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Option Trading Strategies And Positional Option Trading Systemin India
An option is a contract that gives the buyer the right, but not the obligation, to buy or sell anunderlying asset at a specific price on or before a certain date.Option Trading Strategies generally involves the simultaneous purchase and/or sale of different option contracts. Even one legged Long call option or long put option can be viewed as an option strategy. Option is of 2 types.
A) Call Option
B) Put Option
Before going to Nifty Option Trading Strategies, one should know the term used in option trading.
Call option- Suppose Nifty is at 7000 and you buy June month nifty call option contract of 7000 strike at Rs. 100/-. This is called long call. The next couple of day nifty move up 200 points to 7200. The value of call option will increase to Rs. 300.
And if nifty move down 100 point next day, the value of call option will decrease to 50.
Put option-Suppose Nifty is at 7000 and you buy June month nifty put option contract of 7000 strike at Rs. 100/-. This is called long put. The next couple of day nifty move down 200 points to 6800. The value of put option ...
... will increase to Rs. 300.
And if nifty move up 100 point next day, the value of put option will decrease to 50.
In the money- In the money option is one with a strike price that has already been surpassed by the current stock price, means the option holder is more likely to turn a profit.
Out of money- An out of money option is one that has a strike price that the underlying security has yet to reach, means the option has little intrinsic value.
Put call ratio is used to determine the trend of nifty but is not accurate. One should follow the trend of Nifty to trade in nifty option or index option. To get trend of nifty on daily basis one should follow Nifty Positional Trading System. Index Option contract movement depends upon trend of index i.e. nifty trend. If index moves up then call option increase and put option decrease. Technical trader generally use technical analysis chart to predict nifty direction.
In case of clear trend long call and long put can be used but in case of side wise movement and confusing chart pattern different Nifty Option Trading Strategiesare applied. Some option strategies are given below.
Bullish
Long call
Short put
Call bull spread
Put bull spread
Covered call
Protective put
Collar
Call back spread
Bearish
Short call
Long put
Short synthetic
Put bear spread
Call bear spread
Put back spread
Neutral
Long strangle
Short Strangle
Long call butterfly
Short call butterfly
To use these strategies in actual action you need to know trend or direction of index first. Trend of index which is nifty is updated in daily basis in Nifty positional trading system. Nifty support and resistance, upcoming financial events, upcoming financial events and buy sell recommendation is updated daily which helps trader to trade both in nifty future and nifty options.
Mr. Arthur Jackson, Technical Analyst and Founder of Nifty Trend providing trading advisory services in Free positional trading tips, Nifty Trend for Today, Equity, Derivatives and Commodity market. He also made a guest appearance in various workshops which were conducted on stock market awareness.
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