Option Trading Guide for beginners

Options trading is a type of derivatives trading in which traders buy or sell contracts that give them the right, but not the obligation, to buy or sell an underlying asset at a specified price (strike price) on or before a specified date (expiration date). There are two types of options: call options, which give the holder the right to buy an asset, and put options, which give the holder the right to sell an asset.To start trading options, you will need to open an account with a brokerage that offers options trading. Once you have an account, you can begin researching and analyzing options to determine which ones to trade. This may include studying charts, technical indicators, and financial news to identify trends and patterns in the market.When you are ready to trade, you can place an options order with your brokerage. This will involve specifying the type of option (call or put), the underlying asset, the strike price, and the expiration date. You will also need to specify the number of options contracts you want to trade.It’s important to keep in mind that options trading can be risky and it’s important to understand the potential risks before getting started. It’s also important to have a well-defined strategy and to manage your risk by using stop-loss orders and position sizing.Before start trading, it’s highly recommend to educate yourself on the basics of options trading, including the different types of options and the risks and rewards associated with each type. There are many resources available online, such as educational videos, e-books, and articles to help you learn more about options trading

List of option Trading strategies

1. Long Call
2. Short Call
3. Long Put
4. Short Put
5. Covered Call
6. Protective Collar
7. Bull Call Spread
8. Bear Put Spread
9. Butterfly Spread
10. Iron Condor Spread
11. Straddle
12. Strangle
13. Long Straddle
14. Long Strangle
15. Short Straddle
16. Short Strangle
17. Calendar Spread
18. Diagonal Spread
19. Ratio Spread
20. Synthetic Long Stock.

