PROJECT REPORT

ON
“A Study on "Options Strategies" adopted by Investors with special reference to SMC
Global Securities Ltd.”

SUBMITTED
IN THE PARTIAL FULFILLMENT FOR THE AWARD OF THE DEGREE OF
BACHELOR OF BUSINESS ADMINISTRATION
UNDER THE GUIDANCE OF:
Ms. Abha Gupta
Assistant Professor, RDIAS
BY
Sahil Khanna
Enrollment No. 01715901721
BBA- 5th Semester
Batch 2021-24

RUKMINI DEVI INSTITUTE OF ADVANCED STUDIES

An ISO 9001:2015 Certified Institute
NAAC Accredited: A+ Grade (2nd Cycle), Category A+ Institution (by SFRC, Govt. of
NCT Delhi)
(Approved by AICTE, HRD Ministry, Govt. of India)
Affiliated to Guru Gobind Singh Indraprastha University, Delhi
2A & 2B, Madhuban Chowk, Outer Ring Road, Phase-1, Delhi-110085

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 Student Declaration

This is to certify that I have completed the project titled ―Option Strategies‖
Under the guidance of Mr. Naresh Gogia (Vice President; Corporate Client Group,
SMC) in partial fulfillment of the requirement for the award of the degree of Bachelor
of Business Administration from Rukmini Devi Institute of Advanced Studies, New
Delhi. It is also certified that the project of mine is an original work and has not been
submitted earlier elsewhere.

Name of the student: Sahil Khanna

Enrolment Number: 01715901721
Class: BBA Morning B

Signature

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 Certificate from Faculty Guide

This is to certify that the project titled ―Option Strategies‖ is an academic work
done by Sahil Khanna submitted in partial fulfillment of the requirement for the
award of the degree of Bachelor of Business Administration from Rukmini Devi
Institute of Advanced Studies, New Delhi, under my guidance and direction. To the
best of my knowledge and belief, the data and information presented by him/ her in the
project have not been submitted earlier elsewhere.

Name of the Faculty: Ms. Abha Gupta

Designation of the Faculty: Assistant Professor, RDIAS

Signature

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Completion Certificate

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 Acknowledgement
On the occasion of submitting my project report, I want to extend my heartfelt
appreciation to Mr. Naresh Gogia (Vice President of the Corporate Client
Group,SMC), for affording me the opportunity to serve as a project trainee. His
guidance, support, and cooperation throughout the duration of the project have been
invaluable. Mr. Gogia's mentorship has been instrumental in shaping the direction of
the project. His active involvement, insightful perspectives, and continuous
encouragement have been a driving force behind its success. His unwavering
dedication to sharing knowledge and expertise have been a constant source of
inspiration and fortitude, motivating me to strive for excellence. I am indebted to Mr.
Gogia for his constant availability, meticulous attention to detail, and adeptness in
guiding me towards relevant sources of information. His judicious counsel to maintain
simplicity, brevity, clarity, and accuracy in the project's execution has been
instrumental in enhancing its quality. Furthermore, I extend my sincere gratitude to the
entire team of the Corporate Client Group and SMC Global Securities Limited. Their
collective experience and unwavering support have significantly contributed to the
successful completion of this project. Their generous assistance has been pivotal in
navigating the challenges and complexities of this endeavor. I am deeply thankful for
their invaluable contributions and assistance throughout this journey. Their
collaboration has enriched my learning experience and empowered me to deliver a
comprehensive project report. Once again, I express my gratitude to Mr. Naresh Gogia
and the entire team for their kindness, guidance, and support.

Name of Student: Sahil Khanna

Enrollment No.: 01715901721
Class: BBA Morning B Signature
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 Executive Summary

This executive summary provides a concise overview of the project focused on

exploring and analyzing various option strategies. The project aims to provide a
comprehensive understanding of option strategies, their applications, benefits, and
associated risks.

Objective: The primary objective of this project is to investigate and present an in-
depth analysis of different option strategies, including their potential for risk
management, income generation, and speculative trading. By examining a range of
strategies, the project intends to offer insights into how investors and traders can
effectively utilize options to achieve their financial goals.

Scope: The project encompasses a diverse array of option strategies, including but not
limited to:

1. Covered Call Strategy: This involves holding a long position in a stock while
simultaneously writing (selling) call options on the same asset. The goal is to
generate income from the premiums received from selling the calls.

