Guts option strategy
Long Guts like Strangle is a volatility strategy that aims to make money either ways from a stock/index soaring up or plummeting down.
Payoff at expiry
Nifty, lot size 65 · Nifty future 22,973 · 3 Nov 2026Legs
| Action | Option | Strike | Lots | Qty | Premium |
|---|---|---|---|---|---|
| BUY | ITM Call | 22,850 | 1 | 65 | ₹204.08 |
| BUY | ITM Put | 23,050 | 1 | 65 | ₹176.44 |
How it works
- Buy 1 ITM call at the 22,850 strike for ₹204.08, paying the premium.
- Buy 1 ITM put at the 23,050 strike for ₹176.44, paying the premium.
- You pay a net ₹24,734 upfront for the position. Your maximum loss is ₹11,734.
Below 22,669 you profit, and profit grows as Nifty falls.
Between 22,669 and 23,231 you lose, up to ₹11,734.
Above 23,231 you profit, and profit keeps growing as Nifty rises.
Set-up: Buy 1 lot ITM Call and Buy 1 lot ITM Put with same expiration. Expiry is at distant away to avoid exponential time decay that happens as expiration approaches.
What happens if Nifty moves
Profit or loss at expiry| Nifty at expiry | Move | Profit / loss |
|---|---|---|
| 21,600 | −6% | +₹69,516 |
| 22,300 | −3% | +₹24,016 |
| 22,750 | −1% | −₹5,234 |
| 22,950 | Unchanged | −₹11,734 |
| 23,200 | +1% | −₹1,984 |
| 23,650 | +3% | +₹27,266 |
| 24,350 | +6% | +₹72,766 |
How the Greeks affect it
When to use
Outlook is Directional Neutral in Guts. You are looking forward for increasing volatility with stock price moving explosively in either direction.
- Being Directional Neutral, you can participate in either ways volatility jumps.
- Ideal to trade Guts would be when you are expecting wider movement in stocks.
Things to watch
- Time decay is harmful to Guts.
- Time day accelerates exponentially in last week of expiry.
- Its expensive to built Guts as both options are ITM.
Guts: questions
What is a Guts strategy?
Long Guts like Strangle is a volatility strategy that aims to make money either ways from a stock/index soaring up or plummeting down.
When should you use a Guts?
Outlook is Directional Neutral in Guts. You are looking forward for increasing volatility with stock price moving explosively in either direction.
How do you set up a Guts?
Buy 1 lot ITM Call and Buy 1 lot ITM Put with same expiration. Expiry is at distant away to avoid exponential time decay that happens as expiration approaches.
What is the maximum profit of a Guts?
Maximum Profit is unlimited beyond Lower BEP (Put Strike minus total premium) or Higher BEP (Call Strike plus total premium).
What is the maximum loss of a Guts?
It is Net debit Strategy as you have bought both Call & Put. Maximum Loss is limited to total premium paid.
What is the breakeven of a Guts?
With Nifty at 22,973, the example on this page breaks even at 22,669 and 23,231 at expiry.
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