Option Trading Strategies for Indian Market

Option trading in stocks is complex but a right knowledge and understanding of the concept helps you in maximizing your profit. Here we are discussing about the option trading strategies for Indian market that makes it easier for traders like you to trade in derivatives.

Let’s begin our understanding with the meaning of stock options.

The stock options segment is fairly popular with traders in India who use it to grow their wealth. Stock options are a type of option contract in which the underlying asset is a stock. The holder of the contract has the option to buy or sell the underlying shares at a the predetermined price at the date of expiration. 

Given that the popularity of options trading has risen, it is worth knowing how to carry out strategic trading moves. Angel One has got you covered as its website features byte-sized content on trading and investing under its Knowledge Center.

If you want to get started with options trading as a beginner, you should consider understanding the bearish, bullish, and neutral strategies. 

Option Trading Strategy 

For a beginner it is always challenging to understand the market movement and in that case it is becomes difficult to take the right trade decision. If that is the case with you as well, then here is quick overview of some of the strategies that helps you in making a winning trade in options.

Bullish Strategies for Options Trading

 If a trader anticipates a rise in stock prices for a given underlying asset, they can use the following bullish strategies.

  • Long Call – Here, buyers purchase call options as they feel it provides them with the opportunity to gain significant profits. Premium risks apply to this strategy.
  • Short Put – Put options are sold such that the traders can potentially benefit from the underlying asset’s hike in prices.
  • Bull Call Spread – Call options having lower strike prices are bought at the same time as those with higher strike prices are sold.

Bearish Strategies for Options Trading

When traders anticipate the price of an underlying asset’s stocks to fall, they use the following bearish strategies. 

  • Long Put – By buying put options, you profit from the drop in the market price of an underlying asset. 
  • Put Spreads – Here, you buy a put option with a higher strike price while selling a put option with a lower strike price at the same time.
  • Short Calls – You sell call options here provided you believe prices will decline.

Non-Directional Strategies for Option Trading

When traders are uncertain whether the price of options will rise or fall they use neutral or non-directional strategies, some of which have been discussed below.

  • Butterfly – Here, bull spreads are combined with bear put spreads. 
  • Straddle – Options are bought and sold using the same strike price.
  • Strangle – Options with greater strike prices are bought while put options with lower strike prices are sold and profits are generated via the stock derivates prices of both.

In order to learn more about options trading, you should visit Angel One’s Knowledge Center. Here, information is relayed in a straightforward manner and has been created such that individuals from all backgrounds can grasp information with ease.

Angel One has also partnered with Streak1 which enables users to carry out strategic trades. This trading platform makes it possible to plan and manage trades without being burdened by having to use complex coding terms.

Not only does this platform allow you to create, backtest and execute trading strategies but it also allows you to keep tabs on real-time market activities. Users can receive actionable alerts and can manage their alerts on the go. 


Disclaimer
1. Streak is not exchange traded products and Angel One Ltd. is just acting as distributor all dispute with respect to the distribution activity would not have access to exchange investor Redressal Forum or Arbitration mechanism
2. This blog is exclusively for educational purpose
3. Investments in securities market are subject to market risk, read all the related documents carefully before investing. Brokerage will not exceed the SEBI prescribed limit. https://bit.ly/2VBt5c5


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