2. Protective Put Strategy: This strategy involves holding a long position in a

stock and purchasing put options to hedge against potential downside risk.

3. Straddle and Strangle Strategies: These strategies involve buying both call
and put options with the same expiration date and strike price (straddle) or with
different strike prices (strangle). They are used to capitalize on significant price
movements, regardless of the direction.

4. Bullish and Bearish Spread Strategies: These strategies involve using

combinations of call and put options to profit from both bullish (upward) and
bearish (downward) price movements while managing risk.

5. Collar Strategy: In this strategy, an investor holds a long position in a stock,

buys a protective put, and finances the put by selling a covered call. This creates
a range of protection against both downside and upside risk.

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Methodology: The project employs a combination of theoretical analysis and practical
examples to illustrate the mechanics and outcomes of each option strategy. Real-world
case studies and simulations will be used to demonstrate how these strategies perform
under different market conditions.

Benefits: The research and analysis presented in this project offer several benefits to
investors, traders, and financial professionals:

1. Enhanced Understanding: Readers will gain a comprehensive understanding

of how option strategies work, their potential benefits, and the market conditions
where they are most effective.

2. Risk Management: By exploring strategies like protective puts and collars,

investors can learn how to mitigate risk in their portfolios.

3. Income Generation: Covered call and other income-focused strategies can help
individuals generate additional income from their existing stock holdings.

4. Flexibility: Understanding a variety of strategies provides investors with the

flexibility to adapt to different market scenarios and tailor their approaches to
their specific goals.

Conclusion: The project on option strategies serves as a valuable resource for both
novice and experienced investors seeking to harness the power of options. By delving
into the mechanics, benefits, and risks of various strategies, readers can make informed
decisions, optimize their investment approaches, and potentially enhance their overall
portfolio performance.

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 Executive Synopsis

Trainee : Sahil Khanna

Organization : SMC Global Securities Limited

Educational Institute: Rukmini Devi Institute of Advanced Studies

Office Address : 11/6B, Shanti Chambers, Pusa Road, New Delhi - 5

Topic : ―Option strategies‖

Duration : 6 Weeks

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 Introduction

SMC Global Securities Limited

SMC: A ONE STOP INVESTMENT SHOP

SMC Group, a leading financial services provider in India is a vertically

integrated investment solutions company, with a pan-India presence.
Over the years, SMC has expanded its domesticand international
operations. Existing network includes regional offices at Mumbai,
Kolkata, Chennai, Bangalore, Cochin, Ahmadabad Jaipur, Hyderabad
and 1500+ offices across 375+ cities in India. SMC has plans to grow its
network to 2,000 offices across 500+ cities in the next 3 years. The
company has expanded internationally and has established office in Dubai
Gold and Commodities Exchange (DGCX). Its products and Services
include Institutional and retail brokerage of equity, commodity,
currency, derivatives, online trading, investment banking, depository
services, clearing services, IPOs and mutual funds
distribution, Portfolio management, wealth advisory, insurance
broking, equity and commodity research. SMC is one of the most
active trading organizations in India, averaging over 3,50,000 trades
per day. Currently, SMC has a highly efficient workforce of over 4,000
employees and one of the largest retail network in India currently
serving the financial needs of more than 5,50,000 satisfied investors.

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Corporate Client Group
SMC’s state-of-the-art Online Trading facility.
• Online Fund Transfer.
• Trade in NSE, BSE and F&O on a single screen.
• Real Time Streaming Quotes.
• Instant Order/Trade confirmation in the same window
• Online connectivity to Back Office Reports.
• Online IPO facility.
• Back up facility to place Trades through our trading call center

Personalized Client Service

 A Dedicated Relationship Management Team offers you personalized service
 A deeper understanding of your financial needs allows us to offer solutions.
 Demonstrating why our levels of customer care are internationally recognized.

Back office Services by Corporate Desk

• Information regarding Status of Deliveries,
• Pay-in and Pay-out Details,
• Accounting Reports which includes Ledger, Margin Report, Profit and loss
reports.
• Corporate Benefits Reports
• Depository Holding Statements
• Email Confirmations and trade execution reports
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 Research Methodology
OBJECTIVES:

1. Investigate and evaluate commonly used options strategies, such as covered

calls, protective puts, straddles, and spreads.
2. Examine the risk and return characteristics of different options strategies to
determine their suitability for various investor profiles and market conditions.
3. Explore how investors utilize options for hedging against market volatility and
protecting their portfolios from adverse price movements.
4. Investigate speculative options strategies, like long calls and long puts, to
assess their potential for generating significant profits and their associated risks.