1. Long Call: A long call option is a bullish strategy where an investor buys a call option with the hope that the underlying stock’s price will increase. The investor profits when the stock price rises above the strike price of the call option.
   For example, an investor buys a call option on ICICI Bank with a strike price of 850 and expiry in a month. If ICICI Bank’s stock price increases to 900, the investor can exercise the option and make a profit of 50 per share.
2. Short Call: A short call option is a bearish strategy where an investor sells a call option, betting that the underlying stock’s price will decrease. The seller profits when the stock price remains below the strike price of the call option.
   For example, an investor sells a call option on ICICI Bank with a strike price of 850 and expiry in a month. If ICICI Bank’s stock price remains at 800, the seller can keep the premium received for selling the option as profit.
3. Long Put: A long put option is a bearish strategy where an investor buys a put option with the hope that the underlying stock’s price will decrease. The investor profits when the stock price falls below the strike price of the put option.
   For example, an investor buys a put option on ICICI Bank with a strike price of 750 and expiry in a month. If ICICI Bank’s stock price falls to 700, the investor can exercise the option and make a profit of 50 per share.
4. Short Put: A short put option is a bullish strategy where an investor sells a put option, betting that the underlying stock’s price will increase. The seller profits when the stock price remains above the strike price of the put option.
   For example, an investor sells a put option on ICICI Bank with a strike price of 750 and expiry in a month. If ICICI Bank’s stock price remains at 800, the seller can keep the premium received for selling the option as profit.
5. Covered Call: A covered call is a strategy where an investor holds a long position in the underlying stock and sells a call option on the same stock. The strategy is used to generate additional income from the stock while also limiting potential losses.
   For example, an investor holds 100 shares of ICICI Bank at 800 and sells 1 call option with a strike price of 850 and expiry in a month. If ICICI Bank’s stock price remains at 800, the investor receives the premium as additional income. If the stock price increases to 850, the investor will be required to sell the stock at 850 but will still have received the premium as income.
6. Protective Collar: A protective collar is a strategy where an investor holds a long position in the underlying stock, sells a call option on the same stock, and buys a put option with a lower strike price. The strategy is used to limit potential losses on the long stock position while also generating income from the call option.
   For example, an investor holds 100 shares of ICICI Bank at 800, sells 1 call option with a strike price of 850 and expiry in a month, and buys 1 put option with a strike price of 750 and expiry in a month. If ICICI Bank’s stock price falls below 750, the investor can exercise the put option to limit their loss to 50 per share.
7. Bull Call Spread: A bull call spread is a strategy where an investor buys a call option with a lower strike price and sells a call option with a higher strike price. The strategy is used to profit from a moderately bullish outlook on the underlying stock.
   For example, an investor buys 1 call option with a strike price of 800
8. Bear Put Spread: A bear put spread is a strategy where an investor buys a put option with a lower strike price and sells a put option with a higher strike price. The strategy is used to profit from a moderately bearish outlook on the underlying stock.
   For example, an investor buys 1 put option with a strike price of 750 and sells 1 put option with a strike price of 700. If ICICI Bank’s stock price falls between 750 and 700, the investor will make a profit.
9. Butterfly Spread: A butterfly spread is a strategy where an investor simultaneously holds a long position in a call option with a lower strike price, a short position in a call option with a middle strike price, and a long position in a call option with a higher strike price. The strategy is used to profit from a neutral outlook on the underlying stock.
   For example, an investor buys 1 call option with a strike price of 750, sells 2 call options with a strike price of 800, and buys 1 call option with a strike price of 850. If ICICI Bank’s stock price remains around 800, the investor will make a profit.
10. Iron Condor Spread: An iron condor spread is a strategy where an investor simultaneously holds a short position in a call option with a higher strike price and a short position in a put option with a lower strike price, while also holding a long position in a put option with a higher strike price and a long position in a call option with a lower strike price. The strategy is used to profit from a neutral outlook on the underlying stock.
    For example, an investor sells 1 call option with a strike price of 850, buys 1 call option with a strike price of 800, sells 1 put option with a strike price of 750 and buys 1 put option with a strike price of 700. If ICICI Bank’s stock price remains between 750 and 850, the investor will make a profit.
11. Straddle: A straddle is a strategy where an investor simultaneously holds a long position in a call option and a long position in a put option, both with the same strike price. The strategy is used to profit from a significant price movement in either direction of the underlying stock.
    For example, an investor buys 1 call option with a strike price of 800 and 1 put option with a strike price of 800. If ICICI Bank’s stock price moves significantly above or below 800, the investor will make a profit.
12. Long Straddle: A long straddle is a strategy where an investor simultaneously holds a long position in a call option and a long position in a put option with the same strike price. The strategy is used to profit from a significant price movement in either direction of the underlying stock.
    For example, an investor buys 1 call option with a strike price of 800 and 1 put option with a strike price of 800. If ICICI Bank’s stock price moves significantly above or below 800, the investor will make a profit.
13. A Long Strangle is similar to a Long Straddle, but the strike prices of the options are different.
    An investor might buy a call option for ICICI Bank with a strike price of 820 and a put option with a strike price of 780. This strategy is also used when the investor believes the stock price will move significantly, but is unsure of which direction.
14. A Short Straddle is the opposite of a Long Straddle.
    An investor would sell a call option and a put option with the same strike price and expiration date. This strategy is used when the investor believes the stock price will not move significantly in either direction.
15. A Short Strangle is similar to a Short Straddle, but the strike prices of the options are different.
    An investor would sell a call option with a strike price of 820 and a put option with a strike price of 780. This strategy is also used when the investor believes the stock price will not move significantly in either direction.
16. A Calendar Spread is an options strategy in which
    an investor holds a long position in a call or put option and a short position in the same type of option with a different expiration date. For example, an investor might buy a call option for ICICI Bank with a strike price of 800 and expiration date of January and sell a call option for ICICI Bank with the same strike price but expiration date of February.
17. A Diagonal Spread is a combination of a calendar spread and a vertical spread.
    An investor would hold a long position in a call or put option with one strike price and expiration date and a short position in the same type of option with a different strike price and expiration date. For example, an investor might buy a call option for ICICI Bank with a strike price of 800 and expiration date of January, and sell a call option for ICICI Bank with a strike price of 820 and expiration date of February.
18. A Ratio Spread is an options strategy in which an investor holds a long position in one option and a short position in a different number of options of the same type and expiration date.
    For example, an investor might buy 2 call options for ICICI Bank with a strike price of 800 and sell 3 call options with the same strike price and expiration date.
19. A Synthetic Long Stock is a options strategy in which an investor holds a long position in a call option and a short position in a put option with the same strike price and expiration date. This strategy has the same payoff as owning the underlying stock, but with less capital invested.
    For example, an investor might buy a call option for ICICI Bank with a strike price of 800 and expiration date of January, and sell a put option for ICICI Bank with the same strike price and expiration date