Let’s get real for a second. You’re here because you’ve heard options can do two things:
Make you money when stocks go up, down, or sideways.
Protect your portfolio from turning into a dumpster fire during crashes.
But let’s be honest—options can feel like decoding some hieroglyphics. Calls, puts, straddles, the Greeks… what even is a “theta”? And why does everyone on YouTube make it sound like you’ll retire by next Tuesday?
The truth is, options aren’t magic. They’re tools. Like a Swiss Army knife, they can save your butt or slice your fingers if you’re careless.
Want to hedge your Tesla shares before earnings? Done. Generate monthly income from that boring ETF you own? Easy. Bet on Netflix crashing without shorting? Yep, options can do that.
But yes, you will need a PLAN. Randomly buying calls is like throwing darts blindfolded. This guide? It’s your roadmap. We’ll start slow, then dive into strategies that match your goals.
By the end, you’ll know how to:
- Turn market chaos into steady income.
- Sleep better at night, even if stocks nosedive.
- Avoid the 7 deadly sins of option trading (yes, FOMO is one).
Let’s trade.
Looking to create a trading account? Read our practical guide on Top 10 Trading Apps India 2025.
Option Trading Strategies PDF📄
Get our detailed guide—Option Trading Strategies PDF. This PDF will be updated and you will be notified here.
TL;DR Here are the 10 option trading strategies in this article.
Covered Calls strategy
Protective Puts strategy
Cash-Secured Puts strategy
Collar strategy
Iron Condor strategy
Butterfly Spread strategy
Calendar Spread strategy
Straddle/Strangle strategy
Naked Puts/Calls strategy
Backspreads strategy
Foundational Concepts for Option Trading Strategies
Before we deep dive into strategies, let’s learn the basics.
1. Calls vs. Puts: The Yin and Yang
Calls
What They Are: Think of a call option like a coupon that lets you buy a stock at a fixed price.
Notation: NFLX 150 CE (Call European)
Example:
Suppose Netflix (NFLX) is trading at ₹180. You hold a NFLX 150 CE. This means you can buy Netflix at ₹150, locking in a ₹30 profit per share (₹180 – ₹150).
Use calls if you’re bullish or need to hedge a short position.
Puts
What They Are: Puts are like insurance for your stocks, paying you if the stock crashes.
Notation: NFLX 150 PE (Put European)
Example:
Suppose Netflix (NFLX) is trading at ₹170. You hold a NFLX 200 PE. This allows you to sell Netflix at ₹200, giving you a ₹30 profit per share (₹200 – ₹170).
Use puts if you’re bearish or if you own the stock and want downside protection.
Pro Tip: Buying calls/puts = Limited risk (you can only lose the premium). Selling them = unlimited risk.
Premium? It is the price you pay (as a buyer) or receive (as a seller) for an option. It’s determined by two components:
Intrinsic Value:
Calls: Stock Price - Strike Price (if stock > strike).
Puts: Strike Price - Stock Price (if strike > stock).
Extrinsic Value: Time + volatility + interest rates.
Calculating Intrinsic Value
For Calls:
Intrinsic Value = Current Stock Price − Strike Price (if stock price > strike price )
Example: If Netflix (NFLX) is at ₹200 and you hold a ₹150 call:
₹200− ₹150 = ₹50 intrinsic value.
For Puts:
Intrinsic Value = Strike Price - Current Stock Price (if strike > stock).
Example: If Intel (INTL) drops to ₹80 and you hold a ₹120 put:
₹120 - ₹80 = ₹40 Intrinsic Value.
If an option has no intrinsic value, it’s “OTM—out of the money” and priced purely on extrinsic value.
2. Strike Price & Expiration
Strike Price in Option Trading
Strike Price is the “deal price” you lock in when you enter an option.
Key Points:
In-the-Money (ITM):
Calls: Strike is below the current stock price.
Puts: Strike is above the current stock price.
At-the-Money(ATM)
The strike price is equal(or close) to the current stock price
They have the highest time value
Out-of-the-Money (OTM):
Cheaper but riskier—needs a big move in the stock price to be profitable.
Expiration in Option Trading
Expirations: It is the date by which your option must be used or it becomes worthless.
Time Frames:
Weekly Expiries (0-7 days):
Extremely low cost but with rapid time decay
Shorter Expiries (1-30 days):
Lower cost but time decay is rapid.
Longer Expiries (60+ days):
Higher premium but gives your trade more time to work.
Rule of Thumb: OTM options are like lottery tickets—cheap but require a big move, whereas ITM options cost more but behave more like the stock itself.
3. The Greeks in Option Trading
Options are influenced by “Greeks,” which help you understand how they behave:
Delta in Option Trading
What It Does: Measures how much the option’s price moves with a ₹1 change in the stock.
Example:
An option with a delta of 0.6 gains roughly ₹0.60 for every ₹1 increase in the stock price.
Theta in Option Trading
What It Does: Represents time decay—the silent killer.
Example: Think of it as a melting ice cube: your option loses a bit of value each day, and this loss accelerates as expiration nears.
Vega in Option Trading
What It Does: Measures sensitivity to market volatility.
Example:
If an option has high vega, its price might jump significantly if volatility spikes—especially useful to know around earnings season.
Fun Fact: As we get closer to the expiry date, whether its monthly or weekly, theta decay accelerates fast. That means options lose value faster as they are near expiration. y, so consider selling options near expiry or buying them earlier to mitigate rapid time decay.