RESEARCH DESIGN:

The research design is descriptive in nature. It consists of quantitative aspects as the

study consists of data-based questionnaire.

Descriptive Research:

Descriptive Research comprises of several types of surveys and fact finding inquiries.

The most important goal of descriptive research is to study the role of social media
platforms for e-commerce. It includes quantitative analysis.

Quantitative Analysis:
Quantitative research is centered on determining the quantity or amount of something.
It may be used to compile all numerical data in our research since it is relevant to
occurrences that can be stated in terms of quantity.

DATA COLLECTION SOURCE:

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The data used in the whole project is Primary Data .

• Primary Data:

Primary Data was conducted within the organization so as to understand different

perspectives of people regarding the study by collecting data from the

Questionnaire.

POPULATION:
For the study the data has been collected from all the age groups

This includes school going students, graduates and post graduates students,

homemaker, office going people,etc.

SAMPLING TECHNIQUE:

The sampling design which is used here is convenience sampling.

SAMPLE SIZE:
It is the number of observations used for calculating estimates of a given population.
Here the sampling size is 51

RESEARCH TOOLS:

The collected data is analyzed using Excel.

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 Analysis
Option Strategies: An Overview
Most strategies that options investors use have limited risk but also limited profit
potential. For this reason, options strategies are not get-rich-quick schemes.
Transactions generally require less capital than equivalent stock transactions, and
therefore return smaller amounts - but a potentially greater percentage of the
investment - than equivalent stock transactions.
Before you buy or sell options you need a strategy, and before you choose an options
strategy, you need to understand how you want options to work in your portfolio. A
particular strategy is successful only if it performs in a way that helps you meet your
investment goals.
One of the benefits of options is the flexibility they offer—they can complement
portfolios in many different ways. So it's worth taking the time to identify a goal that
suits you and your financial plan. Once you've chosen a goal, you'll have narrowed the
range of strategies to use. As with any type of investment, only some of the strategies
will be appropriate for your objective.
Some options strategies, such as writing covered calls, are relatively simple to
understand and execute. There are more complicated strategies, however, such
as spreads and collars, that require two opening transactions. These strategies are
often used to further limit the risk associated with options, but they may also
limit potential return. When you limit risk, there is usually a trade-off.

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Types of Strategies

Option Strategies

(A) Spread (B) Combination (C) Synthetic

(A) SPREAD

Combination of
Either All Calls or All Either only Buying
Futures and Options
Puts or only Selling
for arbitraging

Spread

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Vertical Spreads (Different strike prices but same expiration date)

Bull
Bear
Butterfly
Horizontal or Calendar Spreads

(Different expiration dates but same strike prices)

Normal
Neutral
Bullish
Bearish

3. Diagonal Spreads (different expiration dates and different strike

prices)

(B) COMBINATION

Straddle
Strangle
Strip
Strap

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(C) SYNTHETIC

Synthetic Long
Synthetic Short

Strategies Covered

 Long Call

 Long Put

 Married Put

 Protective Put

 Covered call

 Cash secured put

 Collar

 Long Straddle

 Short Straddle

 Long Strangle
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 Short Strangle

 Strap

 Strip

 Bull Call Spread

 Bear Put Spread

 Butterfly Spreads

 Box Spreads

 Calendar Spreads

 Diagonal Spreads

 Ratio Call Spread

 Synthetic Long and Synthetic Short

 Market Neutral strategy

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Long Call
Purchasing calls has remained the most popular strategy with investors since listed
options were first introduced. Before moving into more complex bullish and bearish
strategies, an investor should thoroughly understand the fundamentals about buying
and holding call options.
Market Opinion?
Bullish to Very Bullish
When to Use?
This strategy appeals to an investor who is generally more interested in the dollar
amount of his initial investment and the leveraged financial reward that long calls can
offer. The primary motivation of this investor is to realize financial reward from an
increase in price of the underlying security. Experience and precision are keys to
selecting the right option (expiration and/or strike price) for the most profitable result.
In general, the more out-of-the-money the call is the more bullish the strategy, as
bigger increases in the underlying stock price are required for the option to reach the
break-even point.

