Part 6 Institutional Trading

Strategies in Option Trading
Basic Strategies

Buying Calls: Profiting from price increases.

Buying Puts: Profiting from price decreases.

Covered Calls and Protective Puts

Covered Call: Holding a stock and selling a call to earn premium.

Protective Put: Buying a put to hedge potential losses in a stock position.

Spreads

Bull Call Spread: Buy a call at a lower strike, sell at a higher strike.

Bear Put Spread: Buy a put at a higher strike, sell at a lower strike.

Calendar Spreads: Different expiration dates for long and short options.

Advanced Strategies

Straddles: Buying a call and put at the same strike, betting on volatility.

Strangles: Buying out-of-the-money calls and puts.

Iron Condors & Butterflies: Limited-risk strategies combining multiple options for steady income.

Real-World Examples

Apple Stock Call: Investor buys 100 Apple call options at ₹150. Stock rises to ₹180; profit realized by exercising or selling the call.

Hedging a Portfolio: Investor holds ₹10 lakh in shares, buys put options to limit losses during market decline.

Income Generation: Investor sells covered calls on a stock they own to earn premium income.