4. Risk Management: Your Secret Weapon
Most traders fail because they ignore risk. Here’s how to protect your capital:
Position Sizing: Never risk more than 1-2% of your account on a single trade.
Stop-Losses:
Set a “walk away” point.
Example: “If I lose Rs5000 on this trade, I’m out.”Implied Volatility (IV):
High IV: Options are expensive.
Low IV: Options are cheaper.
Always check the IV rank before entering a trade—think of it as your “discount meter.”
> Golden Rule: Trading without risk management is like skydiving without a parachute. Sure, you’ll fly... until you don’t.
Before You Dive Into Strategies...
So far, we've covered the foundational concepts of options trading.
But let's be real — if you're trading in India, chances are you've spent some time on Telegram following influencers or joining trading groups. Many traders rely on these Telegram channels for trade tips, believing they're getting inside information or expert advice.
However, this is where things can get tricky...
Why Telegram Alone Isn’t Enough for Options Trading Insights
Many Telegram channels push rapid-fire calls, leaving you scrambling to decide whether to act. But here’s the problem:
❓ How accurate are these tips?
❓ What’s the win rate?
❓ Is the advisor reliable or just guessing?
Most Telegram channels provide little-to-no transparency on hit rates, ROI, or track records — making it tough to separate noise from valuable insights.
Where Finosauras Makes the Difference
That’s where Finosauras steps in. Instead of blindly following calls, Finosauras helps you track verified data and performance metrics from multiple Telegram trading channels.
Performance Tracking: See how often a channel’s calls actually succeed.
Clear Metrics: View detailed ROI, win rates, and trade performance history.
Standardized Data: Finosauras corrects ticker errors, standardizes entry prices (even if given in ranges), and calculates clear stop loss and target prices based on logical percentages.
Integrating Finosauras with Your Options Strategy
Whether you're testing Covered Calls, Protective Puts, or speculative trades like Straddles, Finosauras can help you:
➡️ Spot Reliable Advisors.
➡️ Filter High-Risk Calls that don't align with your risk management plan.
➡️ Market Trends Details by cross-checking multiple channels.
Trading Tip: Use Finosauras to find advisors with a strong track record in the strategy you're following — this adds an extra layer of confidence to your trades.
Now let’s deep dive into the option trading strategies.
Conservative Option Trading Strategies (Income/Protection)
1. Covered Calls Option Trading Strategy
Objective: Earn extra income from stocks you already own.
Best For: Long-term investors holding Nifty 50 stocks like Reliance or TCS who want monthly income.
When to Use Covered Calls Option Trading Strategy?
Sideways markets (e.g., Infosys stuck between ₹1,400–₹1,500).
High IV Rank (like during RBI policy uncertainty).
To reduce cost basis (lower breakeven on your shares).
The Setup—How to Execute Covered Calls Option Trading Strategy
Step 1: What You Need
100 shares of a stock (e.g., Reliance Industries).
A trading app with a brokerage account with options access (Zerodha, Upstox).
Step 2: Pick Your Strike Prices
Simplified Rule: Choose a strike 3-5% above the current price.
Example: Reliance at ₹1,248 → Sell ₹1,260 CE (3% OTM)..
Pro Tip: Check the stock’s 1-year high to avoid assignment.
Step 3: Choose Expiration
Timeframe: 1 month (aligned with monthly expiry cycles).
Step 4: Risk vs. Reward
Max Profit: Premium + (Strike - Stock Price if assigned).
Example: Premium of ₹50/share → ₹5,000 per lot.
Max Loss: Unlimited (if the stock crashes, but you still own shares).
Breakeven: Purchase price of stock - premium.
NOTE: In options trading, contracts are purchased in lot sizes, not individual shares. Each company has its own predefined lot size.
When to Avoid Covered Calls Option Trading Strategy?
🚩 Pre-earnings season (e.g., TCS results next week → avoid!).
🚩 Low liquidity (e.g., small-cap stocks with wide bid-ask spreads).
🚩 You’re bullish long-term (don’t cap upside on multibaggers!).
✅ Pros
Earn ₹3k–5k/month safely
Low stress (holds like FD)
❌ Cons
Miss rallies (e.g., Adani jumps 20% in a session)
Requires ₹2–3L capital for 1 lot (e.g., Reliance)
Risk Management Tips for Covered Calls Option Trading Strategy
Stick to large-caps (HDFC Bank, ITC)—less gap risk.
Roll up strikes if the stock rises (e.g., Reliance hits ₹2,900 → close ₹2,940 call, sell ₹3,050).
Avoid F&O expiry week—volatility spikes prices.
Real-World Example
Stock: SBI @ ₹721.75
Trade Details:
BUY SBI Futures @ ₹722 (acts like holding the stock)
SELL SBI 750 CE (Call Option) @ ₹13
Lot Size: 750 shares
Premium Earned = ₹13 × 750 = ₹9,750
Outcomes & Scenarios
If SBI closes ≤ ₹750 → You keep the full premium of ₹9,750 (1.8% return in a month).
If SBI closes > ₹750 → Your shares will be sold at ₹750.
Profit Calculation:
(₹750 - ₹722) × 750 + ₹9,750 = ₹21,000If SBI crashes below ₹721.75 → Your loss mimics SBI’s price fall, but the ₹9,750 premium will reduce your losses.
Breakeven Price: ₹722 - ₹13 = ₹709
2. Protective Puts Option Trading Strategy
Objective: Protect your stock holdings from crashes without selling.
