Nifty Short Strangle Strategy – Expiry 15-May-2025

This setup involves selling one lower strike Put and one higher strike Call. The combined premium from both sides totals ₹42. The stop loss is placed at ₹80, and the target is the full premium received.

Expiry Pay-off Chart

The chart below shows how the strategy performs based on where the Nifty ends on expiry day:

• The maximum return is the net premium inflow of ₹42.

• The breakeven points are at 21,958 and 24,942.

• If Nifty remains within 22,000 and 24,900, the strategy retains the entire premium.

• Losses start to appear below 21,958 or above 24,942.

These points help visualise the zone where the structure remains effective.

Rationale

• Geopolitical tensions over the past two days have shifted the volatility regime, with a noticeable rise in India VIX, signaling elevated uncertainty and risk perception.

• The Nifty currently oscillates between 23,800 (support) and 24,600 (resistance). Given the recent rise in volatility, a wider trading range is expected in the coming week.

• On the upside, the rally may be capped near the 24,900 zone, which matches the intermediate high from December 2024.

• On the downside, volatility could pull the index toward 22,900–22,800, which is a gap zone from mid-April and also matches the 61.8% Fibonacci retracement of the move from 21,743 to 24,589.

• Even though Implied Volatility (IV) has risen, the change is likely to be temporary. This situation allows a chance to benefit from Vega and Theta decay using a planned options setup.

• A Short Strangle strategy, with wider, carefully chosen strike prices, is suggested to capture the effect of IV contraction and time decay, while factoring in a wider price range.

Key Takeaway

This Nifty Short Strangle setup is built with the current market volatility and price range in mind. It uses defined strike levels, a stop loss of ₹80, and a target of ₹42, helping structure the trade with a balanced view of risk and reward.

• The peak payoff is the entire premium inflow of ₹42.

• Losses start if Nifty moves below 21,958 or above 24,942.