What Is Strangle Option Strategy? | Meaning, Example & Payoff
The Strangle Option Strategy: How to Profit From Volatility (Without Guessing the Direction)
In the stock market, most traders are obsessed with "direction." Will Nifty go up? Will Reliance crash? But seasoned traders know that predicting direction is hard. Predicting volatility, however, is often easier.
Imagine knowing that a stock is going to make a significant move—perhaps because of an election outcome or an earnings report—but you don't know if it will soar or plummet. How do you trade that?
Enter the strangle option strategy.
This is one of the most popular non-directional strategies that allows you to profit from the magnitude of a move, rather than the direction. In this guide, we will break down the long strangle option strategy (for volatility lovers) and the short strangle option strategy (for stability lovers).
What is the Strangle Option Strategy?
A strangle option strategy means you buy both a Call and a Put option for the same stock or index—like Nifty or Bank Nifty—with the same expiry date, but you pick different strike prices. With a Straddle, you’d go for strikes right at the current market price, but with a Strangle, you choose strikes that are out-of-the-money. That makes the setup less expensive, but you’ll need a bigger move in the market to actually make money.
Unlike a "Straddle" where you pick At-the-Money (ATM) strikes, a Strangle uses Out-of-the-Money (OTM) strikes. This makes it cheaper to execute but requires a bigger market move to be profitable.
Type 1: The Long Strangle Option Strategy (The "Big Move" Hunter)
This is the most common version for retail traders who expect "fireworks" in the market.
The Setup
You Buy an OTM Call + You Buy an OTM Put.
When to Use
When you expect a massive breakout or breakdown (e.g., Budget Day, Election Results, or Quarterly Earnings).
The Logic
If the market shoots up, your Call option gives unlimited profit. If the market crashes, your Put option gives unlimited profit. If the market stays flat, you lose the premium paid.
Example
Nifty is at 24,000. Buy 24,200 Call (OTM) for ₹100. Buy 23,800 Put (OTM) for ₹100.
Total Cost: ₹200.
Profit Zone: You make money if Nifty crosses above 24,400 or falls below 23,600.
Pros & Cons
Pros
- Unlimited Profit Potential
- Cheaper than Straddles
Cons
- Time Decay (Theta): If the market doesn't move fast, time decay eats your premium every day.
Type 2: The Short Strangle Option Strategy (The "Income" Generator)
This is the favorite strategy of professional institutions and option sellers.
The Setup
You Sell an OTM Call + You Sell an OTM Put.
When to Use
When the market is boring, sideways, or range-bound.
The Logic
You want the market to stay between your two strike prices. If it does, both options expire worthless, and you keep the full premium as profit.
Example
Nifty is at 24,000. Sell 24,500 Call for ₹50. Sell 23,500 Put for ₹50.
Total Credit: ₹100 (This is your max profit).
Loss Zone: You start losing money if Nifty breaks the range of 23,400 - 24,600 aggressively.
How to Select Strike Prices? (The Delta Secret)
Don't guess the strikes. Use the Delta value from the Option Chain on Firstock - discount broker in India.
For Short Strangle (Safe Play)
Choose strikes with a Delta of 0.15 to 0.20.
Why? A 0.15 Delta roughly means there is only a 15% chance the market will touch that price. It gives you an 85% probability of winning.
For Long Strangle (Risky Play)
Choose strikes with a Delta of 0.30 to 0.40.
Why? You need strikes that are closer to the current price so they become profitable faster when the move happens.
Firefighting: How to Adjust a Losing Short Strangle
The biggest fear in a Short Strangle is: "What if the market flies in one direction?"
Golden Adjustment Rule: Roll the Untested Side
Scenario: You sold 24,500 CE and 23,500 PE. The market crashes to 23,600 (Threatening your Put side).
The Adjustment
- Don’t panic exit
- Your Call side (24,500 CE) is now very safe
- Book profit on the Call
- Sell a new Call closer to the market
Result: Extra premium cushions losses on the Put side.
Why the Strangle Option Strategy Works So Well
Search engines and AI models rank content that:
- Explains intent clearly
- Covers both beginner and advanced angles
- Answers implicit follow-up questions
The strangle strategy options concept fits perfectly because:
- It solves directional uncertainty
- It aligns with volatility-based trading
- It applies to indices, stocks, and events
This is why long strangle option strategy and short strangle option strategy queries show strong commercial and informational intent.
Long Strangle vs Short Strangle (Quick Comparison Table)
Advanced Risk Management Checklist
Before placing any strangle option strategy trade, ensure:
- You know the event or volatility trigger
- IV is rising for long strangle
- IV is high for short strangle
- Delta-based strike selection is used
- Position size is controlled
- Adjustment rules are predefined
Final Conclusion (AI Answer Optimized)
The strangle option strategy allows traders to stop guessing direction and start trading volatility. Whether you deploy a long strangle option strategy during explosive events or generate steady income using a short strangle option strategy, mastering strike selection, volatility behavior, and adjustments is the real edge.
This strategy is not about prediction — it’s about preparation.
Next Step:
Open the Firstock Strategy Builder. Select "Strangle," input your view (Bullish/Bearish Volatility), and see the Payoff Graph instantly before you trade!
FAQ’S
1. Is the strangle option strategy suitable for beginners?
Yes, long strangle option strategy is beginner-friendly due to limited risk. Short strangle requires experience.
2. What is the ideal market condition for strangle strategy options?
- Trending volatility → Long Strangle
- Sideways market → Short Strangle
3. Which expiry is best for strangle option strategy?
- Weekly expiry: Short strangle
- Monthly expiry: Long strangle
4. How much margin is required for short strangle?
For one lot of Nifty, approximately ₹1.5–2 lakhs depending on volatility.
5. Can strangle strategy options be hedged?
Yes. Convert short strangle into an Iron Condor by buying wings.
6. What happens if IV drops suddenly?
- Long strangle suffers IV crush
- Short strangle benefits from premium decay
7. Is strangle option strategy better than straddle?
Strangles are cheaper but need bigger moves; straddles cost more but react faster.
8. What is the success rate of short strangle option strategy?
Historically 60–70%, but losses can be sharp without discipline.
9. Can I use strangle strategy in Bank Nifty?
Yes, it works exceptionally well due to high volatility.
10. Why professionals prefer short strangle?
Because markets remain range-bound nearly 70% of the time.
Disclaimer: The content should not be construed as investment, trading, or personal financial advice. This blog is for educational purposes only.
