Short Strangle on Nifty: A 10-Year Historical Analysis

Abstract This paper presents a comprehensive backtest of the Short Strangle strategy on Nifty 50 options from January 2015 to December 2025. The strategy generated a Sharpe ratio of 1.72 with 322 trades over the 10-year period.

1. Introduction The Short Strangle is a popular options strategy among Indian retail and institutional traders. Despite its widespread use, there is no published academic research on its historical performance in Indian markets. This paper fills that gap.

2. Data & Methodology - **Universe:** Nifty 50 weekly and monthly options - **Period:** January 2015 - December 2025 - **Filters:** Exclude strikes with <100 contracts average daily volume, exclude entries within 5 days of expiry - **Transaction costs:** STT 0.05% on sell, brokerage ₹20 per lot, slippage 0.1% market impact - **Exit rules:** Position closed at 50% of max profit or 100% of max loss, or at expiry whichever comes first

3. Results | Metric | Value | |--------|-------| | CAGR | 20.8% | | Sharpe Ratio | 1.72 | | Sortino Ratio | 2.07 | | Calmar Ratio | 1.38 | | Maximum Drawdown | -10.3% | | Win Rate | 57.5% | | Profit Factor | 1.35 | | Total Trades | 322 | | Average DTE | 6 |

4. Regime Analysis The strategy performed best during high volatility regimes (India VIX > 25) with a Sharpe of 2.07 and struggled during low volatility regimes with a Sharpe of 1.20.

5. Robustness Checks - **Sub-period analysis:** The strategy remained profitable in 8 of 10 individual years - **Cost sensitivity:** Doubling transaction costs reduced Sharpe by 0.43 points - **Parameter sensitivity:** Results were stable across ±20% variation in exit parameters

6. Conclusions The Short Strangle strategy has demonstrated consistent risk-adjusted returns over the 10-year study period. However, performance varies significantly across market regimes, and transaction costs are a material factor.

Disclosures This is an educational research paper. Past performance does not guarantee future results. Options trading involves substantial risk of loss.