Strangle Option Strategy: Meaning, 2 Types, Differences
Options trading in India is no longer limited to professional traders or institutions. With platforms like NSE derivatives, weekly index expiries, and growing retail participation, strategies such as the strangle options strategy have become extremely popular among Indian traders.
In this guide, we’ll explain about the strangle options strategy, the difference between short strangle option strategy, long strangle option strategy, strangle vs straddle option strategy in the Indian market using the NIFTY and BANK NIFTY. This will provide an easy to understand, practical insight to both the beginner and the intermediate trader.
What is a Strangle Options Strategy?
A strangle strategy enables you to buy volatility and not direction. Rather than determining the direction of the market (that is whether it will rise or fall), you are more concerned with the extent to which it can move.
This renders the strangle options strategy particularly effective when an unusual event happens such as the RBI policy meetings, budget announcements, result seasons and global macro triggers.
A strangle options strategy is a purchase or sale of two options of differing strike prices but of the same expiry date:
- One Call Option (CE)
- One Put Option (PE)
Both options are usually out-of-the-money (OTM) at the time of entry.
Key idea
- You profit from volatility, not direction.
- The market must move significantly for profits in a long strangle.
- The market must remain range-bound for profits in a short strangle.
Types of Strangle Option Strategies
There are two main types of strangle strategies used in the Indian market:
- Long Strangle Option Strategy
- Short Strangle Option Strategy
Let’s understand both in detail.
Long Strangle Option Strategy
What is a Long Strangle?
A long strangle option strategy is created by:
- Buying one OTM Call option
- Buying one OTM Put option
- Same expiry, different strike prices
This strategy is used when you expect a big move in the market but are unsure of direction.
When to Use a Long Strangle?
- Before major events (Budget, RBI policy, US Fed meetings)
- During low volatility phases
- When India VIX is relatively low
Example: Long Strangle in NIFTY
Assume:
- NIFTY trading at 22,000
- Buy 22,300 CE
- Buy 21,700 PE
- Same weekly expiry
Total premium paid = ₹180
Profit Scenario:
- If NIFTY moves above 22,480 or below 21,520
- One option gains sharply
- Other expires worthless
Maximum Loss
- Limited to total premium paid
- ₹180 (best part for beginners)
Maximum Profit
- Unlimited on the upside
- Large on the downside
Advantages of Long Strangle Strategy
- Limited and predefined risk
- Direction-neutral
- High reward during big breakouts
- Suitable for beginners learning volatility trading
Disadvantages of Long Strangle Strategy
- Requires big movement
- Time decay (theta) works against you
- Frequent small losses if market stays flat
Short Strangle Option Strategy
What is a Short Strangle?
A short strangle option strategy involves:
- Selling one OTM Call
- Selling one OTM Put
- Same expiry, different strikes
This strategy profits from time decay and low volatility.
When to Use a Short Strangle?
- When market is range-bound
- After major events (post volatility crush)
- When India VIX is high and expected to fall
This strategy is for experienced traders only
Example: Short Strangle in BANK NIFTY
Assume:
- BANK NIFTY at 47,000
- Sell 47,800 CE
- Sell 46,200 PE
- Total premium received = ₹420
Profit Scenario:
- BANK NIFTY stays between 46,200–47,800
- Options expire worthless
Maximum Profit
- Limited to premium received
Maximum Loss
- Unlimited
- Requires strict risk management
Risk Management for Short Strangle
- Always use hedges
- Define stop-loss in premium terms
- Avoid trading during unexpected news
- Never deploy full capital
Strangle vs Straddle Option Strategy
Many traders confuse strangle vs straddle option strategy. Let’s simplify.
Feature | Strangle Strategy | Straddle Strategy |
Strike price | OTM options | ATM options |
Cost | Lower | Higher |
Movement needed | Bigger | Smaller |
Risk (long) | Limited | Limited |
Best for | Big moves | Immediate volatility |
Strangle vs Straddle option strategy: Which is better?
- Strangle → Cheaper, needs larger move
- Straddle → Expensive, reacts faster
Why Indian Traders Prefer Strangles?
- Weekly expiries offer faster decay
- Lower capital compared to futures
- Suitable for event-based trading
- Works well with India VIX analysis
Common Mistakes Traders Make
- Buying strangles too close to expiry
- Ignoring implied volatility
- Overtrading short strangles
- No stop-loss planning
Who Should Use a Strangle Strategy?
- Traders focusing on volatility
- Event-based traders
- Intermediate to advanced options traders
- Beginners (only long strangle)
Conclusion
The strangle options strategy is one of the most powerful tools in an Indian trader’s arsenal when used correctly. It shifts your mindset from predicting direction to understanding volatility, timing, and risk.
Beginners should start with long strangle strategies to limit losses and understand market behaviour. Experienced traders can explore short strangles, but only with strong risk control and discipline.
We believe that strategies don’t make money – discipline and education do. Learn logic, practice with small capital, and grow consistently.
FAQ'S
What is the strangle option strategy?
A strangle options strategy involves buying or selling OTM calls and put options of the same expiry to trade volatility.
Is strangle better than straddle?
Strangle is cheaper but requires a bigger move, while straddle is costlier and reacts faster.
Is short strangle risky?
Yes. Short strangle has unlimited risk and should only be used by experienced traders.
Can beginners use strangle strategy?
Yes, beginners should start with a long strangle due to limited risk.
Which market is best for strangle strategy in India?
NIFTY and BANK NIFTY are best due to high liquidity and weekly expiries.
What is a Short Strangle option strategy?
A Short Strangle is an options trading strategy where a trader sells an out-of-the-money (OTM) Call option and an OTM Put option of the same expiry to earn premium, expecting low market volatility.
What is a Long Strangle option strategy?
A Long Strangle is an options strategy where a trader buys an OTM Call option and an OTM Put option of the same expiry, expecting high market volatility and big price movement.
