So before you dig in you need to understand Long Straddle strategy. Here is the definition of Long Straddle.
A long straddle is a combination of buying a call and buying a put, both with the same strike price and expiration. Together, they produce a position that should profit if the stock makes a big move either up or down.
Ok so if you have read and understand above line you may have got little or complete idea about what strategy we are going to use.
Let's take an example.
Nifty Spot is trading around 7300 Spot
7300 March CALL is trading around Rs. 167
7300 March PUT is trading around Rs. 124.
What we need to do is we need to buy both CALL and PUT at the same time. Market will move either direction and in this case either CALL will rise or PUT will rise depending upon market will go.
BREAKEVEN = 167 + 124 = 291.
We can get rewarded if one of the call go beyond 291 which will likely to be happen if market will rise 100-200 points in same direction. Or total value of CALL + PUT strike price will be grater than 291 we are in profit.
I suggest to use this strategy before 10th of each month. As you may already know that as we move towards expiry the overall value of CALL/PUT will start decreasing.
Happy Trading!!!
