Short Guts option strategy
Short Guts is a range bound Strategy wherein you don�t expect any movement in stock or fall in volatility.
Payoff at expiry
Nifty, lot size 65 · Nifty future 22,946 · 19 Oct 2026Legs
| Action | Option | Strike | Lots | Qty | Premium |
|---|---|---|---|---|---|
| SELL | ITM Call | 22,850 | 1 | 65 | ₹159.26 |
| SELL | ITM Put | 23,050 | 1 | 65 | ₹164.80 |
How it works
- Sell 1 ITM call at the 22,850 strike for ₹159.26, collecting the premium.
- Sell 1 ITM put at the 23,050 strike for ₹164.80, collecting the premium.
- You receive a net ₹21,064 upfront for the position. Your maximum profit is ₹8,064.
Below 22,726 you lose, and the loss grows as Nifty falls.
Between 22,726 and 23,174 you profit, up to ₹8,064.
Above 23,174 you lose, and the loss keeps growing as Nifty rises.
Set-up: Sell 1 lot ITM Call and Sell 1 lot ITM Put with same expiration. Its idle to choose near term option as time decay gain will be maximum.
What happens if Nifty moves
Profit or loss at expiry| Nifty at expiry | Move | Profit / loss |
|---|---|---|
| 21,550 | −6% | −₹76,436 |
| 22,250 | −3% | −₹30,936 |
| 22,700 | −1% | −₹1,686 |
| 22,950 | Unchanged | +₹8,064 |
| 23,200 | +1% | −₹1,686 |
| 23,650 | +3% | −₹30,936 |
| 24,300 | +6% | −₹73,186 |
How the Greeks affect it
When to use
Short Guts is exposed to unlimited risk if the underlying give explosive movement. It entails huge net credit as we are selling booth ITM call & ITM Put.
- Profit from Range bound stock.
- High yielding income strategy.
- High premium as both options are ITM.Time decay is beneficial to Guts.
- Time day accelerates exponentially in last week of expiry.
Things to watch
- Uncapped Risk on either side.
- Hedging cost would be high if stock gives any directional movement.
Short Guts: questions
What is a Short Guts strategy?
Short Guts is a range bound Strategy wherein you don�t expect any movement in stock or fall in volatility.
When should you use a Short Guts?
Short Guts is exposed to unlimited risk if the underlying give explosive movement. It entails huge net credit as we are selling booth ITM call & ITM Put.
How do you set up a Short Guts?
Sell 1 lot ITM Call and Sell 1 lot ITM Put with same expiration. Its idle to choose near term option as time decay gain will be maximum.
What is the maximum profit of a Short Guts?
Maximum Profit is limited to the net credit received for selling the call and Put minus the difference between the strike.
What is the maximum loss of a Short Guts?
Maximum risk on the strategy is unlimited if the stock rises above the breakeven point or falls below the breakeven point.
What is the breakeven of a Short Guts?
With Nifty at 22,946, the example on this page breaks even at 22,726 and 23,174 at expiry.