Best For: Long-term investors in volatile stocks (e.g., Adani Enterprises, Tata Motors).
When to Use?
Bearish short-term outlook (e.g., pre-budget volatility).
Holding stocks with event risk (e.g., RIL before AGM).
Sleep better during corrections (Nifty support breaks).
The Setup – How to Execute Protective Puts option trading strategy
Step 1: What You Need
100 shares of a stock (e.g., TCS @ ₹3,500).
Enough capital to buy put options (₹5,000–₹10,000 per lot).
Step 2: Pick Strike Price
Simplified Rule: Buy puts 5-10% below current price.
Example: TCS at ₹3,500 → Buy ₹3,300 put (6% downside buffer).
Pro Tip: Use the stock’s 200-day moving average as a floor.
Step 3: Choose Expiry
Timeframe: 1-3 months (matches your worry window).
Step 4: Risk vs. Reward
Max Profit: Unlimited (stock can rally freely).
Max Loss: Premium paid (e.g., ₹200/share → ₹20,000 per lot).
Breakeven: Stock price + premium (₹3,500 + ₹200 = ₹3,700).
When to Avoid Protective Puts option trading strategy?
🚩 Stable blue chips (e.g., HUL – waste of premium).
🚩 Low IV (puts are overpriced; check IV Rank < 30).
🚩 You’re day trading (this is for holders, not gamblers).
✅ Pros
Peace of mind during crashes
No limit on upside gains
❌ Cons
Costs money (like car insurance)
Puts expire worthless if stock stays flat
Risk Management Tips for Protective Puts option trading strategy
Pair with stocks you’ll hold 5+ years (don’t insure day-trade stocks).
Roll puts down if stock falls (e.g., TCS drops to ₹3,200 → buy ₹3,100 put).
Avoid OTM puts for critical support (e.g., buy ATM puts for 5% protection).
Real-World Example Protective Puts option trading strategy
Stock: Infosys @ ₹1,569.90
Trade:
Buy 1 lot (400 shares) of Infosys Futures at ₹1,584.4
Buy 1 lot (400 shares) ₹1,500 Put expiring on 24th April for ₹50 premium
Possible Outcomes
If Infosys ≥ ₹1,584.4:
Futures Gain: Unlimited
Put Option Expires Worthless (Loss ₹20,000)
If Infosys Crashes to ₹1,500:
Futures Loss: ₹1,584.4 – ₹1,500 = ₹84.4 loss per share
Total Loss in Futures: ₹84.4 × 400 = ₹33,760
Put Option Pays Out: ₹1,500 – ₹1,500 = ₹0 (Break-even on the put)
Net Loss = ₹33,760 + ₹20,000 (premium paid) = ₹53,760
If Infosys Crashes to ₹1,450:
Futures Loss: ₹1,584.4 – ₹1,450 = ₹134.4 loss per share
Total Loss in Futures: ₹134.4 × 400 = ₹53,760
Put Option Pays Out: ₹1,500 – ₹1,450 = ₹50
Total Payout on Put: ₹50 × 400 = ₹20,000
Net Loss = ₹53,760 – ₹20,000 = ₹33,760
Breakeven Point
Breakeven = Futures Entry Price – Put Premium
₹1,584.4 – ₹50 = ₹1,534.4
3. Cash-Secured Puts Option Trading Strategy
Objective: Earn premium while waiting to buy stocks at your target price.
Best For: Investors eyeing stocks like HDFC Bank or Asian Paints but waiting for dips.
When to Use?
Bullish but patient (want to buy HDFC Bank at ₹1,600, not ₹1,700).
High IV environments (earn extra premium during fear).
Sideways markets (Nifty stuck in a range).
The Setup – How to Execute Cash-Secured puts option trading strategy
Step 1: What You Need
Cash = Strike Price × Lot Size (e.g., ₹1,600 × 500 HDFC shares = ₹8L).
Margin-enabled account (Zerodha/Upstox).
(You should understand with your broker about margin and the interest rate on them)
Step 2: Pick Strike Price
Simplified Rule: Choose a strike 5-10% below current price.
Example: HDFC Bank at ₹1,700 → Sell ₹1,600 put.
Pro Tip: Align with Fibonacci retracement levels (e.g., 61.8% of rally).
Step 3: Choose Expiry
Timeframe: 30-45 days (premiums decay fastest).
Step 4: Risk vs. Reward
Max Profit: Premium earned (e.g., ₹40/share → ₹20k for HDFC lot).
Max Loss: Stock crashes below strike (you buy at strike, but stock is lower).
Breakeven: Strike Price – Premium (₹1,600 – ₹40 = ₹1,560).
When to Avoid Cash-Secured puts option trading strategy?
🚩 Bear markets (don’t catch falling knives).
🚩 Illiquid stocks (e.g., small-caps – exiting is a nightmare).
🚩 You don’t like the stock (never sell puts on stocks you won’t hold).
✅ Pros
Earn income while waiting
Buy stocks cheaper
❌ Cons
Requires big capital (₹8L for HDFC lot)
Still risky if market crashes 20%+
Risk Management Tips for Cash-Secured puts option trading strategy
Stick to large-caps (e.g., HDFC, Kotak – less likely to collapse).
Keep cash ready (brokers auto-debit if assigned).
Roll puts down if stock nears strike (e.g., HDFC at ₹1,620 → close ₹1,600 put, sell ₹1,550).