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As Stock Substitute
An investor who buys a call instead of purchasing the underlying stock considers the
lower dollar cost of purchasing a call contract versus an equivalent amount of stock as
a form of insurance. The uncommitted capital is "insured" against a decline in the price
of the call option's underlying stock, and can be invested elsewhere. This investor is
generally more interested in the number of shares of stock underlying the call contracts
purchased, than in the specific amount of the initial investment - one call option
contract for each 100 shares he wants to own. While holding the call option, the
investor retains the right to purchase an equivalent number of underlying shares at any
time at the predetermined strike price until the contract expires.
Note: Equity option holders do not enjoy the rights due stockholders – e.g., voting
rights, regular cash or special dividends, etc. A call holder must exercise the option and
take ownership of the underlying shares to be eligible for these rights.
Benefit
A long call option offers a leveraged alternative to a position in the stock. As the
contract becomes more profitable, increasing leverage can result in large percentage
profits because purchasing calls generally requires lower up-front capital commitment
than with an outright purchase of the underlying stock. Long call contracts offer the
investor a pre-determined risk.

Risk vs. Reward

Maximum Profit: Unlimited
Maximum Loss: Limited to the net premium paid
Upside Profit at Expiration:
Stock Price - Strike Price - Premium Paid
(Assuming Stock Price above BEP)

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Your maximum profit depends only on the potential price increase of the underlying
security; in theory it is unlimited. At expiration an in-the-money call will generally be
worth its intrinsic value. Though the potential loss is predetermined and limited in
dollar amount, it can be as much as 100% of the premium initially paid for the call.
Whatever your motivation for purchasing the call, weigh the potential reward against
the potential loss of the entire premium paid.
Break-Even-Point (BEP)?
BEP: Strike Price + Premium Paid
Before expiration, however, if the contract's market price has sufficient time value
remaining, the BEP can occur at a lower stock price.

Volatility
If Volatility Increases: Positive Effect
If Volatility Decreases: Negative Effect
Any effect of volatility on the option's total premium is on the time value portion.
Time Decay?
Passage of Time: Negative Effect
The time value portion of an option's premium, which the option holder has
"purchased" by paying for the option, generally decreases, or decays, with the passage
of time. This decrease accelerates as the option contract approaches expiration.
Long Put
Long put can be an ideal tool for an investor who wishes to participate profitably from
a downward price move in the underlying stock. Before moving into more complex
bearish strategies, an investor should thoroughly understand the fundamentals about
buying and holding put options.
Market Opinion?

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Bearish
When to Use?
Purchasing puts without owning shares of the underlying stock is a purely directional
strategy used for bearish speculation. The primary motivation of this investor is to
realize financial reward from a decrease in price of the underlying security. This
investor is generally more interested in the dollar amount of his initial investment and
the leveraged financial reward that long puts can offer than in the number of contracts
purchased.
Experience and precision are key in selecting the right option (expiration and/or strike
price) for the most profitable result. In general, the more out-of-the-money the put
purchased is the more bearish the strategies, as bigger decreases in the underlying
stock price are required for the option to reach the break-even point.

Benefit
A long put offers a leveraged alternative to a bearish, or "short sale" of the underlying
stock, and offers less potential risk to the investor. As with a long call, an investor who

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purchased and is holding a long put has predetermined, limited financial risk versus the
unlimited upside risk from a short stock sale. Purchasing a put generally requires lower
up-front capital commitment than the margin required to establish a short stock
position. Regardless of market conditions, a long put will never require a margin call.
As the contract becomes more profitable, increasing leverage can result in large
percentage profits.
Risk vs. Reward
Maximum Profit: Limited Only by Stock Declining to Zero
Maximum Loss: Limited to the premium paid
Upside Profit at Expiration:
Strike Price - Stock Price at Expiration - Premium Paid
(Assuming Stock Price below BEP)
The maximum profit amount can be limited by the stock's potential decrease to no less
than zero. At expiration an in-the-money put will generally be worth its intrinsic value.
Though the potential loss is predetermined and limited in dollar amount, it can be as
much as 100% of the premium initially paid for the put. Whatever your motivation for
purchasing the put, weigh the potential reward against the potential loss of the entire
premium paid.

