Get started

Chart Patterns

Part 1 Trading Master ClassReal-World Applications of Options Hedging Institutions hedge portfolios using index options. For example, buying Nifty puts to protect against market crash. Income Generation Funds sell covered calls or iron condors to earn steady income. Event-Based Trading Earnings announcements, policy changes, and global events cause volatility—ideal for straddles or strangles. Speculation with Leverage Traders use calls/puts for leveraged bets on short-term moves. Pros and Cons of Options Trading Pros Flexibility in strategy. Limited risk (for buyers). High leverage. Ability to profit in all market conditions. Cons Complexity. Time decay erodes value of options. Volatility risk. Unlimited risk (for sellers).
BITSTAMP:BTCUSDEducation
by SkyTradingZone
5
Option Trading Advanced Options Strategies Professional traders use combinations for specific market conditions. Butterfly Spread Outlook: Neutral, low volatility. How it works: Combination of bull and bear spreads with three strikes. Risk/Reward: Limited both ways. Calendar Spread Outlook: Neutral with time decay advantage. How it works: Sell near-term option, buy longer-term option (same strike). Benefit: Profit from faster time decay of short option. Ratio Spread Outlook: Directional but with twist. How it works: Buy one option and sell more options of the same type. Risk: Potentially unlimited. Reward: Limited to premium collected. Collar Strategy Outlook: Hedge with limited upside. How it works: Own stock, buy protective put, sell covered call. Use: Lock in gains, reduce downside. Risk Management in Options Trading Options carry significant risks if misused. Successful traders emphasize: Position Sizing: Never risk too much on one trade. Diversification: Spread across multiple strategies/assets. Stop-Loss & Adjustments: Exit losing trades early. Implied Volatility (IV) Awareness: High IV increases premiums; selling strategies may be better.
BSE:SENSEXEducation
by SkyTradingZone
5
Divergence SectersIntermediate Options Strategies These involve combining calls and puts to create structured payoffs. Bull Call Spread Outlook: Moderately bullish. How it works: Buy a call (lower strike), sell another call (higher strike). Risk: Limited to net premium. Reward: Limited to strike difference minus premium. Example: Buy ₹100 call at ₹5, sell ₹110 call at ₹2. Net cost ₹3. Max profit = ₹7. Bear Put Spread Outlook: Moderately bearish. How it works: Buy a put (higher strike), sell another put (lower strike). Risk: Limited to net premium. Reward: Limited. Iron Condor Outlook: Neutral, low volatility. How it works: Sell OTM call and put, buy further OTM call and put. Risk: Limited. Reward: Premium collected. Best for: Range-bound markets. Straddle Outlook: Expect big move (up or down). How it works: Buy one call and one put at same strike/expiry. Risk: High premium cost. Reward: Unlimited if strong move. Strangle Outlook: Expect volatility but uncertain direction. How it works: Buy OTM call + OTM put. Risk: Lower premium than straddle. Reward: Unlimited if strong price move.
NSE:NIFTYEducation
by SkyTradingZone
2
Part 1 Support and ResistanceIntroduction Options trading is one of the most fascinating and versatile aspects of the financial markets. Unlike stocks, which give ownership in a company, or bonds, which provide fixed income, options are derivative instruments whose value is derived from an underlying asset such as stocks, indices, commodities, or currencies. They give traders the right, but not the obligation, to buy or sell the underlying asset at a predetermined price before a specific expiration date. Because of this unique characteristic, options allow traders and investors to design strategies that suit a wide range of market conditions—whether bullish, bearish, or neutral. Through careful strategy selection, one can aim for limited risk with unlimited upside, hedge existing positions, or even profit from sideways markets where prices don’t move much. This article explores options trading strategies in detail. We’ll cover the building blocks of options, common strategies, advanced combinations, and risk management. By the end, you’ll have a strong foundation to understand how professional traders use options to manage portfolios and generate returns. 1. Basics of Options Before diving into strategies, it’s important to review some fundamental concepts. 1.1 What is an Option? Call Option: Gives the holder the right (not obligation) to buy the underlying asset at a predetermined price (strike price) before or on expiration. Put Option: Gives the holder the right (not obligation) to sell the underlying asset at a predetermined price before or on expiration. 1.2 Key Terms Premium: The price paid to buy an option. Strike Price: The agreed price to buy or sell the underlying. Expiration Date: The last day the option can be exercised. Intrinsic Value: Difference between underlying price and strike (if favorable). Time Value: Portion of the premium that reflects time until expiration. 1.3 Options Styles European Options: Exercisable only at expiration. American Options: Exercisable any time before expiration.