Real-World Example for Cash-Secured puts option trading strategy
Asian Paints Stock Price: ₹2,251.30
Strike Price: ₹2,100
Lot Size: 200 shares
Premium Earned: ₹50 per share
Trade Setup
Step 1: Sell 1 lot (200 shares) of ₹2,100 Put Option expiring on 24th April.
Step 2: Premium Earned = ₹50 × 200 = ₹10,000.
Step 3: Margin Required ≈ ₹52,704.
Outcomes
✅ If Asian Paints stays above ₹2,100:
→ You keep the full ₹10,000 premium as profit.
❗ If Asian Paints drops below ₹2,100:
→ You must buy 200 shares at ₹2,100.
→ Effective cost per share = ₹2,100 – ₹50 (premium) = ₹2,050.
4. Collar Strategy
Objective: Limit downside risk and upside potential for near-zero cost.
Best For: Investors holding volatile stocks through uncertain times.
When to Use Collar Strategy?
Holding through elections or global crises (2024 Lok Sabha elections).
Locking in gains (e.g., Tata Motors doubled; protect profits).
Low-cost hedging (use call premium to fund puts).
The Setup – How to Execute Collar Option Trading Strategy
Step 1: What You Need
100 shares (e.g., Tata Steel @ ₹120).
Capital to buy puts & sell calls (offsets cost).
Step 2: Pick Strikes
Put: 5-10% below current price (e.g., ₹110).
Call: 5-10% above (e.g., ₹130).
Pro Tip: Match call premium to put cost (e.g., ₹5 call premium funds ₹5 put).
Step 3: Choose Expiry
Timeframe: 2-3 months (covers event risk).
Step 4: Risk vs. Reward
Max Profit: (Call Strike – Stock Price) + Premiums.
Example: Stock at ₹120 → Max profit = ₹130 – ₹120 = ₹10 + ₹5 premium = ₹15.
Max Loss: (Stock Price – Put Strike) – Premiums.
₹120 – ₹110 = ₹10 – ₹5 = ₹5.
Breakeven: Stock Price – (Put Cost – Call Premium).
When to Avoid Collar Option Trading Strategy?
🚩 Bull markets (capping upside on multibaggers hurts).
🚩 Low volatility (can’t fund puts with cheap calls).
🚩 Penny stocks (illiquid options ruin the strategy).
✅ Pros
Nearly free downside protection
No emotional stress
❌ Cons
Sacrifice upside beyond call strike
Complex for beginners
Risk Management Tips for Collar Option Strategy
Use on stocks you plan to sell soon
Avoid dividend stocks (assignment risk on calls around ex-date).
Close early if the stock breaches the call strike (don’t wait for expiry).
Real-World Example
Stock: Tata Motors @ ₹668.30
Lot Size: 550 shares
Trade Setup
Buy ₹630 Put @ ₹11 (Protection)
Sell ₹700 Call @ ₹15.8 (Income)
Net Credit: ₹15.8 – ₹11 = ₹4.8/share = ₹2,640 (Total Credit)
Outcomes
Stock Stays Between ₹630 – ₹700
➡️ You keep your Tata Motors shares.
➡️ Profit: ₹2,640 from net credit.Stock Falls Below ₹630
➡️ Your losses are capped at ₹630.
➡️ Total Loss Calculation: ₹668.30 – ₹630 = ₹38.3 – ₹4.8 (Credit) = ₹33.5/share
➡️ Total Loss: ₹33.5 × 550 = ₹18,425Stock Rises Above ₹700
➡️ Your shares are sold at ₹700.
➡️ Profit Calculation: ₹700 – ₹668.30 = ₹31.7 + ₹4.8 (Credit) = ₹36.5/share
➡️ Total Profit: ₹36.5 × 550 = ₹20,075
Neutral Option Trading Strategies (Profit from Sideways Markets)
1. Iron Condor Option Trading Strategy
Objective: Profit when a stock or index trades in a tight range.
Best For: Traders expecting low volatility (e.g., Nifty 50 pre-results season).
When to Use?
Sideways markets (e.g., Nifty stuck between 22,500–23,000).
Low IV Rank (volatility is cheap).
Earnings overhang cleared (no major events for 30–45 days).
The Setup – How to Execute Iron Condor Option Trading Strategy
Step 1: What You Need
Margin for spreads (₹50k–₹1L per lot).
Index or liquid stock (Nifty, Bank Nifty, Reliance).
Step 2: Pick Strikes
Sell OTM Call & Put: 2–3% away from current price.
Example: Nifty at 17,800 → Sell 18,200 call & 17,400 put.
Buy Further OTM Call & Put: 1% beyond sold strikes.
Example: Buy 18,300 call & 17,300 put.
Pro Tip: Keep wings 500–700 points apart on Nifty.
Step 3: Choose Expiry
Timeframe: 30–45 days (time decay works in your favor).
Step 4: Risk vs. Reward
Max Profit: Net premium (e.g., ₹8,000–₹12,000 per lot).
Max Loss: Width of wings – net premium (e.g., ₹10,000 – ₹8,000 = ₹2,000).
Breakeven: Upper/Lower strikes ± net premium.
When to Avoid Iron Condor Option Trading Strategy?
🚩 Elections/RBI meetings (volatility spikes kill profits).
🚩 Illiquid stocks (e.g., Vodafone Idea – wide spreads eat returns).
🚩 You’re greedy (don’t widen wings for extra ₹500; risk isn’t worth it).
