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Learn Institutional Trading Part-2What is Investing? Investing involves committing your money to various assets like stocks, mutual funds, gold, real estate, or bonds to grow your wealth over time. Investing is generally a long-term strategy, focusing on the gradual accumulation of wealth. Key Types of Investments Stock Market Investments: Buying shares of companies. Mutual Funds: Pooling money with other investors. Bonds: Lending money to companies or governments for interest. Gold & Real Estate: Physical assets that typically grow over time. Investment Strategies Value Investing: Buying undervalued stocks. Growth Investing: Investing in companies with high growth potential. Dividend Investing: Investing in companies that pay regular dividends. Benefits of Investing Builds wealth over time. Helps fight inflation. Provides financial security.
NSE:FINNIFTY1!Education
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Learn Institutional Trading Part-4Technical Trading Technical trading uses charts, patterns, and indicators to make decisions. Traders study past price movements, volume, and signals to predict future trends instead of focusing on company financials. Stock Market The stock market is a place where shares of companies are bought and sold. It’s like a big online shopping mall for stocks (e.g., NSE, BSE, NYSE). Prices go up and down based on demand, news, earnings, and investor emotions.
NSE:HDFCBANKEducation
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4
Learn Institutional TradingInvesting Investing means putting your money into assets (like stocks, real estate, gold, or mutual funds) to grow your wealth over time. It’s usually long-term, focused on building value and achieving goals like retirement or buying a house. Divergence Trading Divergence trading is when you compare the price of a stock with an indicator (like RSI or MACD). If the stock is going up, but the indicator is going down (or vice versa), it shows divergence—a possible signal that the price might reverse soon.
NSE:NIFTYEducation
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Learn Institutional Option Trading Part-6Mutual Funds in India: Mutual funds pool money from multiple investors and invest in a diversified portfolio. Types: Equity Mutual Funds Debt Mutual Funds Hybrid Funds Index Funds & ETFs Systematic Investment Plan (SIP) is a popular method to invest monthly with discipline. Government Schemes: PPF (Public Provident Fund) NSC (National Savings Certificate) EPF (Employees Provident Fund) These are safe, tax-efficient, and suitable for conservative investors.
NSE:BANKNIFTY1!Education
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Learn Institutional Option Trading Part-5Stock Market Investing: Stock investing involves buying shares of publicly traded companies listed on NSE or BSE. Why Indians Invest in Stocks: Potential for higher returns. Dividend income. Portfolio diversification. Approaches to Investing: Fundamental Analysis: Based on financial health, growth potential, and management quality. Technical Analysis: Based on price patterns, volumes, and charts. Long-Term Investing: Holding stocks for years to build wealth. Short-Term Trading: Buying and selling stocks within days or weeks.
BSE:SENSEXEducation
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Learn Institutional Option Trading Part-2Option Greeks in India: Delta: Measures sensitivity to price changes. Theta: Measures time decay. Vega: Measures sensitivity to volatility. Gamma: Measures change in Delta. Indian traders use these Greeks to manage risk and optimize strategies. Risks in Indian Option Trading: Premium Decay: Loss in value as expiry approaches. High Volatility: Can cause sudden losses. Liquidity Risk: Some options have low trading volume. Complexity: Requires deep market knowledge.
NSE:BANKNIFTYEducation
by SkyTradingZone
Learn Advanced Institutional TradingOption trading is a part of the derivatives market where investors buy and sell contracts known as options. These contracts derive their value from an underlying asset, which can be a stock, index, commodity, or currency. In India, the most commonly traded options are based on Nifty 50, Bank Nifty, and stocks like Reliance, TCS, Infosys, etc. Options give traders the right, but not the obligation, to buy or sell the underlying asset at a predetermined price (strike price) before or on the expiry date. Types of Options: Call Option: Gives the buyer the right to buy the underlying asset. Put Option: Gives the buyer the right to sell the underlying asset.
NSE:NIFTYEducation
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Option TradingIndia’s financial markets are rapidly evolving, and the participation of retail investors, institutions, and foreign players has significantly increased over the past two decades. Among various investment avenues, option trading, equity investing, and gold trading have become the most prominent ways of wealth creation and hedging against risks. Each of these segments has its unique importance, strategies, and regulatory frameworks in India. This guide will help you understand the core concepts, market structure, strategies, and risks associated with Indian Option Trading, Equity Investing, and Gold Trading in a simple and practical manner.