NSE:TATASTEELEducation
by SkyTradingZone
3
XAU/USDThis XAU/USD setup is a sell trade, highlighting a bearish short-term outlook on gold. The entry price is 3414, with a stop-loss at 3423 and an exit price at 3396. This trade seeks to capture an 18-point profit while risking 9 points, maintaining a balanced 1:2 risk-to-reward ratio. Selling at 3414 suggests the trader expects downward pressure, possibly triggered by strength in the U.S. dollar, rising bond yields, or profit-booking after recent gains. The exit at 3396 is strategically placed near a support area where buyers might re-enter, making it a logical profit-taking level. The stop-loss at 3423 limits potential losses if bullish momentum resumes, ensuring disciplined risk management. This setup is ideal for short-term traders looking to ride intraday weakness.
TVC:GOLDShort
by smohdyusuf66
4
Part 1 Master Candlestick PatternOptions in the Indian Stock Market In India, options trading is booming, especially in: Nifty & Bank Nifty (Index options). Stock Options (Reliance, TCS, HDFC Bank, etc.). 👉 Interesting fact: Over 90% of trading volume in NSE comes from options today. Expiry days (Thursdays for weekly index options) see massive action, as traders bet on final movements. The Power of Weekly Options Earlier, only monthly options were available. Now NSE has weekly expiries for Nifty, Bank Nifty, and even stocks. Weekly options = cheaper premiums. Traders use them for intraday or short-term bets. But time decay is very fast.
NSE:BAJFINANCEEducation
by SkyTradingZone
3
Part 4 Institutional Trading Simple Option Strategies Options allow creativity. Instead of just buying/selling, traders create strategies by combining calls & puts. a) Protective Put Buy stock + Buy Put option = Insurance against downside. b) Covered Call Own stock + Sell Call option = Earn income if stock stays flat. c) Straddle Buy Call + Buy Put (same strike, same expiry) = Profit from big moves either way. d) Strangle Buy OTM Call + OTM Put = Cheaper than straddle but requires bigger move. e) Iron Condor Sell OTM Call + OTM Put, while buying further OTM options = Profit if market stays in range. These are just a few. Professional traders use dozens of strategies depending on market condition. Risks in Options Trading Options are attractive, but risky too. Time Decay (Theta) → Every day, options lose value as expiry approaches. Wrong Direction → If your view is wrong, you lose the premium. Liquidity Risk → Some strikes may have no buyers/sellers. Over-Leverage → Small premium tempts traders to overtrade, leading to big losses.
BSE:SENSEXEducation
by SkyTradingZone
1
Part 2 Ride The Big MovesIntroduction to Options Trading When people think about the stock market, they usually think about buying and selling shares. But there’s another side of the market that’s both exciting and complex—derivatives trading. An option is one such derivative. Instead of directly buying a share, you buy a contract that gives you the right (but not the obligation) to buy or sell the share at a certain price within a certain time. Sounds interesting? Let’s make it simple with an analogy. 👉 Imagine you’re interested in buying a car priced at ₹10 lakh. But you’re not sure if you’ll have the money or if the price will change in the future. The dealer says: Pay me ₹10,000 now, and I’ll give you the right to buy the car at ₹10 lakh anytime in the next three months. If car prices rise to ₹11 lakh, you can still buy at ₹10 lakh and save ₹1 lakh. If prices fall to ₹9 lakh, you can simply let the contract expire and lose only your ₹10,000 advance. This advance is like the option premium, and the contract is your option. That’s the essence of options trading—buying rights, not obligations. Basics of Options Options are broadly of two types: Call Option (CE) → Right to buy an asset at a fixed price before expiry. Put Option (PE) → Right to sell an asset at a fixed price before expiry. Example: Call Option: You buy a Reliance 2500 CE (Call Option) at a premium of ₹50. If Reliance rises to ₹2600, you can still buy it at ₹2500 and gain ₹100 (minus premium). If Reliance falls to ₹2400, you won’t exercise it and lose only ₹50. Put Option: You buy a Reliance 2500 PE at a premium of ₹40. If Reliance falls to ₹2400, you can sell at ₹2500 (gain ₹100). If Reliance rises to ₹2600, you won’t exercise it and lose only ₹40. This is why options are considered insurance tools in markets.
