Options Strategy
Long Strangle — Nifty 50
Buy an OTM call and an OTM put at different strikes but the same expiry. Cheaper than a straddle but needs a larger Nifty move to profit. Best used when expecting a big event but wanting to reduce upfront cost.
Leg 1 — BUY OTM Call
24,500 CE
Pay premium: ₹180
Leg 2 — BUY OTM Put
23,500 PE
Pay premium: ₹165
Total cost
₹25,875
Max loss (per lot)
Upper breakeven
24,845
Call strike + total prem
Lower breakeven
23,155
Put strike − total prem
Max profit
Unlimited
Either direction
Adjust your trade parameters
Big rally (above upper BE)
OTM call kicks in. Every point above upper BE = ₹75 profit per lot.
Inside the strikes (loss zone)
Both options expire worthless or near zero. Full premium paid is the max loss.
Big fall (below lower BE)
OTM put kicks in. Every point below lower BE = ₹75 profit per lot.
Long Strangle vs Long Straddle
Long Straddle (ATM)
Higher premium paid
Breakevens closer to spot
Profitable on smaller moves
Best for sharp event spikes
Long Strangle (OTM)
Lower premium paid
Breakevens further from spot
Needs a bigger Nifty move
Best for budget-conscious plays
How to execute on NSE
1
Identify an upcoming high-volatility event where a big Nifty move is expected but direction is uncertain.
2
Select an OTM Call strike above the current Nifty spot and an OTM Put strike below it. Typically 1 to 3 strikes away from ATM.
3
BUY the OTM Call and BUY the OTM Put in the same expiry. Total debit = Call premium + Put premium × 75.
4
Exit both legs together promptly after the event triggers. IV crush after the event erodes OTM options faster than ATM ones.
5
If one side is deep in profit, exit the winning leg and consider keeping the other as a cheap lottery ticket, or exit both for a clean trade.
Key risks to know
Wider loss zone than a straddle: The flat zone between the two OTM strikes is wider, meaning Nifty has more room to sit still and bleed your entire premium.
IV crush hits OTM options hardest: After a major event, implied volatility collapses. OTM options lose a higher percentage of their value than ATM options when IV drops sharply.
Time decay (Theta): You are long two options. Theta bleeds from both every day, and OTM options decay to zero faster in the final week before expiry.
Strike selection matters greatly: Strikes too far OTM make breakevens unreachable. Strikes too close to ATM reduce the cost advantage over a straddle. Aim for 1 to 2% OTM on each side for a balanced strangle on Nifty.