That is absolutely possible. You sell a straddle when you expect the stock to be range bound. In that case, your bet is that if the stock is within the range then you get to take away either full or part of the premium you received. But when you sell a straddle you got to be careful that if the price becomes volatile then your losses could be unlimited. That is a huge risk in any straddle selling and hence it must only be done with proper planning and stop losses set. The chart below captures the pay offs of selling or writing a straddle in the options market.

Sell Straddle by selling RIL 1100 call at Rs.36 and selling RIL 1100 put at Rs.42

Short Call Strike

RIL CMP

Diff

ITM/OTM

Call Premium

P&L on Call

Call Profit

Short Put Strike

RIL CMP

Diff

ITM/OTM

Put Premium

P&L on Put

Put Profit

Total Profit

1100

900

200

OTM

36

0

36

1100

900

-200

ITM

42

-200

-158

-122

1100

920

180

OTM

36

0

36

1100

920

-180

ITM

42

-180

-138

-102

1100

940

160

OTM

36

0

36

1100

940

-160

ITM

42

-160

-118

-82

1100

960

140

OTM

36

0

36

1100

960

-140

ITM

42

-140

-98

-62

1100

980

120

OTM

36

0

36

1100

980

-120

ITM

42

-120

-78

-42

1100

1000

100

OTM

36

0

36

1100

1000

-100

ITM

42

-100

-58

-22

1100

1020

80

OTM

36

0

36

1100

1020

-80

ITM

42

-80

-38

-2

1100

1040

60

OTM

36

0

36

1100

1040

-60

ITM

42

-60

-18

18

1100

1060

40

OTM

36

0

36

1100

1060

-40

ITM

42

-40

2

38

1100

1080

20

OTM

36

0

36

1100

1080

-20

ITM

42

-20

22

58

1100

1100

0

ATM

36

0

36

1100

1100

0

ATM

42

0

42

78

1100

1120

-20

ITM

36

-20

16

1100

1120

20

OTM

42

0

42

58

1100

1140

-40

ITM

36

-40

-4

1100

1140

40

OTM

42

0

42

38

1100

1160

-60

ITM

36

-60

-24

1100

1160

60

OTM

42

0

42

18

1100

1180

-80

ITM

36

-80

-44

1100

1180

80

OTM

42

0

42

-2

1100

1200

-100

ITM

36

-100

-64

1100

1200

100

OTM

42

0

42

-22

1100

1220

-120

ITM

36

-120

-84

1100

1220

120

OTM

42

0

42

-42

1100

1240

-140

ITM

36

-140

-104

1100

1240

140

OTM

42

0

42

-62

1100

1260

-160

ITM

36

-160

-124

1100

1260

160

OTM

42

0

42

-82

1100

1280

-180

ITM

36

-180

-144

1100

1280

180

OTM

42

0

42

-102

1100

1300

-200

ITM

36

-200

-164

1100

1300

200

OTM

42

0

42

-122

As mentioned earlier, selling the straddle is a typically risky strategy which only works when the markets are very range bound so that the total premium receipt can cover the range. If it goes outside the range, the losses can be unlimited. The maximum profit as can be seen in the above chart will be Rs.78 and it will occur at the strike in which the straddle is sold or written which is 1100 in this case. The breakeven point on the downside will be 1022 (1100 – 78) while on the upside the breakeven level will be 1178 (1100 + 78). As long as the RIL price stays within this range, you will earn profits on the short / written straddle. The moment the price goes outside this range, you start losing money on the straddle.