Weekly ATR strangle
This positional NIFTY option-selling strategy places a weekly strangle by realised movement rather than by delta. The session after each Tuesday expiry, at 11:15, it measures the average weekly range (ATR) of NIFTY futures over the last five completed weeks and sells a call and a put 1.25 of those ranges away from the money. The strangle is held until the next expiry unless it costs 2.5 times its credit, or 3 times when India VIX is above 18.How it trades
Results
PRE-BUILT · DEFAULTSWhere it made and lost money
Every condition was profitable in this test, but not equally. Weeks in which NIFTY fell more than 1% made only ₹4,456 over 17 trades with a 71% win rate, as falls pushed towards the put and caused most of the stops; weeks within ±1% made ₹16,246 over 21. Entries after nervous evenings, with India VIX above 14.5, made ₹15,379 over 15 trades with an 87% win rate: higher VIX meant richer premiums and, from 18 upward, a wider 3x stop. Flat openings made ₹20,269 over 30 trades, while gap-up entry days made ₹5,976 over 16.
About this strategy
- Compute a 5-week ATR from weekly candles of the near-month NIFTY future, using only completed weeks.
- On the first session after the previous weekly expiry, at 11:15, sell the call 1.25 × ATR above ATM and the put 1.25 × ATR below, rounded outward to listed strikes, on the nearest Tuesday expiry.
- Never sell closer than the 0.05-delta strike on either side; skip the week if India VIX closed above 30 the evening before.
- Stop out if the strangle's cost reaches 2.5 times the credit received, or 3 times if the previous VIX close was above 18.
- Otherwise hold to expiry and close at the last print of expiry day. There is no target; a new strangle follows next week.
- Optionally, “Wing strikes” buys protective options further out to cap the loss.
Why traders use it
Sizing the strikes by the actual weekly range makes the cushion wide in volatile periods and narrower in calm ones, without relying on implied volatility. Holding to expiry lets the full time value decay, and a stop set as a multiple of the credit is easy to understand: each losing week costs a known number of credits. This weekly, set-and-hold approach is popular with option sellers who prefer one decision a week to intraday management.
The year in plain words
On NIFTY from 1 Oct 2025 to 30 Sep 2026 with default settings, the strategy sold 51 weekly strangles and 42 expired as winners, an 82% win rate, for ₹31,608 before costs and a profit factor of 3.00. Wins averaged ₹1,129 and losses ₹1,756; 7 weeks hit the 2.5x stop and 2 the 3x stop. Eleven of thirteen months with trades were positive, and the deepest drawdown was a single ₹3,507 loss. Weekly trading kept costs low: after ₹20 per order and bid-ask slippage, ₹27,013 remained. One calm-ish year may understate the tail risk of naked strangles.
What the settings do
Risks
- The strangle is naked by default, so a gap or crash beyond the stop can produce a loss far larger than any seen in this test.
- A high win rate with larger losses means one bad week can erase several good ones.
- Positions are held over several nights and are exposed to overnight news.
- Naked weekly option selling needs substantial margin compared with the premium earned.
Who it suits
Option sellers who prefer one decision a week, have margin for a naked NIFTY strangle or for the winged version, and can accept rare but sharp losing weeks in exchange for frequent small gains.
Questions traders ask
How does an ATR-based strangle choose its strikes?
It measures NIFTY's average weekly range over the last five weeks and places each strike 1.25 times that range from the at-the-money strike. When the market has been moving a lot, the strikes go further out; when it has been quiet, they come closer.
Is the weekly ATR strangle profitable on NIFTY?
In this backtest from 1 Oct 2025 to 30 Sep 2026 it made ₹31,608 before costs and ₹27,013 after ₹20 per order and bid-ask slippage, before statutory charges, winning 42 of 51 weeks. A naked strangle can still suffer a large loss in a crash, and past results do not guarantee future ones.
Why is the stop wider when India VIX is high?
Option prices swing more when VIX is high, so a 2.5x stop would be hit by normal noise more often. Above a VIX of 18 the stop widens to 3x the credit to give the trade more room.
When is the strangle entered?
On the first trading session after the previous weekly expiry, which is usually Wednesday since NIFTY weeklies expire on Tuesday. If a holiday moves the expiry, the entry day moves with it.