Sample Strategy - Strangle with Individual leg TG/SL (Sensex)

Disclaimer:

This document is for informational purposes only and describes the mechanics of the strategy as configured on the Quantiply platform. It is not financial advice. Past performance of any strategy does not guarantee future results. Please ensure you understand the risks involved before trading with real capital.

Strategy Overview:

This strategy deploys a Short OTM Strangle on SENSEX. In simple terms, you are simultaneously selling one Call option and one Put option, both placed slightly away from the current market price. The idea is to collect premium from both sides and profit as long as the market stays within a certain range.

Here is what gets sold at entry:

• 1 lot of SENSEX OTM 5 Call Option (CE)
• 1 lot of SENSEX OTM 5 Put Option (PE)

Both legs are entered at the same time, at the defined start time of the strategy.

What does “OTM 5” mean?

OTM stands for Out of the Money. The number 5 refers to how many strikes away from the current ATM (At the Money) strike each leg is placed.

• The Call option (CE) is placed 5 strikes above the ATM strike.
• The Put option (PE) is placed 5 strikes below the ATM strike.

So if SENSEX is trading near 80,000 and each strike interval is 100 points, the ATM would be 80,000. The CE leg would be sold at 80,500, and the PE leg at 79,500.

This structure gives the market some breathing room on both sides. It benefits from time decay; as long as the market does not make a large directional move, both options will lose value over time, and you keep the premium collected at entry.

Strategy Snapshot:

Overview of the key configuration parameters for this strategy

Risk Management Configuration:

In this strategy, each leg is monitored and managed completely on its own. The Call and Put do not share a combined target or stoploss instead, each has its own independent settings.

This means:

• If the Call leg hits its target, it gets squared off. The Put leg continues running.
• If the Put leg hits its stoploss, it gets squared off. The Call leg continues running.

There is no forced exit of the other leg when one side is closed. Each leg is managed independently.

Individual Leg Target (TGT):

Type: Percentage (%)

Value: 50%

How it works:

When you sell an option, you receive a premium. As time passes and the market stays away from your strike, that premium starts to decay. The Target setting tells the system at what point to lock in your profit on a specific leg.

A target of 50% means exiting the leg when the option’s premium has decayed by half from its entry price.

Example:

Suppose you sell the SENSEX CE leg at Rs. 200.

Target price = 200 × (1 − 50%) = Rs. 100

When the premium of the CE leg falls to Rs. 100, the system automatically squares off that leg and books the profit. The PE leg continues running independently and is not affected by what happened on the Call side.

Individual Leg Stoploss (SL):

Type: Percentage (%)

Value: 50%

How it works

When you sell an option, the risk is that the market moves sharply in the wrong direction, causing the premium to rise. A rising premium means your position is at a loss. The Stoploss setting limits how much loss you are willing to take on a specific leg before the system steps in and exits.

A stoploss of 50% means exiting the leg when the option’s premium has risen by 50% from its entry price.

Example

Suppose you sell the SENSEX PE leg at Rs. 200.

Stoploss price = 200 × (1 + 50%) = Rs. 300

If the market falls sharply and the PE premium rises to Rs. 300, the system automatically squares off the PE leg to cap the loss. The CE leg continues running on its own and is not squared off unless its own target or stoploss condition is triggered.

Key Things to Know:

• Legs are independent. One leg exiting does not force the other to exit. Each runs on its own until its own condition is met or the strategy’s end time is reached.
• Profit is locked progressively. If the CE hits its target early in the day, that profit is secured. The PE can still continue running for further gains.
• The stoploss is your safety net. A large directional move can cause one leg’s premium to surge. The 50% SL ensures you do not carry excessive loss on a single leg beyond a defined limit.