NSE:BANKNIFTYEducation
by SkyTradingZone
1
XAU/USDThis XAU/USD setup is a buy trade, showing a bullish short-term outlook for gold. The entry price is 3388, the stop-loss is 3384, and the exit price is 3396. The trade looks to capture an 8-point gain while risking only 4 points, offering a solid 1:2 risk-to-reward ratio. Buying at 3388 indicates the trader anticipates upward momentum, possibly supported by dollar weakness, declining bond yields, or increased demand for gold as a safe-haven asset. The entry zone may also represent a minor support level where buyers are expected to step in, pushing prices higher. The exit price at 3396 is positioned just below a potential resistance area, allowing profits to be booked before any selling pressure develops. Meanwhile, the tight stop-loss at 3384 ensures losses are limited if the market turns against the trade. This setup is well-suited for intraday strategies, emphasizing disciplined execution and risk management while targeting consistent, short-term gains.
TVC:GOLDLong
by smohdyusuf66
PCR Trading StrategyHow Beginners Can Start Learn basics of Call, Put, Strike Price. Practice with paper trading before real money. Start with simple strategies (like Buying Calls/Puts). Avoid Option Writing (selling) initially — it’s risky. Slowly learn Greeks, volatility, strategies. Regulatory & Market Aspects (India Example) Options in India are traded on NSE & BSE. Lot sizes fixed by exchanges. Weekly & Monthly expiries available. SEBI regulates to ensure safety. Margins required especially for Option Writing. Famous Stories in Options Trading Hedging by Corporates → Big companies use options to hedge currency & commodity risks. Speculators → Many traders have made fortunes (and huge losses) in options because of leverage. Example: Traders during COVID crash used Put Options and made huge profits.
NSE:INFYEducation
by SkyTradingZone
2
Part 1 Support ans ResistancePayoff Diagrams (Understanding Profits & Losses) Options are best understood with payoff diagrams. Call Buyer → Loss limited to premium, profit unlimited. Put Buyer → Loss limited to premium, profit grows as price falls. Call Seller → Profit limited to premium, risk unlimited. Put Seller → Profit limited to premium, risk high if price falls. Common Option Strategies Beginners usually just buy Calls or Puts. But professionals use strategies combining multiple options: Covered Call → Hold stock + Sell Call to earn income. Protective Put → Hold stock + Buy Put for protection. Straddle → Buy Call + Buy Put (bet on big movement either way). Strangle → Similar to Straddle but strikes are different. Iron Condor → Sell both Call & Put spreads (profit if market stays flat).
NSE:HDFCBANKEducation
by SkyTradingZone
2
Part 4 Trading Master ClassOptions Premium – How Price is Decided? The premium (cost of option) depends on: Intrinsic Value → The real value of option (difference between current price & strike price). Time Value → More time till expiry = higher premium. Volatility → If market is volatile, premium is high because chances of big move increase. Interest Rates & Dividends → Minor effect. 👉 Example: Reliance = ₹2,600. Call Option 2,500 Strike = Intrinsic Value = ₹100. Premium charged = ₹120 (extra ₹20 is time value). Moneyness of Options Options are classified as: In the Money (ITM) → Option already has profit potential. At the Money (ATM) → Option strike = Current price. Out of the Money (OTM) → Option has no intrinsic value (only time value). 👉 Example (Stock at ₹500): Call 480 = ITM. Call 500 = ATM. Call 520 = OTM.
NSE:NIFTYEducation
by SkyTradingZone
2
Part 2 Trading Master ClassTypes of Options There are only two main types of options: (A) Call Option (Right to Buy) A call option gives the buyer the right to buy the asset at a fixed price. 👉 Example: Stock: Reliance is at ₹2,500 today. You buy a Call Option at strike price ₹2,600, paying a premium of ₹50. If Reliance goes to ₹2,700, you can buy at ₹2,600 (profit). If Reliance stays below ₹2,600, your option expires worthless, and you lose the ₹50 premium. (B) Put Option (Right to Sell) A put option gives the buyer the right to sell the asset at a fixed price. 👉 Example: Stock: Infosys is at ₹1,400. You buy a Put Option at strike ₹1,350, paying premium ₹20. If Infosys falls to ₹1,300, you can sell at ₹1,350 (profit). If Infosys stays above ₹1,350, your option expires worthless, and you lose the ₹20 premium. Why Trade Options? Options are popular because they provide flexibility, leverage, and hedging. 1. Leverage (Small money, big exposure) With just a small premium, you control a large quantity of shares. Example: To buy 50 shares of Nifty (at 20,000), you need ₹10 lakhs. But an option may cost only ₹20,000 for the same exposure. 2. Hedging (Risk Protection) Investors use options to protect portfolios. Example: If you hold Infosys shares, you can buy a Put Option to protect against price falls (like insurance). 3. Speculation (Profit from movement) Traders use options to bet on price moves (up, down, or even staying flat). 4. Income (Option Writing) Professional traders sell options to earn premiums regularly.