NSE:BANKNIFTYEducation
by SkyTradingZone
2
Learn Institution Trading Part -6Introduction to Institutional Option Trading Institutional option trading refers to the sophisticated strategies used by hedge funds, mutual funds, insurance companies, proprietary trading firms, and foreign institutional investors (FIIs) to manage portfolios, hedge risks, and generate consistent alpha from the derivatives market. Unlike retail traders, institutions operate with large capital, access to advanced technology, and deep market insights, allowing them to structure complex trades. 2. Why Institutions Trade Options Institutions don’t usually trade options for quick profits. Their trades are designed to meet broader objectives: Hedging Equity Portfolios Volatility Trading Generating Yield on Holdings Market Making and Arbitrage Directional or Non-directional Speculation 3. Core Institutional Option Strategies Let’s explore the most popular strategies that institutions use with real-world logic behind them. A. Covered Call (Buy-Write) Use: Income generation from long-term stock holdings Structure: Buy stock + Sell Call Option (OTM or ATM) Institutional Use Case: A mutual fund holding Reliance shares might sell monthly call options against its holdings to generate monthly income (premium), enhancing total returns.
NSE:BANKNIFTYEducation
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Advanced Institutions Option Trading - Part 3Why Trade Options? Hedging against portfolio loss Leverage with limited capital Income generation through strategies like covered calls Directional trading using strategies like long calls or puts Investment Strategy using Options LEAPS (Long-Term Equity Anticipation Securities): Investing in long-term call options Covered Calls: Generate income while holding stocks Cash-Secured Puts: Earn premium while waiting to buy a stock at lower price These are often used by investors to add flexibility and income to portfolios.
BSE:SENSEXEducation
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2
Learn institutional Trading Part -5Option Buying vs Selling Option Buyers Pay premium Unlimited profit, limited risk Need strong directional movement Option Sellers (Writers) Receive premium Limited profit, unlimited risk Thrive in sideways or range-bound markets Need deep knowledge of Greeks and risk management 6. Popular Option Trading Strategies Beginner Strategies Long Call/Put – Directional trades Protective Put – Hedge stock losses Covered Call – Generate income from holdings Intermediate Strategies Bull Call Spread – Buy and sell calls of different strikes Bear Put Spread – Buy and sell puts Straddle – Buy both call and put at same strike (high volatility) Strangle – Buy OTM call and put (cheaper than straddle) Advanced Strategies Iron Condor – Neutral strategy with 4 legs Butterfly Spread – Limited risk range strategy Calendar Spread – Exploiting time decay differences Ratio Spread – More contracts sold than bought
NSE:BANKNIFTYEducation
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3
Learn institution Trading Part -3How Option Prices Move – The Greeks Delta: Sensitivity to price change in the underlying Gamma: Rate of change of Delta Theta: Time decay – loss in value as expiry nears Vega: Sensitivity to Implied Volatility (IV) Rho: Interest rate sensitivity Understanding Greeks helps manage risk, adjust positions, and time trades better. 4. Why Traders Choose Options Leverage: Control large positions with limited capital Risk Control: Limited loss in buying options Flexibility: Multiple strategies (bullish, bearish, neutral) Hedging: Protect existing stock portfolios Income Generation: Through writing options like covered calls
NSE:HDFCBANKEducation
by SkyTradingZone
2
Master class 9. Introduction to Option Trading Options are powerful derivative instruments that give buyers the right (not obligation) to buy or sell an underlying asset at a predetermined price within a specific time. They are commonly used for hedging, speculation, and income strategies. There are two basic types: Call Options: Right to buy Put Options: Right to sell Options derive value from stocks, indices (Nifty, Bank Nifty), commodities, or currencies and are traded on platforms like NSE in India. 2. Key Terminology in Option Trading Strike Price: Price at which the option can be exercised Premium: Cost of buying the option Expiry: Last day the option is valid Lot Size: Fixed number of underlying units (e.g., 50 for Nifty) Intrinsic Value: Real value of an option if exercised now Time Value: Portion of premium linked to time left before expiry ATM/ITM/OTM: At The Money, In The Money, Out of The Money – defines moneyness of options
NSE:BANKNIFTYEducation
by SkyTradingZone
2
