Get started

Harmonic Patterns

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
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
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
Option Trading 1. Introduction to Options Trading Options trading is one of the most powerful tools in the financial markets. Unlike traditional stock trading, where you buy or sell shares directly, options allow you to control an asset without owning it outright. This gives traders flexibility, leverage, and a wide range of strategies for both profits and risk management. At its core, an option is a contract that gives the buyer the right, but not the obligation, to buy or sell an underlying asset at a specific price (called the strike price) on or before a certain date (the expiration date). The beauty of options lies in choice: you can profit whether markets are rising, falling, or even staying flat—if you know how to use them. 2. What is an Option? An option is a derivative instrument, meaning its value is derived from the price of another asset (the “underlying”), such as: Stocks (e.g., Reliance, Apple) Indexes (e.g., Nifty, S&P 500) Commodities (e.g., Gold, Oil) Currencies Two Main Types of Options: Call Option – Gives the right to buy the underlying asset. Put Option – Gives the right to sell the underlying asset. Example: A call option on Reliance with a strike price of ₹2500 expiring in one month gives you the right (not the obligation) to buy Reliance shares at ₹2500, regardless of the market price. A put option with a strike of ₹2500 gives you the right to sell at ₹2500.
NSE:ICICIBANKEducation
by SkyTradingZone
2
Trading Master Class With ExpertsTips for Beginners in Options Trading Start with buying calls/puts before selling. Trade liquid instruments like Nifty/Bank Nifty. Learn Greeks slowly, don’t jump into complex strategies. Avoid naked option selling without hedging. Paper trade before risking real capital. Role of Volatility in Options Volatility is the lifeblood of options. High Volatility = Expensive Premiums. Low Volatility = Cheap Premiums. Traders often use Implied Volatility (IV) to decide whether to buy (when IV is low) or sell (when IV is high). Mastering Options Options are like a Swiss Army Knife of trading—one tool with multiple uses: speculation, hedging, and income generation. But with great power comes great responsibility. To succeed in options trading: Understand the basics thoroughly. Start small and simple. Master risk management. Use strategies suited to your market outlook. Keep emotions under control. With practice and discipline, options can become a game-changer in your trading journey.
NSE:KOTAKBANKEducation
by SkyTradingZone
2
Part 6 Learn Institutional TradingOptions in Indian Markets In India, options are traded on NSE and BSE, primarily on: Index Options: Nifty, Bank Nifty (most liquid). Stock Options: Reliance, TCS, Infosys, etc. Weekly Expiry: Every Thursday (Nifty/Bank Nifty). Lot Sizes: Fixed by exchanges (e.g., Nifty = 50 units). Practical Example – Nifty Options Trade Scenario: Nifty at 20,000. You expect big movement after RBI policy. Strategy: Buy straddle (20,000 call + 20,000 put). Cost = ₹200 (call) + ₹180 (put) = ₹380 × 50 = ₹19,000. If Nifty moves to 20,800 → Call worth ₹800, Put worthless. Profit = ₹21,000. If Nifty stays at 20,000 → Both expire worthless. Loss = ₹19,000. Option Trading Psychology Patience: Many options expire worthless, don’t chase every trade. Discipline: Stick to stop-loss and position sizing. Avoid Greed: Sellers earn small consistent income but risk blow-up if careless. Stay Informed: News, earnings, and events impact volatility.
BSE:SENSEXEducation
by SkyTradingZone
Part 1 Ride The Big Moves Call 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.
TVC:GOLDEducation
by SkyTradingZone
Part 2 Master Candlestick PatternKey Terms in Options Trading Before diving into strategies, let’s master some core concepts: Underlying Asset: The stock/index/commodity on which the option is based. Strike Price: The price at which the option can be exercised. Expiration Date: The date on which the option contract ends. Premium: The price paid by the option buyer to the seller (writer) for the contract. In-the-Money (ITM): Option has intrinsic value (profitable if exercised). At-the-Money (ATM): Underlying price = Strike price. Out-of-the-Money (OTM): Option has no intrinsic value yet (not profitable to exercise). Lot Size: Options are traded in lots (e.g., Nifty option has a fixed lot of 50 units). Leverage: Options allow control of large positions with smaller capital. How Options Work Options are like insurance. Imagine you own a house worth ₹50 lakh and buy insurance. You pay a small premium so that if the house burns down, you can recover your value. Similarly: A call option is like paying for the right to buy a stock cheaper later. A put option is like insurance against stock prices falling.
