Option trading is tough as there are many strategies based on different market view.
Sharing 6 basic Option Strategies for free that you can use based on different market view (sold as a ₹ 25,000 course!).
A thread 🧵:
Sharing 6 basic Option Strategies for free that you can use based on different market view (sold as a ₹ 25,000 course!).
A thread 🧵:
1/ Bull Call Spread:
This means buying near ATM Call Options and Selling OTM Options of the same expiry.
Let's consider an example: I am bullish on Nifty (spot: 17007).
I will buy 17000 CE and sell 17100 CE of same expiry.
Payoff and other details is attached below.
This means buying near ATM Call Options and Selling OTM Options of the same expiry.
Let's consider an example: I am bullish on Nifty (spot: 17007).
I will buy 17000 CE and sell 17100 CE of same expiry.
Payoff and other details is attached below.
2/ Bull Put Spread:
This means shorting near ATM Put Options and buying Put Options of the same expiry.
Let's consider an example: I am bullish on Nifty (spot: 17007).
I will sell 17000 PE and buy 16900 PE of same expiry.
This means shorting near ATM Put Options and buying Put Options of the same expiry.
Let's consider an example: I am bullish on Nifty (spot: 17007).
I will sell 17000 PE and buy 16900 PE of same expiry.
3/ Bear Put Spread:
This means buying near ATM Put Options and Selling Put Options of the same expiry.
Let's consider an example: I am bearish on Nifty (spot: 17007).
I will buy 17000 PE and sell 16900 PE of same expiry.
This means buying near ATM Put Options and Selling Put Options of the same expiry.
Let's consider an example: I am bearish on Nifty (spot: 17007).
I will buy 17000 PE and sell 16900 PE of same expiry.
4/ Bear Call Spread:
This means shorting near ATM Call Options and buying Call Options of the same expiry.
Let's consider an example: I am bullish on Nifty (spot: 17007).
I will sell 17000 CE and buy 17100 CE of same expiry.
This means shorting near ATM Call Options and buying Call Options of the same expiry.
Let's consider an example: I am bullish on Nifty (spot: 17007).
I will sell 17000 CE and buy 17100 CE of same expiry.
5/ Sideways: Iron Fly
If view is of sideways and expectation is that expiry can be at a particular level, then Iron Fly can be taken.
Example: If I expect Nifty to expire at 17000 then I will short 17000 CE and 17000 PE of current expiry and buy 16900 PE and 17100 CE as hedge.
If view is of sideways and expectation is that expiry can be at a particular level, then Iron Fly can be taken.
Example: If I expect Nifty to expire at 17000 then I will short 17000 CE and 17000 PE of current expiry and buy 16900 PE and 17100 CE as hedge.
6/ Sideways: Iron Condor
If the view is of sideways and expectation is that expiry can be in a particular range, then Iron Fly can be taken.
Eg: If I expect Nifty expiry in 16900-17200, then I will short 17200 CE and 16900 PE of current expiry and buy 16800 PE and 17300CE.
If the view is of sideways and expectation is that expiry can be in a particular range, then Iron Fly can be taken.
Eg: If I expect Nifty expiry in 16900-17200, then I will short 17200 CE and 16900 PE of current expiry and buy 16800 PE and 17300CE.
Note: All the strategy are considered with hedge as naked position in selling side can require high margin.
Also, adjust your hedges position such that your max risk on any position doesn't exceed 5% of your total capital.
Never sell naked options if you are a beginner.
Also, adjust your hedges position such that your max risk on any position doesn't exceed 5% of your total capital.
Never sell naked options if you are a beginner.
That's all about basic Option Trading Strategy that a beginner can use, as all are risk defined.
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