Part 6 Learn Institutional Tading

1. Option Strategies (Beginner to Advanced)
Single-leg strategies:

Long Call – Bullish.

Long Put – Bearish.

Multi-leg strategies:

Covered Call – Hold stock + sell call = income.

Protective Put – Hold stock + buy put = hedge.

Straddle – Buy call + put at same strike (bet on big move).

Strangle – Buy OTM call + put (cheaper than straddle).

Iron Condor – Sell OTM call + put, buy further OTM = earn from sideways market.

Butterfly Spread – Limited risk/reward strategy around ATM strike.

2. Greeks in Options (Risk Measurement Tools)

Options traders must understand the Greeks:

Delta: Sensitivity to price change (probability of ITM).

Gamma: Rate of change of Delta.

Theta: Time decay (loss in premium daily).

Vega: Sensitivity to volatility.

Rho: Sensitivity to interest rates.

Greeks help manage risk scientifically.

3. Options vs Stocks & Futures

Stocks: Ownership, unlimited upside, no expiry.

Futures: Obligation to buy/sell, linear profit/loss.

Options: Right, not obligation, nonlinear payoff.

4. Real-Life Examples of Option Trades

Example: Nifty at 20,000. Trader buys 20,200 Call at premium 100, lot size 50.

If Nifty goes to 20,500 → profit = (300 – 100) × 50 = ₹10,000.

If Nifty stays below 20,200 → loss = ₹5,000 (premium).

This highlights asymmetric risk/reward.

5. Psychology & Discipline in Option Trading

Options attract traders because of quick profits, but discipline is key:

Never risk more than 2–5% of capital in one trade.

Don’t chase OTM lottery tickets blindly.

Focus on strategies, not emotions.

Keep a trading journal.