Short strangle

It sells a call above the index and a put below it, and keeps both premiums if the index stays between the two strikes. The strikes are set well away from today's level, so the index has room to wander.

What it does not do is buy insurance. That is where the extra premium comes from, and it is also why a sharp enough move can lose more than the strategy ever collected. The stops make that rare. They cannot make it impossible.

It only sells when option prices are high, measured against the past year, and only between 10:00 and 11:00, once the opening noise has settled. It skips days before a scheduled market event.

Money comes from time passing with the index inside the strikes. The position is bought back once it has earned half the premium, or closed early on any of the exits below.

Illustrative prices with NIFTY at 24,000, three days before expiry, one lot of 75 units, balanced version.

Sell the 24,300 call

collect ₹40 a unit

Sell the 23,700 put

collect ₹38 a unit

Net collected

₹78 a unit, ₹5,850 a lot

Most it can make

₹5,850, if NIFTY ends between 23,700 and 24,300

Break-evens

23,622 and 24,378

At 24,600

a loss of ₹16,650

At 25,000

a loss of ₹46,650, and it keeps growing

Compare the condor: it collected ₹3,075 for the same week with a loss capped at ₹11,925. The strangle collects nearly twice as much and the chart on this page has no floor. The stops are designed to close it long before 25,000, and on an ordinary day they will. On a gap day they may not get the chance.

These are the real rules, in the order the strategy checks them. Nothing here needs you to be watching.

1. 1

   Takes the profit at half

   Half to sixty percent of the premium, then out.

2. 2

   Leaves a side whose delta rises

   If either sold option's delta reaches the exit level, that side is closed.

3. 3

   Stops when the premium doubles

   Two to two-and-a-half times, by version.

4. 4

   Stops trading for the day after a set loss

   One to one-and-a-half percent of the account.

5. 5

   Closes everything by 15:15

   No overnight exposure, which matters more here than anywhere else on this site.

Adjustments, and why it does not make them

This is the strategy where traders adjust most: rolling the untested side closer to collect more, or rolling the threatened side out to next week. Done well it smooths results; done badly it is how open-ended risk becomes a very large loss.

This robot closes rather than rolls. If you want a version that cannot lose more than a known figure, the iron condor is that strategy.

Each strategy comes as conservative, balanced and aggressive. They share the idea and differ in how much they risk once in.

• Open-ended loss. A stop on the premium is not a stop on the index; a gap can jump past it.
• Margin for two sold legs is substantial and rises when the market gets nervous, exactly when the position is already losing.
• Needs historical option prices to test, which this site does not yet hold. These listings are not published for that reason.

Premium

The price of an option. A seller receives it up front and keeps it if the option expires worthless.

Strike

The index level an option is tied to. A 24,000 call pays its owner only if the index finishes above 24,000.

Expiry

The day an option stops existing. NIFTY and BANKNIFTY have weekly expiries, and these strategies use the current week's.

Lot

Options trade in fixed bundles. One lot of NIFTY is 75 units at the time of writing, so a ₹40 premium is ₹3,000 per lot. Check your broker for the current size.

Delta

Roughly, the chance an option finishes in the money. A 0.15-delta option is about 15% likely to; the lower the delta, the further from today's level the strike sits and the smaller the premium.

Implied volatility (IV)

How big a move the market is pricing in. When IV is high, options are expensive, which is when selling them pays best.

Margin

Money your broker blocks while you hold a sold option, because you may have to pay out. It is returned when the position closes.