NSEIX:NIFTY1!Education
by SkyTradingZone
2
Part 1 Trading Master ClassIntroduction to Options Trading Imagine you want to buy a house. You like one particular property, but you don’t want to commit right away. Instead, you tell the seller: "Here’s ₹1 lakh. Keep this house reserved for me for the next 6 months. If I decide to buy, I’ll pay you the agreed price. If not, you can keep this ₹1 lakh." That ₹1 lakh you gave is called a premium. The deal you made is an option — a contract that gives you the right but not the obligation to buy the house. This is the core idea of options trading: you pay a small premium to get the right to buy or sell something (like stocks, indexes, commodities, etc.) at a fixed price in the future. What is an Option? An option is a contract between two parties: Buyer of option (the one who pays the premium). Seller of option (the one who receives the premium). The buyer has the right (but not obligation) to buy or sell at a certain price. The seller has the obligation to fulfill the deal if the buyer exercises the option. Key Terms: Underlying Asset → The thing on which the option is based (stocks like Reliance, Infosys, indexes like Nifty, commodities, etc.). Strike Price → The pre-decided price at which the buyer can buy or sell. Premium → The cost of buying the option. Expiry → The last date till which the option is valid. Lot Size → Options are traded in fixed quantities, not single shares. Example: Nifty options lot = 50 shares.
NSE:BANKNIFTYEducation
by SkyTradingZone
Part 2 Master Candlestick PatternDisadvantages of Options Complexity for beginners Time decay risk (premium can vanish) Unlimited risk for sellers of uncovered options Requires active monitoring for effective trading Tips for Successful Options Trading Understand the underlying asset thoroughly. Start with basic strategies like long calls, puts, and covered calls. Use proper risk management and position sizing. Keep track of Greeks to understand sensitivity. Avoid over-leveraging. Monitor market volatility; high volatility can inflate premiums. Use demo accounts or paper trading for practice.
NSE:KOTAKBANKEducation
by SkyTradingZone
3
Part 6 Learn Institutional Trading Black-Scholes Model A widely used formula to calculate option prices using: Stock price Strike price Time to expiry Volatility Risk-free interest rate Greeks Delta: Measures sensitivity of option price to underlying price changes. Gamma: Measures delta’s rate of change. Theta: Measures time decay of option. Vega: Measures sensitivity to volatility. Rho: Measures sensitivity to interest rates. Understanding Greeks is critical for managing risk and strategy adjustments.
NSE:BANKNIFTY1!Education
by SkyTradingZone
4
Part 4 Learn Institutional Trading Advanced Strategies Straddle: Buy a call and a put at the same strike and expiry to profit from volatility. Strangle: Buy OTM call and put for cheaper volatility bets. Spread Strategies: Combine multiple calls or puts to limit risk and reward: Bull Call Spread: Buy call at lower strike, sell call at higher strike. Bear Put Spread: Buy put at higher strike, sell put at lower strike. Iron Condor: Combine calls and puts to profit from low volatility. Butterfly Spread: Profit from minimal movement around a central strike. Pricing of Options Option pricing is influenced by several factors: Intrinsic Value The real value if exercised today. Call option IV = Max(Current Price – Strike, 0) Put option IV = Max(Strike – Current Price, 0) Time Value Extra premium due to time until expiration. TV = Option Premium – Intrinsic Value
NSE:TCSEducation
by SkyTradingZone
4
Part 1 Ride The Big Moves Options trading is one of the most versatile tools in financial markets, allowing traders and investors to hedge risk, generate income, and speculate on price movements. While options can seem complex at first, understanding their structure, types, and strategies can make them an invaluable part of your trading toolkit. What Are Options? An option is a financial contract that gives the holder the right, but not the obligation, to buy or sell an underlying asset (like stocks, indices, or commodities) at a predetermined price within a specific period. Unlike futures or stocks, options provide flexibility and limited risk. There are two main types of options: Call Option: Gives the buyer the right to buy the underlying asset at a predetermined price (strike price) before or on the expiration date. Put Option: Gives the buyer the right to sell the underlying asset at the strike price before or on expiration. Key terms to understand: Underlying Asset: The stock, index, commodity, or currency on which the option is based. Strike Price: The price at which the option can be exercised. Premium: The price paid to buy the option. Expiration Date: The date on which the option expires. In-the-Money (ITM): Options with intrinsic value (profitable if exercised now). Out-of-the-Money (OTM): Options without intrinsic value (currently unprofitable). At-the-Money (ATM): Option strike price equals the underlying asset price.