✅ Pros
Limited risk, defined profit
Works in boring markets
Require relatively low margin
❌ Cons
Needs constant monitoring
Small profits (2–4% per month)
Risk Management Tips for Iron Condor Option Trading Strategy
Adjust wings if index nears strikes (e.g., Nifty at 18,150 → roll call up to 18,500).
Close early at 50% profit (don’t wait for expiry).
Avoid F&O expiry week – gamma risk spikes.
Real-World Example
Index: Bank Nifty @ 48,056.65
Trade:
Sell ₹48,500 Call @ ₹426
Sell ₹47,500 Put @ ₹442
Buy ₹48,800 Call @ ₹307
Buy ₹47,200 Put @ ₹218.6
Net Premium Collected: ₹5,832
Outcomes:
Bank Nifty between ₹47,500 – ₹48,500: You keep ₹5,832 premium.
Bank Nifty breaches ₹48,800 or ₹47,200: Max loss capped at ₹3,168.
2. Butterfly Spread Option Trading Strategy
Objective: Profit if a stock lands exactly at a target price.
Best For: Traders with a strong view on a stock’s expiry price
When to Use?
Pinballing around a level (e.g., Reliance ₹2,800 ± ₹20).
Post-earnings stagnation (e.g., HUL after results).
Low IV (cheap to set up).
The Setup – How to Execute Butterfly Spread Option Trading Strategy
Step 1: What You Need
Capital for 3-leg trade (~₹15k–₹30k).
Stock with weekly/monthly options (e.g., ITC).
Step 2: Pick Strikes
Sell 2x ATM options: Center of the butterfly.
Buy 1x ITM & 1x OTM: Wings.
Example: ITC @ ₹450 → Buy ₹440 put, sell 2x ₹450 puts, buy ₹460 put.
Pro Tip: Use ₹10 strike intervals for liquidity.
Step 3: Choose Expiry
Timeframe: 7–15 days (needs precise timing).
Step 4: Risk vs. Reward
Max Profit: Strike width – net debit (e.g., ₹10 – ₹2 = ₹8/share).
Max Loss: Net premium paid (e.g., ₹2,000).
Breakeven: Lower/Upper strikes ± net debit.
When to Avoid?
🚩 Volatile stocks (e.g., Adani Ports – too unpredictable).
🚩 Newbies (complex to manage).
🚩 High IV (expensive to set up).
✅ Pro
High reward if stock pins strike
Low capital needed
❌ Cons
Tiny profit window (₹10–₹20 range)
High brokerage costs (3 legs)
Risk Management Tips
Set price alerts for the center strike.
Close at 80% profit—don’t be greedy.
Avoid OTM wings—liquidity dries up.
Real-World Example
Stock: SBI @ ₹723.05
Trade:
✅ Buy ₹710 put @ ₹6.5
✅ Sell 2x ₹720 puts @ ₹9 each
✅ Buy ₹730 put @ ₹14.6
Net Debit: ₹1.3/share (₹975 per lot).
Outcomes:
📊 SBI closes at ₹720: Profit ₹8.7/share (₹6,525).
📉 SBI at ₹710 or ₹730: Break even.
❗ SBI outside ₹710–₹730: Lose ₹975.
3. Calendar Spread Option Trading Strategy
Objective: Profit from time decay differences between expiries.
Best For: Patient traders eyeing stocks like Infosys post-results.
When to Use Calendar Spread Option Trading Strategy?
Gradual price moves expected (e.g., HDFC Bank after RBI policy).
High IV in near-term (sell expensive weekly options, buy cheap monthly).
Earnings done (e.g., TCS post-Q3 results).
The Setup – How to Execute Calendar Spread Option Trading Strategy
Step 1: What You Need
Margin for short leg (Zerodha/Upstox).
Stock with weekly & monthly options.
Step 2: Pick Strikes
Sell near-term ATM option.
Buy longer-term same strike.
Example: Sell weekly ₹1,000 call, buy monthly ₹1,000 call.
Pro Tip: Match deltas (e.g., 0.5) to hedge directional risk.
Step 3: Choose Expiry
Timeframe: Sell 1-week, buy 1-month.
Step 4: Risk vs. Reward
Max Profit: Net credit + time decay difference.
Max Loss: Unlimited (if stock rockets past strike).
Breakeven: Depends on volatility crush.
When to Avoid Calendar Spread Option Trading Strategy?
🚩 Earnings week (IV spikes ruin the play).
🚩 Low liquidity (e.g., PSU banks).
🚩 You can’t monitor daily (needs adjustments).
✅ Pros
Profit even if stock doesn’t move
Low directional risk
❌ Cons
Complex adjustments needed
Unlimited downside if wrong
Risk Management Tips for Calendar Spread Option Trading Strategy
Roll short leg if challenged (e.g., stock nears strike → close weekly, sell next week).
Pair with delta-neutral hedge (e.g., buy/sell shares).
Avoid meme stocks (e.g., YES Bank – too unpredictable).
Real-World Example
Stock: Infosys @ ₹1,590.85
Trade:
Sell weekly ₹1,580 call @ ₹40.25
Buy monthly ₹1,580 call @ ₹71.9
Net Debit: ₹31.65 (₹12,660 per lot)
Outcomes:
✅ Infosys remains near ₹1,580:
Weekly call expires worthless.
Monthly call retains value.
Profit: ₹8,333 (max profit).
📉 Infosys drops below ₹1,536 or rises above ₹1,637:
Both calls lose value.
Loss: Maximum ₹12,660.
