected.
- If the pair can be bought back for 20% less than the credit, close both legs (target).
- If the pair costs 1.5 times the credit, close both legs (stop).
- After a target or stop, sell a fresh strangle around the new ATM one minute later, at most twice a day and not after 14:30.
- Close anything still open at 15:15.
Why traders use it
Strikes a little away from the money give the market some room before the position loses, while still collecting reasonable intraday premium. Managing the two legs as one avoids the problem of per-leg stops being hit on both sides on a swinging day: a move against one leg is partly offset by the other's decay. The small target banks quick profits on quiet mornings, and the re-entry puts the margin back to work for the rest of the day.
The year in plain words
On NIFTY from 1 Oct 2025 to 30 Sep 2026 the strategy sold 353 strangles, about 29 a month, and won 70%: 141 hit the 20% target, 52 the 1.5x stop and 160 were closed at 15:15. The average loss (₹2,220) was about twice the average win (₹1,089). Net P&L was ₹36,906 before costs but only ₹541 after ₹20 per order and slippage, essentially breakeven. June made ₹13,765, while March lost ₹9,662. The rules found an edge on quiet days, but four orders per strangle used almost all of it.
What the settings do
Risks
- A re-entry after a stop can sell again into a trending day and take a second loss.
- Losses are about twice the size of wins on average, so a few bad days erase many good ones.
- Four orders per strangle make the after-costs result very sensitive to brokerage and spreads.
- Short options carry open-ended risk on a sharp move, and the stop can fill beyond its level.
Who it suits
Traders who can automate an intraday option-selling routine, have the margin for a naked short strangle, and accept a high win rate paired with occasional larger losses and a thin edge after costs.
Questions traders ask
What is an OTM short strangle?
It sells an out-of-the-money call and an out-of-the-money put of the same expiry. It profits if the index stays between the two strikes as time value decays, and loses if the index moves sharply beyond either strike.
Why use a combined stop loss instead of a stop on each leg?
A combined stop looks at the total premium of both legs. When the market moves one way, the losing leg is partly offset by the other leg's decay, so the position survives moderate swings that would trigger a per-leg stop. The trade-off is that a strong trend can still hit the combined stop.
Is the OTM strangle with re-entry profitable?
In this NIFTY backtest from 1 Oct 2025 to 30 Sep 2026 it made ₹36,906 before costs and ₹541 after ₹20 per order and bid-ask slippage, roughly breakeven. Statutory charges are not included. Past results do not guarantee future ones.
How does the re-entry work?
After the target or stop closes the first strangle, the strategy waits one minute, finds the new ATM strike and sells a fresh strangle two strikes either side. It does this at most once more per day and never after 14:30.