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 22,650 · 6 Oct 2026Legs
| Action | Option | Strike | Lots | Qty | Premium |
|---|---|---|---|---|---|
| BUY | ATM Call | 22,650 | 1 | 65 | ₹135.46 |
| BUY | ATM Put | 22,650 | 1 | 65 | ₹135.66 |
How it works
- Buy 1 ATM call at the 22,650 strike for ₹135.46, paying the premium.
- Buy 1 ATM put at the 22,650 strike for ₹135.66, paying the premium.
- You pay a net ₹17,623 upfront for the position. This is the most you can lose.
Below 22,379 you profit, and profit grows as Nifty falls.
Between 22,379 and 22,921 you lose, up to ₹17,623.
Above 22,921 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 |
|---|---|---|
| 21,300 | −6% | +₹70,127 |
| 21,950 | −3% | +₹27,877 |
| 22,400 | −1% | −₹1,373 |
| 22,650 | Unchanged | −₹17,623 |
| 22,900 | +1% | −₹1,373 |
| 23,350 | +3% | +₹27,877 |
| 24,000 | +6% | +₹70,127 |
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 22,650, the example on this page breaks even at 22,379 and 22,921 at expiry.