💼 Breakeven Zones:
Lower breakeven: ₹1,536
Upper breakeven: ₹1,637
Key Tips for Managing the Trade:
🚨 Set an alert at ₹1,580; if breached, consider rolling the short call to the next week’s expiry.
⚠️ Monitor IV closely. If IV crashes too fast, close early to lock profits.
⏳ Time Value Focus: Aim to book 60–70% profit before expiry instead of waiting for full value.
4. Straddle/Strangle Option Trading Strategy
Objective: Profit from big price swings (up or down).
Best For: Events like Budget, RBI policy, or Tata Steel earnings.
When to Use?
High IV expected (e.g., pre-Budget speculation).
Binary events (e.g., RIL AGM, IPO listings).
VIX above 25 (volatility is the playground).
The Setup – How to Execute
> Straddle (Same Strike):
Buy ATM Call & Put:
Example: Nifty at 18,000 → Buy 18,000 call & put.
> Strangle (OTM Strikes):
Buy OTM Call & Put (cheaper but needs bigger move):
Example: Buy 18,500 call & 17,500 put.
Step 1: What You Need
Capital for 2 options (₹10k–₹50k).
High-conviction volatility play.
Step 2: Pick Strikes
Straddle: ATM for maximum sensitivity.
Strangle: 3–5% OTM to reduce cost.
Step 3: Choose Expiry
Timeframe: 1–15 days (volatility events are short-lived).
Step 4: Risk vs. Reward
Max Profit: Unlimited (stock moves sharply).
Max Loss: Premium paid (e.g., ₹10,000).
Breakeven: Stock price ± total premium.
When to Avoid Straddle/Strangle Option Trading Strategy?
🚩 Low IV environments (e.g., post-monsoon market lull).
🚩 You’re risk-averse (premiums can vanish fast).
🚩 Illiquid strikes (wide bid-ask spreads eat returns).
✅ Pros
Win whether stock rises or falls
No need to predict direction
❌ Cons
High cost (like buying both car & bike insurance)
Needs a big move (5%+) to profit
Risk Management Tips
Buy 1–2 days pre-event (don’t hold through IV crush).
Sell before the news (“Buy the rumor, sell the news”).
Use strangles for cheaper bets (e.g., Budget day on Nifty).
Real-World Example
Event: RBI Policy Decision (Nifty @ ₹22,470.50)
Trade:
Buy 22,450 Call @ ₹269.3
Buy 22,450 Put @ ₹197
Total Premium Paid: ₹466.3 per share
Lot Size: 75 (Total Cost = ₹34,973)
Outcomes
➡️ Scenario 1: Nifty Moves Sharply Upwards (e.g., ₹22,900)
22,450 Call Value: ₹450 (₹22,900 – ₹22,450)
22,450 Put Value: ₹0 (Expires worthless)
Net Profit: ₹450 – ₹466.3 = ₹(-16.3) per share
Total Loss: ₹(-1,222.5)** (Slight loss if movement isn’t strong enough)
➡️ Scenario 2: Nifty Moves Sharply Downwards (e.g., ₹22,000)
22,450 Call Value: ₹0 (Expires worthless)
22,450 Put Value: ₹450 (₹22,450 – ₹22,000)
Net Profit: ₹450 – ₹466.3 = ₹(-16.3) per share
Total Loss: ₹(-1,222.5)** (Similar to the upside)
➡️ Scenario 3: Nifty Flat (e.g., ₹22,450 stays unchanged)
Both call and put options expire worthless.
Total Loss: ₹466.3 (Maximum loss scenario)
Total Loss Amount: ₹34,973 (Premium paid)
Breakeven Points
Downside Breakeven: ₹21,984
Upside Breakeven: ₹22,916
Aggressive Option Trading Strategies (Leveraged Speculation)
1. Naked Puts/Calls Option Trading Strategy
Objective: Profit from premium decay with high leverage.
Best For: Experienced traders with deep pockets and iron nerves. Not for beginners!
When to Use?
Extreme confidence in direction (e.g., Nifty won’t drop below 18,000 this month).
IV is sky-high (sell overpriced options during panic).
Margin available in your trading account.
The Setup – How to Execute
Step 1: What You Need
Heavy margin (₹5L+ for Nifty lot).
Guts to handle unlimited losses (e.g., ₹10L+ on a bad day).
Step 2: Sell Naked Options
Naked Put: Sell OTM put (bet stock won’t crash).
Example: Sell ₹1,800 put on Reliance (current price ₹2,800).
Naked Call: Sell OTM call (bet stock won’t moon).
Example: Sell ₹700 call on ITC (current price ₹450).
Step 3: Expiry
Timeframe: 7–15 days (premiums decay fastest).
Step 4: Risk vs. Reward
Max Profit: Premium received (e.g., ₹20,000).
Max Loss: Unlimited (stock can go to zero or infinity).
Breakeven: Strike ± Premium (irrelevant – losses can snowball).
When to Avoid?
🚩 Low risk tolerance (you’ll panic if Reliance gaps down 10%).
🚩 Illiquid stocks (can’t exit even if you want to).
🚩 Market euphoria/crash phases (black swans kill naked sellers).
✅ Pros
High premium income
Simple setup
❌ Cons
Margin calls can wipe out your account
Sleep deprivation guaranteed
Risk Management Tips
Set stop-loss at 2x premium (e.g., ₹20k profit target → ₹40k loss limit).
Never allocate >5% capital to one trade.
Hedge with futures (e.g., sell naked put on Reliance? Buy Reliance futures).
