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​ ​ Volatile 
 
 
 
 

​ Strategies for volatile view 

 
 
 

 
 
 
 
 
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1 Guts 

 
Introduction 
 
Long Guts like Strangle is a volatility strategy that aims to make money either ways from a stock/index soaring up or 
plummeting down 
 
When To Execute? 
 
Outlook is Directional Neutral in Guts. You are looking forward for increasing volatility with stock price moving explosively in 
either direction 
 
Trade 
 
Buy 1 lot ITM Call and Buy 1 lot ITM Put with same expiration. Expiry is at distant away to avoid exponential time decay that 
happens as expiration approaches. 
 
Maximum Profit 
 
Maximum Profit is unlimited beyond Lower BEP (Put Strike minus total premium) or Higher BEP (Call Strike plus total premium). 
 
Maximum Loss 
 
It is Net debit Strategy as you have bought both Call & Put. Maximum Loss is limited to total premium paid 
 
Advantages 
 
Being Directional Neutral, you can participate in either ways volatility jumps 
 
Ideal to trade Guts would be when you are expecting wider movement in stocks 
 
Disadvantages 
 
Time decay is harmful to Guts 
 
Time day accelerates exponentially in last week of expiry 
 
Its expensive to built Guts as both options are ITM 
 

 
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2 Straddle 

 
Introduction 
 
Straddle is a volatility strategy that aims to make money either ways from a stock/index soaring up or plummeting down 
 
When To Execute? 
 
Outlook is Directional Neutral in Straddle;You are looking forward for increasing volatility with stock price moving explosively in 
either direction 
 
Trade 
 
Buy 1 lot ATM Call and 1 lot ATM Put with same expiration . Expiry is at distant away to avoid exponential time decay that 
happens as expiration approaches. 
 
Maximum Profit 
 
Maximum Profit is unlimited beyond Lower BEP (Strike minus premium) or Higher BEP (Strike plus premium) 
 
Maximum Loss 
 
It is Net debit Strategy as you have bought both Call & Put. Maximum Loss is limited to total premium paid 
 
Advantages 
 
Being Directional Neutral, you can participate in either ways volatility jumps 
 
Ideal to trade Straddle for stocks where earning is due to announce 
 
Disadvantages 
 
Time decay is harmful to Straddle 
 
Time day accelerates exponentially in last week of expiry 
 
As cost to establish Straddle is significantly high. If stock fails to give desired move, one can lose the premium 

 
 
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3.Strangle 

 
Introduction 
 
Strangle like Straddle is a volatility strategy that aims to make money either ways from a stock/index soaring up 
or plummeting down 
 
When To Execute? 
 
Outlook is Directional Neutral in Strangle; Ideal when you are looking forward for increasing volatility with stock 
price moving explosively in either direction 
 
Trade 
 
Buy 1 lot OTM Call and 1 lot OTM Put with same expiration. Expiry is at distant away to avoid exponential time 
decay that happens as expiration approaches. 
 
Maximum Profit 
 
Maximum Profit is unlimited beyond Lower BEP (Put Strike minus premium) or Higher BEP (Call Strike plus 
premium) 
 
Maximum Loss 
 
It is Net debit Strategy as you have bought both Call & Put; Maximum Loss is limited to total premium paid 
 
Advantages 
 
Being Directional Neutral, you can participate in either ways volatility jumps 
 
Ideal to trade Strangle would be when you are expecting wider movement in stocks 
 
Disadvantages 
 
Time decay is harmful to Strangle as a time day accelerates exponentially in last week of expiry 
 
As BEP in Strangle is wider. If stock fails to give desired move, one can lose the premium 
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4.Strap 

 
Introduction 
 
The Strap is high volatility strategy with more bias towards Upside 
 
When To Execute? 
 
Strap is neutral to bullish Strategy. You are looking for increasing volatility with the stock price moving 
explosively in either direction, preferably to the upside 
 
Trade 
 
Buy 2 lots ATM Call and 1 lot ATM Puts with same expiration. Strategy is expensive compare to Straddle and it 
requires explosive move mostly on upside. 
 
