OPTIONS FOR EVERYONE
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Day 2 Session Powered by
MINDFLUENTIAL TRADING
Contents
Day 1 Options Trading Core Concepts
About Options
Strike Price Selections in Options
ITM / ATM / OTM Option types
Intrinsic Value and Time Value of Options
How to read the Option Chain data like a Pro
PCR & Max Pain
Option Selling Vs Option Buying
Option Greeks
Day 2 Directional Option Strategies
Bullish Option Spread Strategies: Bearish Option Spread Strategies:
Bull Call Spread Bear Call Spread
Bull Put Spread Bear Put Spread
Call Ratio Spread & Back Spread Put Ratio Spread & Back Spread
Adjustments Adjustments
Bull Condor Bear Condor
Day 3 Non - Directional Option Strategies, Firefighting & Hedging Contents
Neutral Strategies / Non-Directional strategies
Short Straddle
Short Strangle
Short Iron Condor
Short Iron Fly
Firefighting Techniques
Margin Management
Hedging Concepts
Delta Neutral Concept.
Day 4 12 Intraday Option Buying Strategies & Related Topics
Plotting important levels on the chart for Intraday Trading
Fake-out Analysis
Stoploss & Risk Management
How to replicate Stop loss in the Options Chart
6 Gap up & Gap down Strategies
2 CPR-based strategies
2 Institutional Zones-based Strategies
Riding Trending Markets with EMAs
2 EMA Strategies
How to find Sideways Market
Contents
Day 5 Tackling Rangebound Days
Delta Neutral Adjustments
Futures OI, Stock Option Strategies, Passive Index Strategies & Journal etc.
Understanding Long & Short Build-up & Covering - Stock Selection
Covered Call & Cash Secured Put
Result Based Strategies or IV-based strategies
Passive Weekly Strategy in Index
Passive Monthly Strategy in Index
Maintaining Effective Trading Journal
Day 6 All About Expiry Day Concepts & Strategies
How to Plan for Expiry Days
Expiry Day Option Selling Strategy
Logic Behind Zero-Hero Strategies
4 Strategies for Zero - Hero Trades
Live OI Chart Analysis
About MT Discord Community Support
Q&A Session will be there at end of every session
BULLISH OPTION STARTEGIES
"You create this strategy when you think stock price
bull call spread will go up but not above certain strike price"
Buy a atm / otm call Debit Strategy sell a higher call
Lower cost, Lower returns You're Moderately Bullish Re : Ri - Moderate to High PoP - Moderate RoI - Moderate to High
Max Profit
Limited [Strike Difference - Net Premium]
Less if you get our early
Max loss
Limited to net premium you pay
Less if you get our early
breakeven on expiry
You have to recover the premium
Buy Strike + Net Premium
Capital Needed
Its more than naked call buy due to margin
Its less than naked call sell due to margin benefit
bull call spread
Effect of variables
Stock Price
Profit increases with stock price
Strike Price
You can change strike price to choose Profit, Cost, Risk - Reward and PoP
Expiry
You can change Expiry to choose Profit, Cost, Risk - Reward and PoP
Its best in near week / month expiry
Passage of Time
Theta is usually low because sell leg cancels the buy leg
P&L varies interestingly which is based on whether the spot price is near your buy strike or sell strike
Implied Volatality
Spreads are almost immune to IV changes
bull call spread
SPREAD EXAMPLES Choosing Right gap between Spreads
Buy out of the money & sell deep out of the money
High between strike distance
Low Cost, High Profit High cost, Higher Loss, High Profit
Difficult to breakeven and low probability of profit Difficult to breakeven and lower probability of profit
High Reward to Risk ratio Higher Reward to Risk ratio
Buy at the money & sell out of the money
Low between strike distance
Moderate Cost, Moderate Profit Low cost, Low Loss, Low Profit
Medium breakeven and moderate probability of profit Easy to breakeven and higher probability of profit
Lower Reward to Risk ratio Lower Reward to Risk ratio
Buy in the money & sell out of the money
High cost, Lower Profit
Easy to breakeven and has high probability of profit
Not many prefer this
bull call spread
Pros
Cheaper then naked call buy in terms of premium
Pay only for the upside you want. Great for small moves
Low impact of Theta and Vega. Good for beginners
Better breakeven than buying a call
Cons
High margin requirement
A Comparison between
"You create this strategy when you think stock price will
bull put spread not go down, but you are not sure about bullishness"
sell a put credit Strategy buy lower strike put
Lower cost, Lower returns You're not Bearish Re : Ri - Moderate PoP - Moderate RoI - Moderate to Low
Max Profit
Limited to Net Premium
Less if you get our early
Max loss
Limited to Strike difference - Net premium
Less if you get our early
breakeven on expiry
You have to preserve the premium
Sell Strike - Net Premium
Capital Needed
Higher due to margin, lower than a sell put due to
margin benefit
bull put spread
Effect of variables
Stock Price
Profit increases when stock price or stays where it is
Stock Price
You can change strike price to choose Profit, Cost, Risk - Reward and PoP
