ITC likely to trade range-bound: Traders can take benefit applying short straddle

The stock of ITC is trading in the range for a long period. To take advantage of this range-bound movement, traders can apply a Short straddle strategy. The stock has been trading in the range of Rs 200 to Rs 227 for the last six months.  One may use these levels as a stop loss.  

So here is the strategy 

SELL ITC 210CE JUNE2021 at Rs.6.75 and SELL ITC 210PE JUNE 2021 at Rs 8.70.  The Upper Breakeven point would be Rs.225.45 and the Lower Breakeven point would be Rs. 194.55. 

If a trader initiates a short straddle, he would receive net credit of approx. Rs 49,440. Maximum profit would be received if stock closes at Rs 210 on the expiry day, however, the stock is likely to incur losses if it starts to move below or above the breakeven point. Estimated loss at the breakeven point would be Rs 3200.  

Pay off chart

Note: This is purely for educational purpose and should not be considered as a recommendation by any means.