Straddle option strategy
Straddle 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 22,946 · 19 Oct 2026Legs
| Action | Option | Strike | Lots | Qty | Premium |
|---|---|---|---|---|---|
| BUY | ATM Call | 22,950 | 1 | 65 | ₹102.85 |
| BUY | ATM Put | 22,950 | 1 | 65 | ₹106.80 |
How it works
- Buy 1 ATM call at the 22,950 strike for ₹102.85, paying the premium.
- Buy 1 ATM put at the 22,950 strike for ₹106.80, paying the premium.
- You pay a net ₹13,627 upfront for the position. This is the most you can lose.
Below 22,740 you profit, and profit grows as Nifty falls.
Between 22,740 and 23,160 you lose, up to ₹13,627.
Above 23,160 you profit, and profit keeps growing as Nifty rises.
Set-up: Buy 1 lot ATM Call and 1 lot ATM 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 |
|---|---|---|
| 21,550 | −6% | +₹77,373 |
| 22,250 | −3% | +₹31,873 |
| 22,700 | −1% | +₹2,623 |
| 22,950 | Unchanged | −₹13,627 |
| 23,200 | +1% | +₹2,623 |
| 23,650 | +3% | +₹31,873 |
| 24,300 | +6% | +₹74,123 |
How the Greeks affect it
When to use
Outlook is Directional Neutral in Straddle;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 Straddle for stocks where earning is due to announce.
Things to watch
- Time decay is harmful to Straddle.
- Time day accelerates exponentially in last week of expiry.
- As cost to establish Straddle is significantly high. If stock fails to give desired move, one can lose the premium.
Straddle: questions
What is a Straddle strategy?
Straddle 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 Straddle?
Outlook is Directional Neutral in Straddle;You are looking forward for increasing volatility with stock price moving explosively in either direction.
How do you set up a Straddle?
Buy 1 lot ATM Call and 1 lot ATM 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 Straddle?
Maximum Profit is unlimited beyond Lower BEP (Strike minus premium) or Higher BEP (Strike plus premium).
What is the maximum loss of a Straddle?
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 Straddle?
With Nifty at 22,946, the example on this page breaks even at 22,740 and 23,160 at expiry.
Watch: Straddle videos
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