TVC:IN10YEducation
by SkyTradingZone
4
BTC/USDThe BTC/USD trade with an entry price of 109,492, stop-loss at 108,687, and exit price at 111,161 is a short-term buy trade setup designed to capture upward momentum in Bitcoin. The trade aims for a profit of about 1,669 points while risking around 805 points, giving a favorable risk-to-reward ratio of nearly 1:2, which is ideal for consistent trading results. The entry price at 109,492 is chosen strategically, likely after confirmation of bullish signals such as a bounce from support, a trendline reversal, or indicators like RSI and MACD showing upward momentum. Entering at this level suggests confidence that BTC/USD would rise toward the target zone. The stop-loss at 108,687 is placed below a nearby support level, ensuring downside protection if the market moves unexpectedly against the trade. This prevents large losses and maintains discipline in risk management. The exit price at 111,161 is the take-profit target, likely aligned with a resistance zone. Securing profits at this level ensures gains are locked in before any potential pullback. Overall, this setup highlights disciplined planning, strong technical analysis, and strict risk control, which are essential for trading successfully in the volatile BTC/USD market.
BITSTAMP:BTCUSDLong
by smohdyusuf66
Part 1 Trading Master Class With ExpertsIntermediate Option Strategies Straddle – Buy Call + Buy Put (same strike/expiry). Best for high volatility. Strangle – Buy OTM Call + Buy OTM Put. Cheaper than straddle. Bull Call Spread – Buy lower strike call + Sell higher strike call. Bear Put Spread – Buy higher strike put + Sell lower strike put. Advanced Option Strategies Iron Condor – Sell OTM call + OTM put, hedge with farther strikes. Good for sideways market. Butterfly Spread – Combination of multiple calls/puts to profit from low volatility. Calendar Spread – Buy long-term option, sell short-term option (same strike). Ratio Spread – Sell multiple options against fewer long options. Hedging with Options Options aren’t just for speculation; they’re powerful hedging tools. Portfolio Hedge: If you own a basket of stocks, buying index puts protects against a market crash. Currency Hedge: Importers/exporters use currency options to lock exchange rates. Commodity Hedge: Farmers hedge crops using options to lock minimum prices.
NSE:RELIANCEEducation
by SkyTradingZone
2
Part 1 Support and ResistanceCall and Put Options in Action Call Option Example Reliance is trading at ₹2500. You buy a 1-month call option with strike price ₹2550, premium ₹50, lot size 505. If Reliance rises to ₹2700 → Profit = (2700 - 2550 - 50) × 505 = ₹50,500. If Reliance falls below 2550 → You lose only the premium (₹25,250). Put Option Example Nifty is at 20,000. You buy a 1-month put option, strike 19,800, premium 100, lot size 50. If Nifty falls to 19,200 → Profit = (19,800 - 19,200 - 100) × 50 = ₹25,000. If Nifty rises above 19,800 → You lose premium (₹5,000). Participants in Options Trading Option Buyer – Pays premium, has limited risk and unlimited profit potential. Option Seller (Writer) – Receives premium, has limited profit and potentially unlimited risk. Example: Buyer of call: Unlimited upside, limited loss (premium). Seller of call: Limited profit (premium), unlimited loss if stock rises.
OKX:BTCUSDEducation
by SkyTradingZone
2
Divergence SecretsOption Greeks – The Science Behind Pricing Options pricing is influenced by multiple factors. These sensitivities are known as the Greeks: Delta – Measures how much option price changes with stock price. Gamma – Rate of change of Delta. Theta – Time decay (options lose value daily). Vega – Sensitivity to volatility. Rho – Sensitivity to interest rates. Example: A call option with Delta = 0.6 means for every ₹10 rise in stock, option premium increases by ₹6. Basic Option Strategies (Beginner Level) Buying Calls – Bullish bet. Buying Puts – Bearish bet. Covered Call – Hold stock + sell call for extra income. Protective Put – Own stock + buy put for downside insurance.
NSE:KOTAKBANKEducation
by SkyTradingZone
2