Break-Even-Point (BEP)?
BEP: Strike Price - Premium Paid
Before expiration, however, if the contract's market price has sufficient time value
remaining, the BEP can occur at a higher stock price.
Volatility
If Volatility Increases: Positive Effect
If Volatility Decreases: Negative Effect

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Any effect of volatility on the option's total premium is on the time value portion.
Time Decay?
Passage of Time: Negative Effect
The time value portion of an option's premium, which the option holder has
"purchased" when paying for the option, generally decreases, or decays, with the
passage of time. This decrease accelerates as the option contract approaches expiration.
A market observer will notice that time decay for puts occurs at a slightly slower rate
than with calls.
Married Put
An investor purchasing a put while at the same time purchasing an equivalent number
of shares of the underlying stock is establishing a "married put" position - a hedging
strategy with a name from an old IRS ruling.
Market Opinion? Bullish to Very Bullish
When to Use? The investor employing the married put strategy wants the benefits of
stock ownership (dividends, voting rights, etc.), but has concerns about unknown, near-
term, downside market risks. Purchasing puts with the purchase of shares of the
underlying stock is a directional and bullish strategy. The primary motivation of this
investor is to protect his shares of the underlying security from a decrease in market
price. He will generally purchase a number of put contracts equivalent to the number of
shares held.

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Benefit
While the married put investor retains all benefits of stock ownership, he has "insured"
his shares against an unacceptable decrease in value during the lifetime of the put, and
has a limited, predefined, downside market risk. The premium paid for the put option is
equivalent to the premium paid for an insurance policy. No matter how much the
underlying stock decreases in value during the option's lifetime, the investor has a
guaranteed selling price for the shares at the put's strike price. If there is a sudden,
significant decrease in the market price of the underlying stock, a put owner has the
luxury of time to react. Alternatively, a previously entered stop loss limit order on the
purchased shares might be triggered at a time and at a price unacceptable to the
investor. The put contract has conveyed to him a guaranteed selling price, and control
over when he chooses to sell his stock.
Risk vs. Reward
Maximum Profit: Unlimited

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Maximum Loss: Limited
Stock Purchase Price - Strike Price + Premium Paid
Upside Profit at Expiration: Gains in underlying share value - Premium Paid
Your maximum profit depends only on the potential price increase of the underlying
security; in theory it is unlimited. When the put expires, if the underlying stock closes
at the price originally paid for the shares, the investor's loss would be the entire
premium paid for the put.
Break-Even-Point (BEP)?
BEP: Stock Purchase Price + Premium Paid

Volatility
If Volatility Increases: Positive Effect
If Volatility Decreases: Negative Effect
Any effect of volatility on the option's total premium is on the time value portion.
Time Decay?
Passage of Time: Negative Effect
The time value portion of an option's premium, which the option holder has
"purchased" when paying for the option, generally decreases, or decays, with the
passage of time. This decrease accelerates as the option contract approaches expiration.
A market observer will notice that time decay for puts occurs at a slightly slower rate
than with calls.

Protective Put
An investor who purchases a put option while holding shares of the underlying stock
from a previous purchase is employing a "protective put."
Market Opinion?

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Bullish on the Underlying Stock
When to Use?
The investor employing the protective put strategy owns shares of underlying stock
from a previous purchase, and generally has unrealized profits accrued from an
increase in value of those shares. He might have concerns about unknown, downside
market risks in the near term and wants some protection for the gains in share value.
Purchasing puts while holding shares of underlying stock is a directional strategy, but a
bullish one.

