Overnight VIX strangle
This overnight option-buying strategy holds a long NIFTY strangle from just before the close to 09:20 the next morning. It trades only when India VIX closed above 14.5 the day before, on the view that nervous markets are more likely to gap at the open. The bet is on the size of the overnight move, not its direction.How it trades
Results
PRE-BUILT · DEFAULTSWhere it made and lost money
Every trade happened in a high-VIX spell by design, so the useful splits are about the move that followed. When NIFTY moved more than 1% during the hold the strangle paid, making ₹22,990 over 16 rising nights and ₹19,260 over 15 falling ones. The 36 nights when it stayed within ±1% lost ₹33,641, as both options shed an evening's time value and some volatility. Trend going in mattered too: entries in markets below their 20-day average made ₹30,703 over 44 trades, while those in uptrends lost ₹20,761 over 25, since nervous falling markets produced the bigger overnight gaps in this test.
About this strategy
- Each afternoon, check yesterday's India VIX close; if it was 14.5 or lower, skip the night.
- Five minutes before the session closes, take the nearest weekly NIFTY expiry with at least two calendar days left, so the options never expire the next morning.
- Buy one lot of the call about 100 points above the forward and one lot of the put about 100 points below it.
- Hold overnight with no stop or target.
- Sell both options at 09:20 on the next session.
Why traders use it
Overnight news, global markets and pre-open orders often move NIFTY at the open more than in any other ten minutes of the day. Owning both a call and a put lets a trader profit from a big gap in either direction while knowing the most that can be lost is the premium paid. Filtering on India VIX tries to buy only when large moves are more likely, and exiting at 09:20 limits the time decay paid to one night.
The year in plain words
From 1 Oct 2025 to 30 Sep 2026 India VIX was above 14.5 often enough for 71 overnight trades on NIFTY, all between February and July 2026. They made ₹9,500 before costs, a profit factor of 1.08, but after ₹20 per order and bid-ask slippage the result was a ₹672 loss, essentially break-even. Only 38% of nights won. The result depended on big gaps: winners averaged about ₹4,620 and the best single night made ₹23,871, all in February 2026, while March and May lost ₹14,186 and ₹12,704. The maximum drawdown before costs was about ₹42,900.
What the settings do
Risks
- Most nights the gap is too small to cover the premium paid, so losses come in steady runs.
- The VIX filter uses yesterday's close, not the level at the time of entry.
- Spread costs are paid on four option orders every trade, which turned a small profit into a loss.
- Opening prices at 09:20 can be volatile and the fill may differ from the backtest.
Who it suits
Traders who prefer limited-risk option buying, can place orders near the close and again shortly after the open, and accept long losing runs waiting for an occasional large gap.
Questions traders ask
What is an overnight long strangle?
It means buying an out-of-the-money call and an out-of-the-money put near the close and selling them the next morning. The position gains if NIFTY gaps sharply either way at the open, and loses part of the premium if the open is quiet.
Is the overnight strangle strategy profitable?
In this NIFTY backtest from 1 Oct 2025 to 30 Sep 2026 it made ₹9,500 before costs but lost ₹672 after ₹20 per order and bid-ask slippage, over 71 trades. Statutory charges were not included. One February night supplied much of the gain; past results do not guarantee future ones.
Why use India VIX as a filter?
India VIX reflects the size of moves the option market expects. When it is high, overnight gaps tend to be larger, which is what a long strangle needs. Because VIX is published at the close, the backtest uses the previous day's value to avoid looking ahead.
Why not buy the weekly that expires next morning?
That option would be sold on its own expiry day, when its time value is almost gone and it reacts very sharply. Requiring at least two calendar days to expiry avoids that and keeps the trade about the gap alone.