Advanced Technical Master classMulti-Timeframe Analysis involves analyzing multiple chart timeframes (Monthly, Weekly, Daily, 4H, 1H) to confirm trend direction and improve timing accuracy. Application: Identify long-term trend (Monthly/Weekly) Use Daily/4H for entry signals Filter noise with lower timeframes Key Tools: Moving Averages, Trendlines, MACD Module 2: Advanced Chart Patterns Key Patterns Covered: Harmonic Patterns (Gartley, Bat, Crab) Elliott Waves (Impulse & Corrective Waves) Wyckoff Method (Accumulation/Distribution Phases) Practical Use: Pattern + Volume = Strong Entry Combine with Fib levels for reversal confirmation Module 3: Volume Price Analysis (VPA) Core Principle: Volume precedes price. Learn to read volume spikes, absorption, and exhaustion. Indicators to Use: On Balance Volume (OBV) Volume Profile VWAP
NSE:NIFTYEducation
by SkyTradingZone
2
Institution Option Trading Part-7Regulatory & Risk Considerations SEBI (India) & SEC (US) regulations limit speculative exposure. Institutions must report Open Interest, Position Limits, Margin Usage. Must adhere to VaR (Value at Risk) frameworks and internal risk policies. Institutional Trading during Events Earnings Seasons: Institutions use straddles/strangles for earnings plays. Budget or RBI Policy: Protective collars/volatility trades. Global Crisis (e.g. COVID): Use of massive protective puts (SPX, NIFTY). VIX & Institutional Behavior India VIX plays a vital role in determining institutional option strategies. High VIX = buying protection, long gamma strategies. Low VIX = selling premium, income strategies.
NSE:SBINEducation
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Institution Option Trading Part-1Role of Market Makers & Liquidity Providers Institutions often rely on market makers for tight bid-ask spreads. Market makers hedge every trade using delta-neutral strategies. Their presence helps institutions build or unwind large positions without disrupting prices. Institutional Examples in Option Trading Hedge Funds: Use volatility arbitrage, gamma scalping, dispersion trading. Insurance Firms: Use long-dated puts to hedge annuity products. Banks: Write structured products with option-like features (e.g., equity-linked notes). Asset Managers: Use protective puts or collars on core portfolios.
BSE:SENSEXEducation
by SkyTradingZone
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Institution Option Trading Part-2.0Institutional Order Flow – Market Impact Option Flow as Signal: Large trades in options market may indicate upcoming moves in underlying assets. Unusual Options Activity (UOA): Tracked by smart money traders to anticipate institutional moves. Dark Pools: Institutions often use off-exchange mechanisms to avoid price impact. Tools & Analytics Used by Institutions Volatility Surface Analysis Greeks Sensitivity Scans (Delta, Gamma, Vega, Theta) Skew Charts & Term Structure Trade Cost Analysis (TCA) Liquidity Heatmaps Algo Execution Strategies (TWAP, VWAP)
NSE:NIFTYEducation
by SkyTradingZone
4
Institution Option Trading Part-6Introduction to Institutional Option Trading Institutional option trading refers to the use of options by large financial institutions such as hedge funds, pension funds, insurance companies, mutual funds, and proprietary trading desks to manage risk, enhance returns, or speculate on price movements. Unlike retail traders, institutions bring scale, research, and complex strategies to the options market. Slide 2: Key Characteristics of Institutional Traders Large Capital Base: Institutions trade in bulk with millions or billions of dollars. Data Advantage: Access to premium data, analytics, and predictive algorithms. Advanced Infrastructure: High-frequency execution systems, smart order routing. Risk Management Focus: Use options for hedging equity, credit, FX, or commodity exposure. Regulatory Boundaries: Subject to risk limits, compliance, and disclosures
NSE:BANKNIFTYEducation
by SkyTradingZone
4
Institution Option Trading Part-5Popular Strategies Tested via Option Database IV Crush Earnings Strategy Buy/sell options before earnings when IV is high, expecting post-earnings IV drop. High OI Breakouts Trade breakouts from strikes with high OI using price+OI correlation. Skew Arbitrage Analyze IV skew and trade underpriced/overpriced strikes accordingly. Time Decay Capture (Theta) Sell options with high Theta before expiry using historical decay rates. 💡 Advantages of Option Database Trading Quantitative Edge: Allows logic-based decisions over emotion-driven trades. Backtesting Confidence: Know the probability of success before risking capital. Scalability: Can analyze hundreds of symbols and expiry combinations. Automation Ready: Can link with brokers to run fully algorithmic systems.
BSE:SENSEXEducation
by SkyTradingZone
2