Maximum Profit 
Maximum Profit is unlimited. However profit is more skewed on upside as we bought double the number of Calls. 
Profitability improves at double the speed on upside. The BEP to the downside is the strike minus the net debit, 
which is more than the Straddle because weve bought double the amount of Calls 
 
Maximum Loss 
It is Net debit Strategy as you have bought both Call & Put. Strap is more expensive than usual Straddle for the 
extra Call it possess 
 
Advantages 
 
With Neutral to Bullish outlook, one can participate in either ways surge in volatility preferably volatility on Upside. 
Ideal to trade when implied volatility is at lower end, lower option prices and is expected to increase exponentially 
with bias on upside 
 
Disadvantages 
 
Time decay is harmful to Strap. Time day accelerates exponentially in last week of expiry. Cost to establish Strap 
is significantly high. If stock fails to give desired move, one can lose the premium 
 
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5. Strip 

 
Introduction 
 
The Strip is high volatility strategy with more bias towards downside 
 
When To Execute? 
 
Strip is neutral to bearish Strategy; Ideal for traders who are anticipating an increase in volatility with the stock price moving 
explosively in either direction, preferably on the downside 
 
Trade 
 
Buy 1 lot ATM Call and 2 lots ATM Puts with same expiration . Strategy is expensive as compared to Straddle and it requires 
explosive move mostly on downside 
 
Maximum Profit 
 
Maximum Profit is unlimited. However profit is more skewed on downside as we bought double the number of puts. 
Profitability improves at double the speed on downside. The BEP on the upside is the strike plus the net debit, which is more 
than the Straddle because we have bought double the amount of puts 
 
Maximum Loss 
 
It is Net debit Strategy as you have bought both Call & Put. Strip is more expensive than usual Straddle because of the extra Put 
within the strategy 
 
Advantages 
 
With Neutral to Bearish outlook, one can participate in either ways surge in volatility preferably volatility on downside 
 
Ideal to trade when implied volatility is at lower end. Beneficial when option prices are lower and expected to increase 
exponentially with bias on downside 
 
Disadvantages 
 
Time decay is harmful to Strip. Time decay accelerates exponentially in last week of expiry 
 
As cost to establish Strip is significantly high. If stock fails to give desired move, one can lose the premium 

 
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6. Short Call Butterfly 

 
Introduction 
 
Short Call Butterfly Strategy is a Volatility strategy. It is opposite to Long Call Butterfly. It offers lower reward for 
relatively higher risk. 
 
When To Execute? 
 
Short Call Butterfly strategy is Directional Neutral strategy that expects high volatility in the underlying to make 
money. In scenario where strike difference is not equal it is known as Modified Short Call Butterfly. 
 
Trade 
 
Sell 1 lot ITM Call, Buy 2 lots ATM Call and Sell 1 lot deep OTM Call 
 
Maximum Profit 
 
It is a net credit strategy. Maximum Profit arrives if the stock closes above highest call or below the first call 
 
Maximum Loss 
 
Maximum Loss occurs if the stock fails to give any momentum and expires near the ATM strike calls. Maximum 
loss is difference between first and second call less net credit received. 
 
Advantages 
 
Idle for the stock that is range bound for the long time and is expected to give breakout/ breakdown. It is net 
credit strategy with defined reward to risk. 
 
Disadvantages 
 
Time decay could be beneficial if the stock is near the extremes and can hurt if the stock expires near middle 
strike. Higher profit potential comes only near expiration 
 
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7. Short Call Condor 

 
Introduction 
 
Short Call Condor Strategy is a Volatility strategy. It is opposite to Long Call Condor. It offer lower reward for 
relatively higher risk 
 
When To Execute? 
 
