A bought call further out caps the loss on a sold strangle, at the cost of part of the premium
A short strangle keeps its premium only between two breakevens, and outside them the loss grows with each point. A hedge changes that shape. The chart adds a bought call further above the sold call. Above that strike the loss stops growing, so the loss on the upside has a ceiling. The sold put is unchanged, so a fall still has no cap.
The hedge has a price. The bought call costs premium, which lowers the net premium the seller keeps. On a calm expiry the hedge expires unused and only its cost is lost. It pays when the index moves beyond its strike, which is the same kind of move that hurts the sold call.
A futures hedge is the other route. A long future offsets a sold call, and a short future offsets a sold put. It removes the risk on that side, but it adds exposure on the other, where the future and the other sold option lose together in the same move.
Test the hedge on past chains. List the expiries when the index moved past each sold strike, then the loss on each day with and without the hedge. The shape in the chart is the rule; the history shows how often the rule applies.
SEBI's Aug 2026 study found that 87.7% of individual traders in equity F&O made a net loss in FY26. It counts net results by trader. It does not measure any hedge, so it cannot tell you whether a hedge would have changed a result.
Before you trade. Derivatives trading carries a high risk of loss. SEBI's study "Profitability of Individual Traders in the Equity Derivatives Segment (FY25 to FY26)" (August 2026) found that 87.7% of individual traders in equity F&O made net losses in FY26, with aggregate net losses of Rs 91,685 crore. Read the SEBI study