Benefit
Like the married put investor, the protective put investor retains all benefits of
continuing stock ownership (dividends, voting rights, etc.) during the lifetime of the
put contract, unless he sells his stock. At the same time, the protective put serves to
limit downside loss in unrealized gains accrued since the underlying stock's purchase.
No matter how much the underlying stock decreases in value during the option's
lifetime, the put guarantees the investor the right to sell his shares at the put's strike
price until the option expires. If there is a sudden, significant decrease in the market
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price of the underlying stock, a put owner has the luxury of time to react. Alternatively,
a previously entered stop loss limit order on the purchased shares might be triggered at
both a time and a price unacceptable to the investor. The put contract has conveyed to
him a guaranteed selling price at the strike price, and control over when he chooses to
sell his stock.
Risk vs. Reward
Maximum Profit: Unlimited
Maximum Loss: Limited
Strike Price - (Stock Purchase Price + Premium Paid)
Upside Profit at Expiration: Gains in Underlying Share Value since Purchase -
Premium Paid
Potential maximum profit for this strategy depends only on the potential price increase
of the underlying security; in theory it is unlimited. If the put expires in-the-money,
any gains realized from in an increase in its value will offset any decline in the
unrealized profits from the underlying shares. On the other hand, if the put expires at-
or out-of-the-money the investor will lose the entire premium paid for the put.
Break-Even-Point (BEP)?
BEP: Stock Purchase Price + Premium Paid
Volatility
If Volatility Increases: Positive Effect
If Volatility Decreases: Negative Effect
Any effect of volatility on the option's total premium is on the time value portion.
Time Decay?
Passage of Time: Negative Effect
The time value portion of an option's premium, which the option holder has
"purchased" when paying for the option, generally decreases, or decays, with the

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passage of time. This decrease accelerates as the option contract approaches expiration.
A market observer will notice that time decay for puts occurs at a slightly slower rate
than with calls.

Covered Call
The covered call is a strategy in which an investor writes a call option contract while at
the same time owning an equivalent number of shares of the underlying stock. If this
stock is purchased simultaneously with writing the call contract, the strategy is
commonly referred to as a "buy-write." If the shares are already held from a previous
purchase, it is commonly referred to an "overwrite." In either case, the stock is
generally held in the same brokerage account from which the investor writes the call,
and fully collateralizes, or "covers," the obligation conveyed by writing a call option
contract. This strategy is the most basic and most widely used strategy combining the
flexibility of listed options with stock ownership.
Market Opinion?
Neutral to Bullish on the Underlying Stock
When to Use?
Though the covered call can be utilized in any market condition, it is most often
employed when the investor, while bullish on the underlying stock, feels that its market
value will experience little range over the lifetime of the call contract. The investor
desires to either generate additional income (over dividends) from shares of the
underlying stock, and/or provide a limited amount of protection against a decline in
underlying stock value.

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Benefit
While this strategy can offer limited protection from a decline in price of the
underlying stock and limited profit participation with an increase in stock price, it
generates income because the investor keeps the premium received from writing the
call. At the same time, the investor can appreciate all benefits of underlying stock
ownership, such as dividends and voting rights, unless he is assigned an exercise notice
on the written call and is obligated to sell his shares. The covered call is widely
regarded as a conservative strategy because it decreases the risk of stock ownership.
Risk vs. Reward
Maximum Profit: Limited
Maximum Loss: Substantial
Upside Profit at Expiration if Assigned: Premium Received + Difference (if any)
Between Strike Price and Stock Purchase Price
Upside Profit at Expiration if Not Assigned: Any Gains in Stock Value + Premium
Received

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Maximum profit will occur if the price of the underlying stock you own is at or above
the call option's strike price, either at its expiration or when you might be assigned an
exercise notice for the call before it expires. The risk of real financial loss with this
strategy comes from the shares of stock held by the investor. This loss can become
substantial if the stock price continues to decline in price as the written call expires. At
the call's expiration, loss can be calculated as the original purchase price of the stock
less its current market price, less the premium received from initial sale of the call.
Any loss accrued from a decline in stock price is offset by the premium you received
from the initial sale of the call option. As long as the underlying shares of stock are not
sold, this would be an unrealized loss. Assignment on a written call is always possible.
An investor holding shares with a low cost basis should consult his tax advisor about
the tax ramifications of writing calls on such shares.
Break-Even-Point (BEP)?
BEP: Stock Purchase Price - Premium Received
Volatility
If Volatility Increases: Negative Effect
If Volatility Decreases: Positive Effect
Any effect of volatility on the option's price is on the time value portion of the option's
premium.
Time Decay?
Passage of Time: Positive Effect
With the passage of time, the time value portion of the option's premium generally
decreases - a positive effect for an investor with a short option position.