Short Call Condor is a volatility strategy that expects big move in underlying to make money. In scanario where 
strike difference between 1st and 2nd strike is not equal to difference between 3rd and 4th strike;it is known as 
Modified Short Call Condor Strategy 
 
Trade 
 
Sell 1 ITM Call, Buy 1 middle ITM Call, Buy 1 middle OTM Call and Sell 1 deep OTM Call 
 
Maximum Profit 
 
It is the net credit strategy. Maximum Profit arrives if the stock closes above highest call or below the first call 
 
Maximum Loss 
 
Maximum Loss occurs if the stock fails to give any momentum and expires between the two bought calls. 
Maximum loss is difference between first and second call less net credit received 
 
Advantages 
 
Idle for the stock that is range bound for the long time and is expected to give breakout/ breakdown. It is net 
credit strategy with defined reward to risk 
 
Disadvantages 
 
Time decay could be beneficial if the stock is near the extremes and can hurt if the stock expires between middle 
two strike. 2.Higher profit potential comes only near expiration 
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8. Short Iron Butterfly 

 
Introduction 
 
Short Iron Butterfly is a Volatility strategy. It involves very high risk for limited reward 
 
When To Execute? 
 
Short Iron Butterfly is a combination of Bear Put Spread and Bull Call Spread. With Short Iron butterflies, you are 
looking for big move in stock either direction. You are expecting surge in volatility.In scenario where strike 
difference is not equal it is known as Modified Short Iron Butterfly. 
 
Trade 
 
Sell 1 lot OTM Put, Buy 1 lot ATM Put, Buy 1 lot ATM Call and Sell 1 lot OTM Call 
 
Maximum Profit 
 
Your maximum reward is the difference between any adjacent strike prices less the net debit. (Strikes are 
equip-distance from each other). 
 
Maximum Loss 
 
Maximum risk is your net debit you pay 
 
Advantages 
 
It is executed when stock had been range bound for long time and is about to give a breakout/breakdown. It is 
idle to trade long term option as negative time decay impact will be least 
 
Disadvantages 
 
Time decay is generally harmful to the option position 
 
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9. Short Put Butterfly 

 
Introduction 
 
Short Put butterfly Strategy is a Volatility strategy. It is opposite to Long Put Butterfly. It offer lower reward for 
relatively higher risk 
 
When To Execute? 
 
Short Put Butterfly is a volatility strategy that expects big move in underlying to make money.In scenario where 
strike difference is not equal it is known as Modified Short Put Butterfly. 
 
Trade 
 
Sell 1 lot ITM Put, Buy 2 lots ATM Put, Sell 1 lot deep OTM Put 
 
Maximum Profit 
 
It is the net credit strategy. Maximum Profit arrives if the stock closes above highest Put or below the first Put 
 
Maximum Loss 
 
Maximum Loss occurs if the stock fails to give any momentum and expires near ATM strike Puts. Maximum loss 
is difference between first and second Put less net credit received 
 
Advantages 
 
Idle for the stock that is range bound for the long time and is expected to give breakout/ breakdown. It is net 
credit strategy with defined reward to risk 
 
Disadvantages 
 
Time decay could be beneficial if the stock is near the extremes and can hurt if the stock expires near middle 
strike. 2.Higher profit potential comes only near expiration 
 
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10. Short Put Condor 

 
Introduction 
 
Short Put Condor Strategy is a Volatility strategy. It is opposite to Long Put Condor. It offers lower reward for 
relatively higher risk 
 
When To Execute? 
 
Short Put Condor is a volatility based strategy that could be executed when one expects big move in underlying 
to make money.In scanario where strike difference between 1st and 2nd strike is not equal to difference between 
3rd and 4th strike;it is known as Modified Short Put Condor Strategy 
 
Trade 
 
Sell 1 ITM Put, Buy 1 middle ITM Put, Buy 1 middle OTM Put and Sell 1 deep OTM Put 
 
Maximum Profit 
 
It is the net credit strategy. Maximum Profit arrives if the stock closes above highest Put or below the first Put 
 
Maximum Loss 
 
Maximum Loss occurs if the stock fails to give any momentum and expires between the two bought Puts. 
Maximum loss is difference between first and second Put less net credit received 
 
Advantages 
 
Idle for the stock that is range bound for the long time and is expected to give breakout/ breakdown. It is net 
credit strategy with defined reward to risk 
 
Disadvantages 
 
Time decay could be beneficial if the stock is near the extremes and can hurt if the stock expires between middle 
two strikes 
Higher profit potential comes only near expiration 
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