7 Best Options Strategies For Income Every Month

Strategy with Examples 

1. Covered Call Strategy

2. Cash-Secured Put Strategy

3. Iron Condor Strategy

4. Calendar Spread Strategy

5. Butterfly Spread Strategy

6. Straddle Strategy

7. Covered Put Strategy

Options trading is a flexible financial strategy that can be employed to generate profits inside the Indian stock market. While it’s far right that options trading may be complex, it offers traders a wide range of strategies to match different market situations. In this article, we will find out seven effective options buying and selling strategy tailor-made for the Indian market.

1.Covered Call Strategy:

The covered call strategy is a conservative approach to generate income by selling call options on stocks you already own. Let’s say you own 100 shares of Tata Motors, currently trading at Rs. 600 per share. You can sell one call option with a strike price of Rs. 620 for a premium of Rs. 20 per share. If the stock remains below Rs. 620, you keep the premium as income. If it goes above Rs. 620, you might have to sell your shares at that price.

2.Cash-Secured Put Strategy:

This strategy involves selling put options on stocks you wouldn’t mind owning. Suppose you are interested in acquiring Infosys shares, currently priced at Rs. 1,500. You can sell a put option with a strike price of Rs. 1,450 for a premium of Rs. 30. If Infosys stays above Rs. 1,450, you keep the premium. If it falls below, you may be obligated to buy the shares at the strike price, which is still a good deal.

3.Iron Condor Strategy:

The iron condor strategy is a neutral strategy that involves selling both a put spread and a call spread on the same underlying asset. This creates a range in which the asset’s price should remain. For instance, if you believe Nifty50 will stay within a range of 20,000 to 20,500, you can sell a put spread at 20,000 and a call spread at 20,500. You profit as long as Nifty50 remains within this range.

4.Calendar Spread Strategy:

A calendar spread is a strategy where you simultaneously buy and sell options with the same strike price but different expiration dates. For example, if you expect a near-term volatility decrease in Reliance Industries, you can sell a near-term call option and buy a longer-term call option with the same strike price. As time passes, the near-term option loses value faster than the longer-term option gains, resulting in a profit.

5.Butterfly Spread Strategy:

The butterfly spread strategy is used when you anticipate minimal price movement in an underlying asset. You simultaneously buy and sell multiple options at different strike prices. For instance, if you believe HDFC Bank will stay close to its current price of Rs. 1,500, you can execute a butterfly spread with strike prices of Rs. 1,480, Rs. 1,500, and Rs. 1,520.

6.Straddle Strategy:

The straddle strategy involves buying both a call and a put option with the same strike price and expiration date. This is useful when you expect a significant price movement but are unsure of the direction. For example, if you anticipate a big move in Infosys following its quarterly earnings report, you can buy a straddle with a strike price of Rs. 1,500.

7.Covered Put Strategy:

The covered put strategy is similar to the covered call, but it involves selling put options on stocks you wouldn’t mind short-selling. For instance, if you believe that Reliance Industries is overvalued at Rs. 2,400, you can sell a put option with a strike price of Rs. 2,450. If the stock remains above Rs. 2,450, you keep the premium. If it falls below, you might be obligated to buy the stock and then sell it at a profit.

Conclusion:

Options buying and selling inside the Indian market gives a variety of strategies for profits generation, every ideal to different market situations and risk tolerances. Before use any of those strategies, it is very important to thoroughly recognize their mechanics and associated risks. Additionally, it’s really helpful to discuss with a monetary guide or conduct complete research to make knowledgeable decisions that align along with your financial goals and market outlook.