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Cash Secured Put
According to the terms of a put contract, a put writer is obligated to purchase an
equivalent number of underlying shares at the put's strike price if assigned an exercise
notice on the written contract. Many investors write puts because they are willing to be
assigned and acquire shares of the underlying stock in exchange for the premium
received from the put's sale. For this discussion, a put writer's position will be
considered as "cash-secured" if he has on deposit with his brokerage firm a cash
amount (or equivalent) sufficient to cover such a purchase.
Market Opinion?
Neutral to Slightly Bullish
When to Use?
There are two key motivations for employing this strategy: either as an attempt to
purchase underlying shares below current market price, or to collect and keep premium
from the sale of puts which expire out-of-the-money and with no value. An investor
should write a cash secured put only when he would be comfortable owning underlying
shares, because assignment is always possible at any time before the put expires. In
addition, he should be satisfied that the net cost for the shares will be at a satisfactory
entry point if he is assigned an exercise. The number of put contracts written should
correspond to the number of shares the investor is comfortable and financially capable
of purchasing. While assignment may not be the objective at times, it should not be a
financial burden. This strategy can become speculative when more puts are written
than the equivalent number of shares desired to own.

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Benefit
The put writer collects and keeps the premium from the put's sale, no matter how much
the stock increases or decreases in price. If the writer is assigned, he is then obligated
to purchase an equivalent amount of underlying shares at the put's strike price. The
premium received from the put's sale will partially offset the purchase price for the
stock, and can result in a purchase of shares below the current market price. If the
underlying stock price declines significantly and the put writer is assigned, the
purchase price for the shares can be above current market price. In this case, the put
writer will have an unrealized loss due to the high stock purchase price, but will have
upside profit potential if retaining the purchased shares.
Risk vs. Reward
Maximum Profit: Limited
Premium Received
Maximum Loss: Substantial
Strike Amount - Premium Received
Upside Profit at Expiration: Premium Received from Put Sale
Net Stock Purchase Price if Assigned: Strike Price - Premium Received from Put
Sale

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If the underlying stock increases in price and the put expires with no value, the profit is
limited to the premium received from the put's initial sale. On the other hand, an
outright purchase of underlying stock would offer the investor unlimited upside profit
potential. If the underlying stock declines below the strike price of the put, the investor
might be assigned an exercise notice and be obligated to purchase an equivalent
number of shares. The net stock purchase price would be the put's strike price less the
premium received from the put's sale. This price can be less than current market price
for the stock when assignment is made.
The loss potential for this strategy is similar to owning an equivalent number of
underlying shares. Theoretically, the stock price can decline to zero. If assignment
results in the purchase of stock at a net price greater than the current market price, the
investor would incur a loss - unrealized as long as ownership of the shares is retained.
Break-Even-Point (BEP)?
BEP: Strike Price - Premium Received from Sale of Put
Volatility
If Volatility Increases: Negative Effect
If Volatility Decreases: Positive Effect
Any effect of volatility on the option's total premium is on the time value portion.
Time Decay?
Passage of Time: Positive Effect
With the passage of time, the time value portion of the option's premium generally
decreases - a positive effect for an investor with a short option position.

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Collar
A collar can be established by holding shares of an underlying stock, purchasing a
protective put and writing a covered call on that stock. The option portions of this
strategy are referred to as a combination. Generally, the put and the call are both out-
of-the-money when this combination is established, and have the same expiration
month. Both the buy and the sell sides of this spread are opening transactions, and are
always the same number of contracts. In other words, one collar equals one long put
and one written call along with owning 100 shares of the underlying stock. The
primary concern in employing a collar is protection of profits accrued from underlying
shares rather than increasing returns on the upside.
Market Opinion?
Neutral, following a period of appreciation
When to Use?
An investor will employ this strategy after accruing unrealized profits from the
underlying shares, and wants to protect these gains with the purchase of a protective
put. At the same time, the investor is willing to sell his stock at a price higher than
current market price so an out-of-the-money call contract is written, covered in this
case by the underlying stock.

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Benefit
This strategy offers the stock protection of a put. However, in return for accepting a
limited upside profit potential on his underlying shares (to the call's strike price), the
investor writes a call contract. Because the premium received from writing the call can
offset the cost of the put, the investor is obtaining downside put protection at a smaller
net cost than the cost of the put alone. In some cases, depending on the strike prices
and the expiration month chosen, the premium received from writing the call will be
more than the cost of the put. In other words, the combination can sometimes be
established for a net credit - the investor receives cash for establishing the position.
The investor keeps the cash credit, regardless of the price of the underlying stock when
the options expire. Until the investor either exercises his put and sells the underlying
stock, or is assigned an exercise notice on the written call and is obligated to sell his
stock, all rights of stock ownership are retained.
Risk vs. Reward

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This example assumes an accrued profit from the investor's underlying shares at the
time the call and put positions are established, and that this unrealized profit is being
protected on the downside by the long put. Therefore, discussion of maximum loss
does not apply. Rather, in evaluating profit and/or loss below, bear in mind the
underlying stock's purchase price (or cost basis). Compare that to the net price received
at expiration on the downside from exercising the put and selling the underlying
shares, or the net sale price of the stock on the upside if assigned on the written call
option. This example also assumes that when the combined position is established,
both the written call and purchased put are out-of-the-money.

