If the underlying stock remains steady or declines during the life of the near-term option, that option will expire worthless and leave the investor owning the longer-term option free and clear. If both options have the same strike price, the strategy will always require paying a premium to initiate the position. This strategy profits if the underlying security is between the two short call strikes at expiration. This strategy profits if the underlying stock is outside the wings of the iron butterfly at expiration. This strategy consists of buying puts as a means to profit if the stock price moves lower.

It is a candidate for bearish investors who want to participate in an anticipated downturn, but without the risk and inconveniences of selling the stock short. If the stock remains steady or rises during the life of the near-term option, it will expire worthless and leave the investor owning the longer-term option.

This strategy profits if the underlying security is between the two short put strikes at expiration. The initial cost to initiate this strategy is rather low, and may even earn a credit, but the upside potential is unlimited.

The basic concept is for the total delta of the two long calls to roughly equal the delta of the single short call. If the underlying stock only moves a little, the change in value of the option position will be limited. But if the stock rises enough to where the total delta of the two long calls approaches the strategy acts like a long stock position.

The initial cost to initiate this strategy is rather low, and may even earn a credit, but the downside potential is substantial. The basic concept is for the total delta of the two long puts to roughly equal the delta of the single short put. But if the stock declines enough to where the total delta of the two long puts approaches the strategy acts like a short stock position.

This strategy is simple. It consists of acquiring stock in anticipation of rising prices. The gains, if there are any, are realized only when the asset is sold. Until that time, the investor faces the possibility of partial or total loss of the investment, should the stock lose value. In principle, this strategy imposes no fixed timeline. However, special circumstances could delay or accelerate an exit. For example, a margin purchase is subject to margin calls at any time, which could force a quick sale unexpectedly. This strategy consists of buying a call option and a put option with the same strike price and expiration.

The combination generally profits if the stock price moves sharply in either direction during the life of the options. This strategy profits if the stock price moves sharply in either direction during the life of the option. This strategy consists of writing an uncovered call option. It profits if the stock price holds steady or declines, and does best if the option expires worthless. A naked put involves writing a put option without the reserved cash on hand to purchase the underlying stock. This strategy entails a great deal of risk and relies on a steady or rising stock price.

It does best if the option expires worthless. This strategy consists of adding a long put position to a long stock position. If the stock keeps rising, the investor benefits from the upside gains. Yet no matter how low the stock might fall, the investor can exercise the put to liquidate the stock at the strike price. This strategy profits if the underlying stock is outside the wings of the butterfly at expiration. Minimum loss maximum gain. With introduction of bank nifty weekly options, any options trader can write far of Out of the Money call or puts during the expiry days to take less risk and high probability trades As sellers of the options are always at the advantage because time value decay usually work in their favor.

Even you can see a big increase in the open interest in the out of the money options during or near to the expiry days.

With weekly options, now we can do writing of options 4 times in a month to take benefit of time value decay. Technical charts can be utilized to see the major resistance and support levels within last days of the expiry as the options writing above or below these anchor levels can be used to take small profits but those which have higher probability of success.

Also, writing works in favor during the last two hours of the expiry day. With experience, we can start trading big lot size to make big profits from this. Options are used for hedging purpose. Options buyers will only loose. Knowing trend or direction you can protect your money. Trader can take the help of the information to know technical trend and trade technically. Probably you should trade Options based on open interest.

It is believed as a Confirming Indicator by numerous traders across the globe.

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It generally confirms the market trend whether its rising, falling or sideways when used in conjunction with other parameters like volume and price. It also measures the flow of money in the market. Check out the below article for a comprehensive guide on OI analysis with a supporting excel sheet:. Thanks for the wonderful explaination. Its good to know that the shared information is benefiting the trading community.

Bear Call Spread

What is the best strategy that one can follow always in options index trading General. I believe there cannot be straight forward answer for this. Current Month Expiry: Short term - 2 weeks, Medium term - 4 weeks 1month. Once again, amazing work by the team as always. Started learning how to study OI and interpret it. Did a small OI analysis for Nifty short term view.

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That's itself is the biggest gift you guys could give us Indians. Thomas Wessel. Very systematic strategical approach vs. Easy to understand and follow.