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Option Trading in India | Option Strategies

HomeOption Trading in India | Option Strategies

Recommended before reading this section:

Derivative Trading in India – Forward and Future Contracts

Call Option | Put Option – Option Trading Basics


Over the last few years, domestic stock markets have witnessed an increased interest in the Futures & Options (F&O) segment. There are lots of reasons for this increased interest in option trading in India.

Primarily, lack of returns in the cash segment due to a prolonged economic slowdown has driven away many stock market participants. Many others have taken to option trading because it requires less capital (since it provides higher leverage. i.e. you can put a small margin amount of the whole transaction value to take a trading position).Further, it is possible to make profits by betting on the directional movement of a stock or the market as a whole unlike the cash market where you typically buy and hold the stock until it appreciates.

The biggest argument in favor of option trading is the fact that when employed effectively, option trading strategies will help the investor make risk free profits.

However, while option strategies are easy to understand, they have their own disadvantages. Most importantly, unlike buying in the cash market (i.e. equity segment) where you can hold on to the underlying purchase for as long as you would like, in case of F&O market, you are time bound. In other words, you must exit your trades at a certain time in future, and you may be forced to incur a loss.

Nevertheless, it is important to understand how these strategies work. Keep in mind that the strategies below are not exhaustive and there are endless possibilities of making money in the stock markets by employing a combination of strategies in the cash, futures and options markets, by entering into simultaneous trades. For this reason, derivatives markets around the world have always attracted the brightest and sharpest minds.

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STRATEGIES

Option Trading Examples with

Real Time Stock Quotes 

Long Call Option Tata Motors Limited
Short Call Option ITC Limited
Long Put Option ICICI Bank Limited
Short Put Option

Oil & Natural Gas Corporation Limited

Short Straddle

Chambal Fertilizers & Chemicals Limited

Long Straddle Reliance Industries Limited
Short Strangle Sesa Sterlite Limited
Long Strangle  Cipla Limited

Synthetic Long Call Strategy

IDBI Bank Limited

Covered Call Strategy HDFC Bank Limited
Long Combo Strategy Allahabad Bank
Collar Strategy Sesa Goa Limited
Bull Call Spread Strategy Larsen and Toubro Limited
Bull Put Spread Strategy Nifty
Bear Call Spread Strategy Ashok Leyland Limited
Bear Put Spread Strategy Axis Bank Limited
Long Call Condor Strategy State Bank of India
Short Call Condor Strategy Hindustan Unilever Limited
Long Call Ladder Strategy Bajaj Auto Limited
Long Put Ladder Strategy IDFC Limited
Short Call Ladder Strategy Andhra Bank
Short Put Ladder Strategy Bharat Heavy Electricals Limited
Strip Option Strategy HDFC
Strap Option Strategy BPCL
Short Synthetic Strategy Indian Hotels Company Limited
Call Backspread Strategy Infosys Limited
Put Backspread Strategy Reliance Infrastructure Limited

 

About the Author

Rajat Sharma pictureRajat Sharma is a well known stock market analyst and commentator. He has covered Indian markets for over a decade and is regarded for consistently identifying early stage investment opportunities. Attorney by qualification, Rajat has done extensive work for improving corporate governance and disclosure standards.