Advanced Option StrategiesWhat are Options?
Before we dive into advanced stuff, here’s a quick refresher.
An Option is a contract that gives you the right (but not the obligation) to buy or sell a stock/index at a certain price, on or before a certain date.
There are 2 types:
Call Option – Right to BUY
Put Option – Right to SELL
Buyers pay a premium. Sellers receive a premium and take on the obligation.
💼 Why Use Advanced Strategies?
If you only buy calls or puts, you might:
Lose 100% of your capital quickly
Get the direction right, but still lose due to time decay
Suffer from high premiums or volatility crush (IV crush)
Advanced strategies help you:
✅ Reduce risk
✅ Lock-in profits
✅ Earn from sideways markets
✅ Trade during high volatility events
✅ Create income strategies
🧠 1. Bull Call Spread – Directional but Risk-Defined
Used when: You’re moderately bullish, but don’t want to spend too much on a call.
How it works:
Buy 1 ATM Call
Sell 1 higher strike OTM Call
Example:
Nifty at 22000
Buy 22000 CE @ ₹100
Sell 22200 CE @ ₹40
Net Cost = ₹60
Max Profit: ₹200 (22200–22000) – ₹60 = ₹140
Max Loss: ₹60 (net premium paid)
👉 This strategy caps your risk and reward but is cost-efficient and smart in range-bound bull moves.
🧠 2. Bear Put Spread – Controlled Downside Betting
Used when: You’re mildly bearish and want to control losses.
How it works:
Buy 1 ATM Put
Sell 1 lower strike Put
Example:
BankNifty at 48500
Buy 48500 PE @ ₹120
Sell 48000 PE @ ₹60
Net Cost = ₹60
Max Profit: ₹500 – ₹60 = ₹440
Max Loss: ₹60
👉 Ideal for limited downside moves — cheaper than naked Put.
🧠 3. Iron Condor – The Sideways Market King
Used when: Market is flat or expected to stay in a range.
How it works:
Sell 1 OTM Call + Buy 1 higher OTM Call
Sell 1 OTM Put + Buy 1 lower OTM Put
You make money if market stays between the 2 sell strikes.
Example:
Nifty is at 22500
Sell 22800 CE, Buy 23000 CE
Sell 22200 PE, Buy 22000 PE
👉 You collect premiums from both sides.
Max Profit = Net Premium
Max Loss = Difference between strikes – Net Premium
👉 Works great in expiry week or low-volatility phases.
🧠 4. Straddle – Big Move Expected, Direction Unknown
Used when: A major move is expected (news, event, earnings), but unsure about direction.
How it works:
Buy ATM Call and ATM Put of the same strike & expiry.
Example:
Stock at ₹500
Buy 500 CE @ ₹20
Buy 500 PE @ ₹25
Total Cost = ₹45
If stock moves big — say ₹60 or more either way — you profit.
👉 High risk due to premium decay if market stays flat.
Need volatility to spike.
🧠 5. Strangle – Cheaper than Straddle, Wider Range
Used when: You expect a big move but want lower cost than a straddle.
How it works:
Buy OTM Call and OTM Put (strikes wider apart than ATM).
Example:
Nifty at 22500
Buy 22800 CE @ ₹12
Buy 22200 PE @ ₹10
Total Cost = ₹22
You profit if the move crosses either strike + premium.
👉 Needs bigger move than straddle but less premium at risk.
🧠 6. Calendar Spread – Play with Time
Used when: You expect price to stay near a level short term, but may move later.
How it works:
Sell near-term option
Buy far-term option (same strike)
Example:
Sell 22500 CE (weekly) @ ₹50
Buy 22500 CE (monthly) @ ₹70
Net Cost = ₹20
👉 You make money if price stays near 22500 by expiry of short leg.
Profits from time decay of the short leg.
🧠 7. Ratio Spreads – Advanced Directional with a Twist
Used when: You expect a move in one direction, but want to reduce cost.
Bull Call Ratio Spread
Buy 1 lower Call
Sell 2 higher Calls
Example:
Buy 22000 CE @ ₹100
Sell 2× 22200 CE @ ₹60 each
Net Credit = ₹20
If market moves moderately up — you profit.
But if it rises too fast — risk increases.
👉 Suitable for experienced traders only — manage risk carefully.
🧠 8. Covered Call – Income Strategy for Investors
Used when: You hold stocks and want to earn extra income.
How it works:
Hold 100 shares of a stock
Sell 1 OTM Call
Example:
You own 100 shares of Reliance @ ₹2500
Sell 2600 CE @ ₹20
If Reliance stays below ₹2600, you keep the premium.
If it rises above ₹2600, your shares get sold, but you still profit.
👉 Perfect for long-term investors.
🧠 9. Protective Put – Insurance for Your Stock
Used when: You own shares but want downside protection.
How it works:
Hold stock
Buy 1 ATM/OTM Put
Example:
Own Infosys @ ₹1500
Buy 1480 PE @ ₹20
If stock falls below ₹1480, your loss is capped.
👉 It’s like buying insurance for your portfolio.
🧠 10. Butterfly Spread – Range-Bound Precision Strategy
Used when: You expect minimal movement and want low-risk, high-RR trade.
How it works (Call Butterfly):
Buy 1 lower strike Call
Sell 2 middle strike Calls
Buy 1 higher strike Call
Example:
Buy 22000 CE
Sell 2× 22200 CE
Buy 22400 CE
You earn if market expires at the middle strike.
Max loss = Net debit
Max profit = At middle strike
👉 Best for expiry day premium decay strategies.
Common Mistakes to Avoid
Not understanding strategy risk
Using high-margin strategies without protection
Overtrading in expiry week
Not adjusting trades as market moves
Ignoring volatility impact (IV crush)
🛠 Tools to Use
Option Chain (for strike selection)
IV (Implied Volatility) data
Open Interest (OI)
Strategy Builder platforms (e.g. Sensibull, Opstra, or TradingView)
🎯 Final Thoughts
Advanced options trading isn’t gambling — it’s about smart risk management.
These strategies:
Give you control
Limit losses
Provide flexibility across different market types