Real-World Example
Trade Execution
Sell 1 Nifty 22,200 PUT (PE)
Expiry: 27 March
Premium Received: ₹112
Lot Size: 75
Total Premium Earned: ₹112 × 75 = ₹8,400
Outcomes
📈 If Nifty Closes Above ₹22,200 (Best Case)
Full profit = ₹8,400
Example: Nifty closes at ₹22,500 → PUT expires worthless → ₹8,400 profit.
📉 If Nifty Falls to ₹22,100 (Mild Downtrend)
Loss Calculation:
→ Strike Price – Spot Price = ₹22,200 – ₹22,100 = ₹100
→ ₹100 × 75 = ₹7,500 LossNet P/L: ₹8,400 – ₹7,500 = ₹900 Profit
🚨 If Nifty Crashes to ₹21,800 (Danger Zone)
Loss Calculation:
→ ₹22,200 – ₹21,800 = ₹400
→ ₹400 × 75 = ₹30,000 LossNet P/L: ₹30,000 – ₹8,400 = ₹21,600 Net Loss
⚠️ If Nifty Crashes to ₹21,500 (Worst Case)
Loss Calculation:
→ ₹22,200 – ₹21,500 = ₹700
→ ₹700 × 75 = ₹52,500 LossNet P/L: ₹52,500 – ₹8,400 = ₹44,100 Net Loss
2. Ratio Spreads Option Trading Strategy
Objective: Profit from sideways moves with skewed risk-reward.
Best For: Traders who think “This stock won’t move much, but if it does, I’m safe.”
When to Use Ratio Spreads Option Trading Strategy?
Neutral bias with a hedge (e.g., HDFC Bank post-results).
Low IV Rank (cheap to set up).
Capital-efficient speculation (less margin than naked trades).
The Setup – How to Execute Ratio Spreads Option Trading Strategy
Step 1: What You Need
Margin for short legs (₹1L–₹2L).
Stock with liquid options (e.g., ICICI Bank).
Step 2: Sell More, Buy Less
Call Ratio Spread: Sell 2x OTM calls, buy 1x ITM call.
Example: ICICI @ ₹900 → Buy ₹880 call, sell 2x ₹920 calls.
Put Ratio Spread: Sell 2x OTM puts, buy 1x ITM put.
Step 3: Expiry
Timeframe: 30–45 days (needs time decay).
Step 4: Risk vs. Reward
Max Profit: Limited (net premium + strike difference).
Max Loss: Unlimited beyond short strikes.
Breakeven: Complex—use options calculators.
When to Avoid Ratio Spreads Option Trading Strategy?
🚩 Volatile stocks (e.g., Adani Group—gaps wreck ratios).
🚩 You don’t understand Greeks (delta/gamma will haunt you).
🚩 Greedy strikes (don’t sell ₹1,000 calls on a ₹900 stock).
✅ Pros
Low upfront cost
Profit even if wrong
❌ Cons
Unlimited risk beyond short strikes
Complex adjustments needed
Risk Management Tips
Cap short strikes at 10% OTM (e.g., ICICI @ ₹900 → ₹990).
Roll short legs if tested (e.g., ICICI at ₹910 → close ₹920 calls, sell ₹940).
Pair with VIX spikes (sell when IV is high).
Real-World Example
Stock: Axis Bank @ ₹1,011.20
Lot Size: 625
Expiry Date: 24 April 2025
Trade Setup:
✅ Buy 1x ₹980 PUT @ ₹19
✅ Sell 2x ₹950 PUT @ ₹11 each
Net Premium Received: ₹1,875
Outcomes:
1️⃣ Axis Bank closes above ₹980
All options expire worthless.
Profit: ₹1,875 (Full premium retained).
2️⃣ Axis Bank closes at ₹950
Maximum Profit: ₹20,625
Calculation: (₹980 - ₹950) × 625 = ₹18,750 (Intrinsic Value) + ₹1,875 (Premium Received).
3️⃣ Axis Bank crashes below ₹917
Loss starts escalating beyond this point.
Example: If Axis Bank falls to ₹900:
Loss = [(₹950 - ₹900) × 625] - ₹1,875
Loss: ₹28,125 - ₹1,875 = ₹26,250
3. Backspreads Option Trading Strategy
Objective: Profit from explosive moves with limited risk.
Best For: Traders expecting black swan events (e.g., Yes Bank collapse).
When to Use?
High volatility potential (e.g., Tata Motors before EV launch).
Cheap IV (buying OTM options is affordable).
Asymmetric risk-reward (small loss if wrong, 5x gain if right).
The Setup – How to Execute Backspreads Option Trading Strategy
Step 1: What You Need
Capital for long legs (₹10k–₹50k).
Stock with weekly/monthly options (e.g., Tata Steel).
Step 2: Buy More, Sell Less
Call Backspread: Buy 2x OTM calls, sell 1x ITM call.
Example: Tata Steel @ ₹120 → Sell ₹110 call, buy 2x ₹130 calls.
Put Backspread: Buy 2x OTM puts, sell 1x ITM put.
Step 3: Expiry
Timeframe: 15–30 days (needs time for the big move).
Step 4: Risk vs. Reward
Max Profit: Unlimited if stock moons/crashes.
Max Loss: Net debit (e.g., ₹5,000).
Breakeven: Strike ± (net debit / number of contracts).
When to Avoid?
🚩 Low IV environments (OTM options too cheap).
