Knowledge Center

There are various types of Stock Option Trading Strategies available and we are listing out most of them and also when to use those strategies.

  • Unidirectional - 1 Legged Strategies
  • Unlimited Profit - Limited loss
  • Long Call-Bullish
  • Long Put-Bearish
  • Limited Profit Unlimited loss
  • Short Call-Bearish
  • Short Put-Bullish
  • Unidirectional - 2 Legged Strategies
  • Limited Profit  limited loss
  • Bull Call Spread-Bullish
  • Put Spread-Bullish
  • Bear Put Spread-Bearish
  • Bear Call Spread-Bearish
Unidirectional - 1 Legged Strategies
Unlimited Profit –limited loss
1 Long Call Bullish
2 Long Put Bearish
     
 
Limited Profit –Unlimited loss
3 Short Call Bearish
4 Short Put Bullish
     
 
Unidirectional - 2 Legged Strategies Limited Profit – limited loss
5 Bull Call Spread Bullish
6 Bull Put Spread Bullish
7 Bear Put Spread Bearish
8 Bear Call Spread Bearish
     
 
Non directional - 2 Legged Strategies Unlimited Profit – Unlimited loss
9 Long Straddle Neutral and Volatile
10 Long Strangle Neutral and Volatile
11 Short Straddle Neutral and Non-Volatile
12 Short Strangle Neutral and Non-Volatile
13 Long Combo A type-Bullish
14 Long Combo B type-Bearish
     
 
Non –Directional -4 Legged StrategiesLimited Profit – limited loss
15 Long Iron Butterfly Neutral and Non Volatile
16 Long Call Butterfly Neutral and Non Volatile
17 Long Put Butterfly Neutral and Non Volatile
18 Long Iron Condor Neutral and Non Volatile
19 Long Call Condor Neutral and Non Volatile
20 Long Put Condor Neutral and Non Volatile
21 Short Iron Butterfly Neutral and volatile
22 Short Call Butterfly Neutral and volatile
23 Short Put Butterfly Neutral and Volatile
24 Short Iron Condor Neutral and Volatile
25 Short Call Condor Neutral and Volatile
26 Short Put Condor Neutral and Volatile
     
 
Strategies along with Futures or Stocks
27 Covered Call Moderately Bullish about the Stock
28 Covered Put Moderately Bearish about the Stock
29 Collar-A type Bullish
30 Collar- B type- Bearish
31 Synthetic Long Call/ Protective Put Bullish
32 Synthetic Long put/ Protective call Bearish
     
 
 

"Delta Neutral & Non directional trading strategies lead you to success in trading"

 

We cover one strategy every month
LONG CALL

Construction:
Buy 1 Call at strike price A.
Margins:
No.
Your Market Outlook:
Bullish. The Nifty price will rise well above the Strike price A. The more bullish your view the further out of the Money you can buy to create maximum leverage.
Profit:
Profit is unlimited .The profit increases as the market rises.
Break – Even point:
The break-even point will be the options Strike price A plus the premium paid for the option.
Loss:
The maximum loss is the premium paid for the option. Maximum loss will be if the nifty closes at strike price A or below it. Any point between the strike price A and the break-even point you will make a loss although not the maximum loss.
Volatility:
The option value will increase as volatility increases
Time Decay:
As each day passes the value of the option erodes. (Bad)
CONSTRUCTION OF LONG CALL
NIFTY IS TRADING AT 8000 SPOT PRICE
BUY CALL OPTION AT 8100 STRIKE PRICE A
PREMIUM PAID 85
B.E.P (8100 + 85) 8185 (STRIKE PRICE A + PREMIUM PAID)

PAY-OFF SCHEDULE: LONG CALL

Loss
Nifty Closing at
Profit
85
7500
 
85
7600
 
85
7700
 
85
7800
 
85
7900
 
85
8000
SPOT PRICE
85
8100
STRIKE PRICE A
 
8185
B.E.P
 
8200
15
 
8300
115
 
8400
215
 
8500
315

EXERCISE – LONG CALL

Nifty is trading at 7980.
Bought call option of Strike price 8100 @ 60
Q.1.What is the B.E.P?
Q.2.What is the profit/loss if nifty closes at
(A) 8385 (B) 8201 (C) 8063 (D) 7956 (E) 7700 (F) 8185 (G) 7657 (H) 8400

Please answer the above questions and mail the answers to us. We will evaluate you performance