Expiry
You can change Expiry to choose Profit, Cost, Risk - Reward and PoP
Its best in near week / month expiry
Passage of Time
Theta is usually low because sell leg cancels the buy leg theta
P&L varies interestingly which is based on whether the spot price is near your buy strike or sell strike
Implied Volatality
Spreads are almost immune to IV changes
P&L changes depend on whether the spot is near your buy strike or sell strike
bull put spread
Choosing Right gap between Spreads
sPREAD eXAMPLES
High between strike distance
Sell out of the money put & Buy lower out of the money put
High cost, Higher Loss, High Profit
Lower premium, higher loss potential Far (Good) breakeven and High probability of profit
Far (good) breakeven and high probability potential Low Reward to Risk ratio
Low reward to risk ratio as you sell cheap options
Low between strike distance
Sell at the money put & Buy lower out of the money put
Low Premium, Low Loss, Low Profit
Moderate Premium, Moderate Profit Close (Bad) breakeven and lower probability of profit
Medium breakeven and moderate probability of profit Higher Reward to Risk ratio
Low to moderate Reward to Risk ratio
Buy in the money & sell out of the money
Higher premium & higher profit
Close (Bad) breakeven and lower probability of profit
Moderate Reward to Risk ratio
bull put spread
Pros
Makes money in bullish, neutral & slightly bearish scenarios
Net premium is received. Higher probability of profit
Low impact of Theta & Vega. Great for beginners
Better breakeven than buying a naked call & Bull call spread
Cons
High margin requirement
A Comparison between
"You create this strategy when you think stock price
bear put spread will go down but not below certain strike price"
Buy a put Debit Strategy sell a lower put
Lower cost, Lower returns You're Moderately Bearish Re : Ri - Moderate to High PoP - Moderate RoI - Moderate to High
Max Profit
Limited [Strike Difference - Net Premium]
Less if you get our early
Max loss
Limited to net premium you pay
Less if you get our early
breakeven on expiry
You have to recover the premium
Buy Strike + Net Premium
Capital Needed
Its more than naked put buy due to margin
Its less than naked put sell due to margin benefit
bear put spread
Effect of variables
Stock Price
Profit increases when stock goes down
Strike Price
You can change strike price to choose Profit, Cost, Risk - Reward and PoP
Expiry
You can change Expiry to choose Profit, Cost, Risk - Reward and PoP
Its best in near week / month expiry
Passage of Time
Theta is usually low because sell leg cancels the buy leg theta
P&L varies interestingly which is based on whether the spot price is near your buy strike or sell strike
Implied Volatality
Spreads are almost immune to IV changes
bear put spread
Choosing Right Spread Choosing Right gap between Spreads
Buy out of the money put & Sell deep out of the money put High between strike distance
Low cost, high profit High cost, Higher Loss, High Profit
Difficult to breakeven and low probability of profit Difficult to breakeven and Lower probability of profit
High Reward to Risk Ratio High Reward to Risk ratio
Buy at the money put & Sell out of the money put
Moderate cost, Moderate Profit Low between strike distance
Medium breakeven and moderate probability of profit
Lower cost, Lower Loss, Lower Profit
Low Reward to Risk ratio
Easier breakeven and higher probability of profit
Lower Reward to Risk ratio
Buy in the money & sell out of the money
NO ONE DOES IT GENERALLY
Higher cost & Lower profit
Easy breakeven and higher probability of profit
Lower Reward to Risk ratio
Bear put spread
Pros
Cheaper than naked put buy in terms of premium
Pay only for the movement you want. Great for small moves
Low impact of Theta & Vega, Good for beginners
Better breakeven than buying a naked put
Cons
High margin requirement
A Comparison between
"You create this strategy when you think stock price
bear call spread will not go up, but you are not sure about bearishness"
sell a call credit Strategy buy higher strike call
Lower cost, Lower returns You're not Bullish Re : Ri - Moderate PoP - Moderate RoI - Moderate to Low
Max Profit
Limited to Net Premium
Less if you get our early
Max loss
Limited to Strike difference - Net premium
Less if you get our early
breakeven on expiry
You have to preserve the premium
Sell Strike + Net Premium
Capital Needed
Higher due to margin, lower than a sell call due to
margin benefit
bear call spread
Effect of variables
Stock Price
Profit increases when stock goes down or stay neutral
Strike Price
You can change strike price to choose Profit, Cost, Risk - Reward and PoP
Expiry
You can change Expiry to choose Profit, Cost, Risk - Reward and PoP
Its best in near week / month expiry
Passage of Time
Theta is usually low because sell leg cancels the buy leg theta
P&L varies interestingly which is based on whether the spot price is near your buy strike or sell strike
