Navigating the intricate world of trading often requires innovative strategies that capitalize on market volatility. Among these strategies, the “straddle strategy” stands out as a versatile approach that aims to profit from significant price movements, regardless of whether they are upswings or downswings. In this article, we will delve into the concept of straddle positions, exploring how to make an automated version of best short straddle strategy.

What Is a Straddle Options Strategy?

A straddle is a price-neutral options strategy that involves the trading of call and put options for an asset, with the same strike price and expiration date. Traders employ straddles to take advantage of changes to an underlying asset's implied volatility. When an asset’s price moves more than expected, the option’s premium will surge more than expected as well, leading to profit for straddle options traders.

Types of Straddle Options Strategies

There are two types of straddle strategies for crypto options traders to choose from:

  • 1. Long Straddles — A trader buys both a call and a put contract at the same strike price, and benefits when IV rises (long strategy).
  • 2. Short Straddles — A trader writes both a call and a put contract at the same strike price, and benefits when IV falls (short strategy).

To initiate a long straddle, you buy a call option and a put option with the same strike price and expiration date. For the strategy to make money at expiration, the price of the underlying asset must deviate from the strikes (in either direction) by an amount greater than the total premium you’ve paid.

For a short straddle, the opposite applies. Here, you sell a put and call with the same strike price and expiration date. To profit at expiration with this approach, the underlying asset must not deviate from the strikes by more than the total amount of premium collected.

Let’s dive deeper into metrics of short straddle strategy and build one fully automated algo on short straddle strategy

Short Intraday Straddle 

The core concept behind it is that the market is neutral 70% of the time and directional only for the other remaining part. We short ATM options of both directions, which makes this a non-directional strategy as we have hedged delta of one by the other. It is thus a delta neutral strategy as well.

Non-directional strategies give fewer returns as compared to directional ones; but at the same time, they require much less analysis and have a higher win rate. Let’s take an example: Let the current Nifty 50 index value be 20000. Which makes 20000 as the ATM strike of Nifty. So we would short 20000 PE and 20000 CE. Now, we have a choice between being naked with our positions or keeping a stop loss to exit the position.

Let’s see how you can built a fully automated short straddle strategy on Tradetron in Just 2 minutes.

Step 1 – Go to Options wizard and select Short straddle strategy.

Step 2 - Modify basic settings like entry timings , underlying for short straddle , exit settings and click on save button.

Congratulations, you just made a short straddle algorithm on nifty bank with pre-defined trailing stop loss and exit settings. Now you can backtest this algo to check historical performance and on the basis of past performance you can fine tune strategy.

And if you feel this isn’t what you need you can check the videos below to understand how to build different types of short straddle strategies on the Tradetron strategy builder.

Situation in which straddles can be used: 
  • - Straddle based strategies are best used when you expect a rise or drop in volatility of the underlying.
  • - A long straddle takes advantage of a sudden increase in volatility or vega, which can happen during times of an uncertain event.
  • - A short straddle takes advantage of a sudden drop in volatility or vega, which can happen after times of an uncertain event.


A straddle is effective when an investor expects significant price volatility in the underlying asset but is uncertain about the direction of the price movement. Profits are realized if the asset's price moves significantly in either direction.

The main risk in a straddle strategy is that the price movement may not be significant enough to cover the cost of purchasing both the call and put options. If the price remains relatively stable, the investor may incur a loss.

Automation allows for the efficient and timely execution of the short straddle strategy without the need for constant manual monitoring. It can help capture opportunities in the market and manage risk according to preset parameters

In an automated short straddle algorithm, the system automatically executes the selling of both call and put options based on predefined criteria. The algorithm aims to capitalize on market neutrality and takes advantage of the market being directional only a small percentage of the time.

To build a fully automated short straddle strategy on Tradetron, follow these steps:

Go to the Options wizard and select the Short Straddle strategy.

Modify basic settings such as entry timings, underlying for the short straddle, exit settings, and click on the save button.

Yes, the strategy can be applied to different underlying assets. However, it's important to customize the settings, including the entry timings and exit criteria, based on the specific characteristics of each asset.