Net Upside Stock Sale Price if

Assigned on the Written Call:
Call's Strike Price + Net Credit Received for Combination
or
Call's Strike Price - Net Debit Paid for Combination
Net Downside Stock Sale Price
if Exercising the Long Put:
Put's Strike Price + Net Credit Received for Combination
or
Put's Strike Price - Net Debit Paid for Combination

If the underlying stock price is between the strike prices of the call and put when the
options expire, both options will generally expire with no value. In this case, the
investor will lose the entire net premium paid when establishing the combination, or

36
keep the entire net cash credit received when establishing the combination. Balance
either result with the underlying stock profits accrued when the spread was established.
Break-Even-Point (BEP)?
In this example, the investor is protecting his accrued profits from the underlying stock
with a sale price for the shares guaranteed at the long put's strike price. In this case,
consideration of BEP does not apply.

37
Findings & Data Interpretation

38
 BIBLIOGRAPHY:
The web sites referred are as follows:

1. www.wikipedia.com
2. www.moneycontrol.com
3. ww.google.co.in
4. www.bseindia.com
5. www.finance.yahoo.com
6. www.money.rediff.com
7. www.finance.google.com
8. www.equitymaster.com
9. www.myiris.com
10.www.economictimes.com
11.www.nseindia.com
12.www.economictimes.com
13.www.yahoofinance.com

39
Plagiarism Report

40
 Questionnaire
Section 1: Investor Profile
1. Age:

 Under 25

 25-34

 35-44

 45-54

 55-64

 65 or older
2. Occupation:

 Employed full-time

 Employed part-time

 Self-employed

 Retired

 Student

 Other (please specify): ______________

3. Investment Experience:

 Novice (less than 1 year)

 Beginner (1-3 years)

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 Intermediate (3-5 years)

 Advanced (5+ years)

4. Risk Tolerance:

 Very Low

 Low

 Moderate

 High

 Very High
Section 2: Knowledge and Understanding of Option Strategies
5. How would you rate your understanding of options and option strategies?

 Poor

 Fair

 Good

 Very Good

 Excellent
6. Have you ever traded or invested in options?

 Yes

 No
7. If you have traded options, which option strategies have you used or are
familiar with? (Check all that apply)

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 Covered Call

 Protective Put

 Long Call

 Long Put

 Bull Call Spread

 Bear Put Spread

 Iron Condor

 Straddle

 Strangle

 Other (please specify): ______________

8. What sources do you use to educate yourself about option strategies? (Check
all that apply)

 Books

 Online courses

 Financial advisors

 Online forums

 Financial news websites

 Other (please specify): ______________

Section 3: Decision-making and Usage of Option Strategies

43
9. What are the primary reasons for your interest in using option strategies?
(Select up to three)

 Generate income

 Hedge against market volatility

 Speculative trading

 Portfolio diversification

 Capital preservation

 Others (please specify): ______________

10. Do you consult with a financial advisor or professional before utilizing
option strategies?

 Yes

 No
11. How often do you engage in trading or investing using option strategies?

 Daily

 Weekly

 Monthly

 Quarterly

 Rarely

 Never

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12. What factors influence your choice of a particular option strategy? (Check
all that apply)

 Market conditions

 Risk tolerance

 Economic indicators

 Earnings reports

 Technical analysis

 Fundamental analysis

 Others (please specify): ______________

Section 4: Future Interest and Recommendations

13. Would you consider learning more about option strategies in the future?

 Yes, definitely

 Yes, maybe

 No, not interested

14. What improvements or additional resources would encourage you to adopt
or learn more about option strategies?

 More educational materials

 Simplified explanations

 Webinars or workshops

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 Simulated trading platforms

 Personalized guidance

 Other (please specify): ______________

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