Overnight short straddle
The overnight short straddle tries to earn one specific slice of option premium: the part that pays for the night. Every evening it sells the NIFTY at-the-money call and put a few minutes before the close and buys both back at 09:20 the next morning. It rests on research suggesting option sellers are paid more for overnight risk than the overnight moves usually cost them.How it trades
Results
PRE-BUILT · DEFAULTSWhere it made and lost money
The overnight move decided almost everything. Nights when NIFTY stayed within 1% made ₹1,00,572 over 157 trades, while nights with a fall of more than 1% lost ₹44,487 over 44 and a rise of more than 1% lost ₹31,386 over 41, since a short straddle loses on a gap in either direction. The 20-day trend mattered too: nights in an uptrend earned ₹62,047 over 121 trades and those in a downtrend lost ₹39,796 over 123, as falling markets gap more and lift option prices. Choppy entry days lost ₹23,310 over 66 nights, while quiet ones made ₹29,088 over 109.
About this strategy
- Every trading day, five minutes before the close (15:35 since the close moved to 15:40), find the ATM strike of the nearest NIFTY weekly that does not expire that day.
- Sell one lot of the ATM call and one lot of the ATM put.
- Hold both overnight with no stop and no target.
- Buy both back at 09:20 on the next trading session.
- On a weekly expiry day, use the following week's contract instead; by default, nights before expiry are traded too.
Why traders use it
Options are priced for the risk of the whole calendar, but the market is shut for about seventeen hours a night, and research on Indian index options has found that sellers tend to be overpaid for that closed stretch. Holding only overnight avoids intraday whipsaws and needs just two decisions a day. It is a clean way to test whether that overnight premium exists, which is why it interests systematic option sellers.
The year in plain words
On NIFTY from 1 Oct 2025 to 30 Sep 2026 the strategy sold 246 overnight straddles and won 64% of them for ₹24,344 before costs, a profit factor of 1.10. The average loss (₹2,772) was well above the average win (₹1,680), and the worst night lost ₹37,573. After ₹20 per order and bid-ask slippage on four orders a night, the result turned into a ₹3,372 loss (profit factor 0.99), before statutory charges. February lost ₹24,048 while April and May made close to ₹29,000 together. A small overnight premium showed up before costs, but trading costs more than wiped it out.
What the settings do
Risks
- The position is fully exposed to overnight gaps, and a stop cannot act while the market is shut.
- One bad night can lose more than a month of typical wins, as the ₹37,573 worst trade shows.
- Four orders every night make the result very sensitive to brokerage and the spread near the close and open.
- Selling a straddle overnight needs full option-selling margin every day.
Who it suits
Traders who can automate a daily close-and-open routine, have option-selling margin to spare overnight, and accept that a single gap can produce a large loss. Statutory charges, not in this test, would push the after-costs result further down.
Questions traders ask
What is an overnight short straddle?
It sells the at-the-money call and put near the close and buys them back early the next morning. The aim is to collect the premium the market charges for the overnight period, when the index cannot be traded but news can still arrive.
Is selling a straddle overnight profitable?
In this backtest on NIFTY from 1 Oct 2025 to 30 Sep 2026 it made ₹24,344 before costs but lost ₹3,372 after ₹20 per order and bid-ask slippage, with a maximum drawdown of ₹56,693 before costs. Statutory charges are excluded. Past results do not guarantee future ones.
Why is there no stop loss?
The market is closed for most of the holding period, so a stop could not be executed overnight anyway, and gaps open past any level. The original study had no stop either; the only exit is the morning buy-back.
Is this the same as BTST?
It is the option-selling cousin of BTST. A BTST trade buys near the close to profit from a move overnight; this sells a straddle to profit from the absence of a big move, so it gains when the market opens close to where it closed.