Straddles & strangles

A big move, either way

Debit

Risk: Defined: the premium paid

Long straddle

Also called: Buy straddle

Buy a call and a put at the same (at-the-money) strike: profits if the underlying moves further than the combined premium in either direction.

Payoff sketch (per unit, index points)

At expiry

Today (7 days left)

Net premium

Debit 360 pts

Max profit

Unlimited above the chart

Max loss

−360 pts (₹23,383 per lot)

Breakeven

24,640 / 25,360

Legs: Buy CE ATM · Buy PE ATM. Illustration, not live prices: an index at 25,000, strikes 100 points apart, Black-Scholes premiums at 13% implied volatility, 7 days to expiry, 6.5% interest, no skew and before charges. Rupees per lot use a NIFTY lot of 65.

How it works

The two premiums together are the market's price for the move expected by expiry. The straddle pays off only if the actual move is bigger.

It loses time value on both legs every day and is exposed to falls in implied volatility, which typically follow scheduled events.

When traders use it

Ahead of an event when the trader expects a move larger than the one priced in.
When implied volatility is judged low relative to the moves likely to follow.

Greeks

Delta	Near zero at entry; becomes positive on a rise and negative on a fall.
Gamma	Strongly positive, largest near expiry.
Theta	Strongly negative: both legs decay.
Vega	Strongly positive: the position is a bet on volatility.

Profit, loss and margin

Max profit	Unlimited on the upside; large on the downside.
Max loss	Both premiums plus charges, if the underlying settles exactly at the strike.
Breakeven	Strike ± total premium paid.
Margin	No margin: both premiums are paid upfront.

In India

Buyers pay the full premium upfront and need no further margin; the most they can lose is the premium plus charges.
A long option that finishes in the money is exercised automatically. STT is then charged on its intrinsic value at the exercise rate (0.15% from 1 April 2026 in Arthfy's cost model), instead of the sale rate on the premium (also 0.15%) that applies when the option is sold before the close. See the lesson on the STT exercise trap.
Since 20 November 2024 each exchange keeps one weekly index expiry: NIFTY on NSE and SENSEX on BSE. Since September 2025 NSE contracts expire on Tuesdays and BSE contracts on Thursdays. BANKNIFTY, FINNIFTY, MIDCPNIFTY and stock options expire monthly (NSE on the last Tuesday). A holiday moves the expiry to the previous trading day.

Arthfy numbers

Long straddle: what it did since 2016

Long straddle, at the money, entered 8-15 days before expiry.

0-2 d

3-7 d

8-15 d

16-30 d

31-45 d

Try it in the F&O hub

Opens the tool with this structure on today's NIFTY chain. Reading is free with an Arthfy account; some runs use free attempts.

Open in the builderPayoff, Greeks, scenario grid and charges on today's NIFTY chain

Backtest since 2016Daily data, every NIFTY expiry

Replay on expiry daysMinute data since October 2024

Open the option chainLive premiums, IV and Greeks

Straddles & strangles

Strip

For education: how the structure works and what it did historically, not a recommendation to trade it.