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Learn Option Strategy in Nse market

Learn Option Strategy in Nse market

Here A1 Intraday tips Team has explained option strategy in Nse share market. We A1intradaytips team first request traders who are new to stock market i.e. beginners who don't have knowledge about options should Read What is option and what is call (CE) and put(PE) and Strike price this page carefully. We expect it will help you as you will get more knowledge about the options which could help you to make lot of money trading in options in the future.


Option Strategy when traders Buy's Call Option (CE)

At the Money (CE) call(ATM)

A1 intraday tips explains the meaning of At the Money call option(CE) by giving the example of Nifty Options trade. If Nifty is trading at 12000 levels and a Intraday trader buy the call (CE) with strike price of 12000 it's called at the money call (CE).

In the Money (CE) call (ITM)

In the money call (CE) means If Nifty is trading at 12000 and Intraday traders Buy's the call (CE) with below 12000 strike price e.g. 11900/11800/11700 it's called in the money call.

Out the money (PE) Put Option (OTM)

Out the money (PE) put means If Nifty is trading at 12000 and intraday traders buy the put(PE) with below 12000 strike price e.g. 11900/11800/11700 its called Out the money Put Option(PE) in bearish trend.


Earning Money in Put Options

When traders will earn the money in buying Put Option (PE)


In the above example of Nse Nifty on the expiry day Nse Nifty is trading below 12000 than traders will earn the money. If the Nifty is trading above with strike price of 12000 or same strike price 12000 traders will lose all the money ( Premium ) and will make the loss.


Here A1 Intraday tips gives brief summary about how to Analyze Bullish and Bearish Trend as per buying / selling done by trader in Call Option / Put Option:

BULLISH TREND :

  • If the traders buys the Call option (CE) means it's a Bullish Trend.
  • If trader Sell the Put Option (PE), means it's a Bullish Trend.

BEARISH TREND :

  • If the trader buys Put Option (PE) means Bearish Trend.
  • If Trader sell's the Call Option(CE) means Bullish Trend.


What is Bulls Spread Strategy

The meaning of Bull Spread strategy means option Investor tries to make profit expecting a rise in the price of the underlying asset. It can be trading by using both puts and calls with different strike prices.
Buy 1 ATM (AT THE MONEY CALL ) call option (leg 1)
Sell 1 OTM ( OUT THE MONEY CALL ) call option (leg 2)
Example
NIFTY SPOT 12000
ATM – 12000 CE, premium – Rs. 125/-
OTM – 12200 CE, premium – Rs. 50/-

Bull Call Spread, trade set up

  • Buy 12000 NIFTY CE by paying 125 towards the premium. Since money is going out of my account this is a debit transaction.
  • Sell 12200 CE and receive 50 as premium. Since a traders receive's money, this is a credit transaction.
  • The Net cash flow is the difference between the debit and credit i.e 125 – 50 = 75/-.
Bull Call Strategy in Nse market
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What Bear Put Spread strategy

The Bear Put Spread Strategy is a strategy to sell a Put Option and also buying a nother Put option. In this Bear Put Spread Strategy, you will have to pay higher premium and receive the lower premium. Altogether you will get Net debit in premium. Your risk is capped at the difference in premiums while your profit will be limited to the difference in strike prices of Put Option minus net premiums in this strategy.

Bear Put Strategy in Nse market

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