NSE:RELIANCEEducation
by SkyTradingZone
Part 1 Master Candlestick PatternIntroduction to Options Trading Options trading is one of the most powerful tools in the financial markets. Unlike traditional stock trading, where you buy or sell shares directly, options allow you to control an asset without owning it outright. This gives traders flexibility, leverage, and a wide range of strategies for both profits and risk management. At its core, an option is a contract that gives the buyer the right, but not the obligation, to buy or sell an underlying asset at a specific price (called the strike price) on or before a certain date (the expiration date). The beauty of options lies in choice: you can profit whether markets are rising, falling, or even staying flat—if you know how to use them. What is an Option? An option is a derivative instrument, meaning its value is derived from the price of another asset (the “underlying”), such as: Stocks (e.g., Reliance, Apple) Indexes (e.g., Nifty, S&P 500) Commodities (e.g., Gold, Oil) Currencies Two Main Types of Options: Call Option – Gives the right to buy the underlying asset. Put Option – Gives the right to sell the underlying asset. Example: A call option on Reliance with a strike price of ₹2500 expiring in one month gives you the right (not the obligation) to buy Reliance shares at ₹2500, regardless of the market price. A put option with a strike of ₹2500 gives you the right to sell at ₹2500.
NSE:COALINDIAEducation
by SkyTradingZone
Part3 Trading MasterclassOption Trading vs Stock Trading Stocks = Ownership, long-term growth, dividends. Options = Contracts, leverage, flexible strategies. Stocks = Simpler, but capital-intensive. Options = Complex, but require less capital and offer hedging. For example: Buying 100 shares of Reliance at ₹2500 = ₹2,50,000. Buying 1 call option of Reliance at ₹100 premium with lot size 250 = only ₹25,000. This leverage makes options attractive—but also riskier. Real-Life Examples & Case Studies Case 1: Bull Market A trader buys Nifty 20000 Call at ₹200 premium. Nifty rallies to 20500. Profit = ₹300 (500 – 200). Huge return on a small premium. Case 2: Bear Market Investor holds TCS shares but fears a fall. Buys a protective put. When stock drops, put increases in value, reducing losses. Case 3: Neutral Market Trader sells an Iron Condor on Bank Nifty, betting price will stay range-bound. Premium collected = profit if market stays sideways.
NSE:TCSEducation
by SkyTradingZone
7
Part 1 Trading MasterclassRisks & Rewards in Option Trading Option trading can be thrilling, but it’s not without risks. For Buyers: Maximum loss = premium paid. Maximum profit = potentially unlimited (for calls) or huge (for puts). For Sellers: Maximum gain = premium received. Maximum loss = unlimited (for calls) or very large (for puts). Risks also come from: Time decay (options lose value daily). Volatility crush (sudden drop in implied volatility can reduce premiums). Liquidity issues (wide bid-ask spreads can hurt execution). That’s why risk management (stop-losses, proper sizing, hedging) is crucial. Option Trading vs Stock Trading Stocks = Ownership, long-term growth, dividends. Options = Contracts, leverage, flexible strategies. Stocks = Simpler, but capital-intensive. Options = Complex, but require less capital and offer hedging. For example: Buying 100 shares of Reliance at ₹2500 = ₹2,50,000. Buying 1 call option of Reliance at ₹100 premium with lot size 250 = only ₹25,000. This leverage makes options attractive—but also riskier.
BSE:SENSEXEducation
by SkyTradingZone
6
Divergence SecretsRisks & Rewards in Option Trading Option trading can be thrilling, but it’s not without risks. For Buyers: Maximum loss = premium paid. Maximum profit = potentially unlimited (for calls) or huge (for puts). For Sellers: Maximum gain = premium received. Maximum loss = unlimited (for calls) or very large (for puts). Risks also come from: Time decay (options lose value daily). Volatility crush (sudden drop in implied volatility can reduce premiums). Liquidity issues (wide bid-ask spreads can hurt execution). That’s why risk management (stop-losses, proper sizing, hedging) is crucial. Option Trading vs Stock Trading Stocks = Ownership, long-term growth, dividends. Options = Contracts, leverage, flexible strategies. Stocks = Simpler, but capital-intensive. Options = Complex, but require less capital and offer hedging. For example: Buying 100 shares of Reliance at ₹2500 = ₹2,50,000. Buying 1 call option of Reliance at ₹100 premium with lot size 250 = only ₹25,000. This leverage makes options attractive—but also riskier.
TVC:IN10YEducation
by SkyTradingZone
5