Implied Volatality
Spreads are almost immune to IV changes
bear call spread
Choosing Right Spread Choosing Right gap between Spreads
High between strike distance
Sell out of the money call & Buy higher out of the money call
SAFE High Premium, Higher Loss, High Profit
Lower premium, higher loss potential Far (Good) breakeven and High probability of profit
Far (good) breakeven and high probability potential Lower Reward to Risk ratio
Low reward to risk ratio as you sell cheap options
Low between strike distance
Sell at the money call & Buy higher out of the money call
AGRESSIVE Lower Premium, Lower Loss, Lower Profit
Moderate Premium, Moderate Profit Close (Bad) breakeven and lower probability of profit
Medium breakeven and moderate probability of profit High Reward to Risk ratio
Low to moderate Reward to Risk ratio
Buy in the money & sell out of the money
NO ONE DOES IT GENERALLY
Higher premium & higher profit
Close (Bad) breakeven and lower probability of profit
Moderate Reward to Risk ratio
Bear call spread
Pros
Makes money in bearish, neutral & slightly bullish scenarios
Net premium is received. Higher probability of profit
Low impact of Theta & Vega. Great for beginners
Better breakeven than buying a naked put& Bear put spread
Cons
High margin requirement
A Comparison between
Adjustments How to do the adjustments for spreads
Lets understand that by taking BULL CALL SPREAD as an example
Your view is that Fin Nifty will go up by Dec 5
You entered Bull Call Spread with 9 days to
expiry. Break Even is 19735
You paid a net premium of Rs.3,380, and that is
your max loss if Fin Nifty expires below 19650
Say when it is around 4 days to expiry, FN is
trading around 19450, which is 200 points
below the Buy option of 19650
Now if you feel that the FN may not go above
19735 (BE) by expiry, then it is highly probable
that you may incur a loss. To avoid that or to
reduce the loss, you may make an adjustment.
LETS LOOK AT THE ADJUSTMENT TRADE
Close your hedge trade (secondary trade) of 19850 CE by buying it as you sold it before; it would be trading at almost Rs.1
So you will realise 59 as profit
Sell a new CE at 19350 (1 leg ITM). As of now, its value is 299; before 3 days, it could be trading at 100
Before 4 days to expiry, your net premium position would be (59 + 117 - 145) = 31*40 = 1240
This means you converted your loss of Rs.3,380 to a profit of 560 if FN expires at 19350 or below
If it ATM at 19450, then you will realise a loss of (59+67-145) = -19*40 = -760
So even if your view went wrong, there is a chance to reduce the loss or make a breakeven in some cases, it may also turn
into profits, depending on where the Index expires.
WHAT IF YOUR 2ND VIEW WAS WRONG AND NIFTY STARTED GOING UP AFTER YOU
ENTER ADJUSTEMENT
You will keep monitoring your losses, and the moment it reaches your original max loss. You will exit all the
positions and book the initial loss. You can even exit early if you want to book less loss.
WHEN TO MAKE THIS KIND OF ADJUSTMENTS
To be done only to reduce the loss
You are basically changing your complete view from bull call spread to bear call spread
Nifty is substantially down
Should never take more loss than the original max loss
No need to have an extra margin in the account
Not more than 2 positions open at any single point in time
Ideal gap b/w two strikes are 200 / 250 for Nifty & Fin Nifty & 400 / 500 for BN
THIS IS THE ADVANTAGE WHEN YOU SELL THE OPTIONS
call ratio "You create this strategy when you expect that markets expire slightly
bullish but do not want to make loss if it goes bearish
spread
buy 1 ATM call Credit Strategy Sell 2 OTM calls
call ratio You create this strategy when there is good upside potential, but you
do not want to make a loss if it goes bearish. Maintain 1:2 ratio
back spread
buy 2 otm calls Debit Strategy Sell 1 atm call
PUT ratio "You create this strategy when you expect that markets expire slightly bearish
but do not want to make a loss if it goes bullish. Maintain 1:2 ratio
spread
buy 1 ATM PUT Credit Strategy Sell 2 OTM PUTS
put ratio "You create this strategy when there is good downside
potential but do not want to make a loss if it goes
back spread bullish. However Ratio to maintained at 1:2
buy 2 otm puts Debit Strategy Sell 1 itm / atm put
Bull This is preferred when you expect more than 1% upmove and want to have a better
risk-reward than you can prefer. The Breakeven must be around 0.5%. The risk-
Condor reward can be close to 1:3. In this kind of scenario; this is better than buying the
naked option or going for a Bull Call Spread.
Bear This is preferred when you expect more than 1% down move and want a better risk-
reward than you prefer. The break-even must be around -0.5%. The risk-reward can
Condor be close to 1:3. In this kind of scenario, this is better than buying the naked option
or going for a Bear Call Spread.
q&A Session
End of day 2 Session
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