Table of Contents
What is short strangle? Why so famous?
Short strangle is very famous for nifty and secondly banknifty. It Involves selling options at two points at a distance from Spot Price.
How to select our selling strike price in our strangle?
1. Go for technical analysis and draw resistance/vah(value are high) and support/val(value are low)
Sell strikes at these support and resistance drawn.
2. Go for monthly chart and draw high and low, now draw last few weeks high and low. Now select points of support and resistance using the high and low’s
3. Option chain analysis to figure out the sellers perspective of highest OI(active contracts) and change in OI(market participants) ande volume for liquidity.
Now select the strike prices at roughly equal distance.
For above 3 selections say market is at 17000 and you found 17500 and 16500 as support and resistance then go for selling them for net premium as initial profit which we can earn. Now always remember to keep targets at 80% premium decay only for weekly options.
This will give a regular monthly income for 4 weeks expiry.
4. Now assume you did not have any time to do above 3 types of selections then go for roughly 120 premium related strike price on nifty for call and put.
Note: try buy far otm pe and ce as additional. Legs to reduce margins Requirements by brokers.