🚩 Illiquid underlyings (e.g., PSU stocks).
🚩 Impatient traders (needs holding till D-Day).
✅ Pros
Limited risk
High reward potential
❌ Cons
Needs a big move (10%+)
Time decay kills OTM options
Risk Management Tips
Use delta-neutral ratios (e.g., 2:1 for calls/puts).
Close if IV crashes (e.g., post-earnings IV drop).
Avoid penny stocks (no liquidity to exit).
Real-World Example
Stock: Tata Steel @ ₹150.30
Trade Setup:
✅ Sell 1x ₹140 PUT @ ₹2
✅ Buy 2x ₹130 PUT @ ₹0.75 each
Net Debit (Entry Cost): ₹2,750 (₹5,500 – ₹2,750)
Outcomes
1️⃣ Tata Steel stays above ₹140:
All options expire worthless.
Loss = ₹2,750 (Net Debit).
2️⃣ Tata Steel crashes to ₹110:
Profit = (₹140 – ₹110) × 5500 – 2x [(₹130 – ₹110) × 5500] – Net Debit
Profit Calculation:
(140-110) * 550 - 2 * [(130 - 110) * 5500] - 2750 = ₹1,65,000 - ₹2,20,000−₹2,750=−₹57,750
3️⃣ Tata Steel dips slightly (~₹145 to ₹140):
Minimal impact, close to breakeven.
These were some strategies; in our next blog posts, we would cover some more advanced strategies like synthetic positions and spread and gamma scalping.
Option Trading Strategy Selection Framework
1. What’s Your Goal?
👉 Pick one:
Income Generation → Go to Step 2
Portfolio Protection → Go to Step 3
Speculation/Quick Profits → Go to Step 4
Sideways Market (Minimal Movement) → Go to Step 5
2. Income Generation Strategies
✅ Do you already own 100+ shares of a stock?
Yes: → Use a Covered Call to generate steady income.
No: → Use a Cash-Secured Put to earn premium while waiting to buy the stock at a lower price.
💡 Pro Tip: For stable income, pick options with 30-60 day expiries and OTM strike prices for higher success rates.
3. Portfolio Protection Strategies
✅ Are you worried about a market crash or sudden dip?
Yes: → Use a Protective Put to insure your holdings.
No, I’m just cautious: → Use a Collar (combine a put and covered call) for low-cost protection.
💡 Pro Tip: Protective strategies are best when volatility is low — premiums are cheaper.
4. Speculation/Quick Profit Strategies
✅ What’s your market outlook?
Strong Bullish View: → Use a Long Call or Bull Call Spread.
Strong Bearish View: → Use a Long Put or Bear Put Spread.
Uncertain (Big Move Expected Either Way): → Use a Straddle or Strangle.
💡 Pro Tip: For speculative trades, pick shorter expiries (1-2 weeks) to minimize premium costs.
4. Sideways Market Strategies (Low Volatility)
✅ Are you confident the stock will stay in a range?
Yes: → Use an Iron Condor or Calendar Spread for controlled risk and consistent gains.
No, but I want limited risk: → Use a Butterfly Spread for a balanced risk-reward profile.
💡 Pro Tip: Sideways strategies work best when Implied Volatility (IV) is high — you'll sell options for inflated premiums.
Tools and Resources
Option Trading Strategies Books
While options can feel overwhelming at first, these books break down concepts into simple, actionable insights.
📚 Beginner-Friendly Reads
“Options Made Easy” by Guy Cohen
“Options as a Strategic Investment” by Lawrence G. McMillan
“The Bible of Options Strategies” by Guy Cohen
📘 Advanced Reads for Experienced Traders
“Option Volatility & Pricing” by Sheldon Natenberg
“Trading Options Greeks” by Dan Passarelli
> Start with “Options Made Easy” if you’re a beginner — it’s concise and packed with real-world tips.
Option Trading Strategies Tools
Sensibull (Best for Beginners) – Integrated with Zerodha, it offers an intuitive interface for building strategies, analyzing Greeks, and managing risk
Opstra by Define Edge (Best for Technical Analysis) – Great for tracking option chains, analyzing IV charts, and setting alerts.
Market Pulse (Best for Mobile Trading) – A mobile-first app with real-time data, option Greeks, and strategy building.
Options Oracle (Best for Advanced Users) – Ideal for complex multi-leg strategies and analyzing risk-reward scenarios.
Option Trading Strategies Platforms
📈 Best for Beginners
Zerodha – India's most popular platform with seamless Sensibull integration.
Angel One – User-friendly interface with easy options chain access.
💼 Best for Active Traders
Fyers – Great for charting, detailed market data, and custom indicators.
Upstox – Offers lightning-fast order execution with solid options data.
⚙️ Best for Strategy Automation
Tradetron – Allows automated trading with custom rule-based strategies.
Streak by Zerodha – Automate entry/exit rules with zero coding knowledge.
💡 Pro Tip: If you're new, start with Zerodha + Sensibull. For power users, combine Opstra for analysis with Tradetron for automation.
Conclusion
Options trading can be rewarding, but the truth is—not everyone wins. Losses are part of the game, and success comes from managing them wisely.
Your Action Plan for Success
✅ Start with low-risk strategies like Covered Calls.
✅ Focus on learning key concepts like Greeks and IV.
✅ Use paper trading to practice before risking real money.
✅ Track your trades to understand what works best.
✅ Avoid chasing hype—research before you act.
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Track the track record of trading advisors before following their tips.
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Happy Trading!