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Options Spread Strategies

The document discusses different spread strategies for options trading including bull call spreads, bear call spreads, bear put spreads, and bull put spreads. It provides details on when and how to design each strategy, their breakeven points, maximum losses, and maximum profits.

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amit.9766
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137 views25 pages

Options Spread Strategies

The document discusses different spread strategies for options trading including bull call spreads, bear call spreads, bear put spreads, and bull put spreads. It provides details on when and how to design each strategy, their breakeven points, maximum losses, and maximum profits.

Uploaded by

amit.9766
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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Download as PDF, TXT or read online on Scribd
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SPREAD STRATEGIES

BOOTCAMP

BOOTCAMP
FOR EVERY OPTION STRATEGY YOU MUST KNOW

WHEN TO DESIGN?
HOW TO DESIGN?
BREAKEVEN POINT
MAXIMUM LOSS
MAXIMUM PROFIT
SPREADS STRATEGY
BULL CALL SPREAD (DEBIT STRATEGY)
BEAR CALL SPREAD (CREDIT STRATEGY)
BEAR PUT SPREAD (DEBIT STRATEGY)
BULL PUT SPREAD (CREDIT STRATEGY)

NOTE: TO EARN TIME DECAY – DESIGN CREDIT


SPREAD STRATEGIES
ON DIRECTIONAL VIEW – DESIGN DEBIT SPREAD
STRATEGIES
BULL CALL SPREAD (DEBIT SPREAD)
1) WHEN TO DESIGN?
- WHEN YOU HAVE A BULLISH VIEW
2) HOW TO DESIGN?
- BUY CALL OPTION WITH LOWER STRIKE PRICE
-SELL CALL OPTION WITH HIGHER STRIKE PRICE
3) BREAKEVEN POINT
-LOWER STRIKE PRICE + NET DEBIT
4) MAX LOSS
-LIMITED TO THE NET DEBIT (IF ON EXPIRY PRICE CLOSED AT OR BELOW LOWER
STRIKE)
5) MAX PROFIT
-STRIKE SPREAD – NET DEBIT (IF ON EXPIRY PRICE CLOSED AT OR ABOVE
HIGHER STRIKE)
RESISTANCE BREAKOUT – HCLTECH –
BULL CALL SPREAD
HOW TO DESIGN BULL CALL SPREAD
HCLTECH CMP 1200 (BREAKOUT TRADE FROM RESISTANCE)
BUY 1200 CALL OPTION AT (28)
SELL 1210 CALL OPTION AT 24
NET DEBIT = 4 POINTS
LOT SIZE = 700
BEP= LOWER STRIKE PRICE + NET DEBIT = 1200+4=1204
MAX LOSS = 4 POINTS; TOTAL LOSS ₹2800 (700 X4)
MAX LOSS IS POSSIBLE IF ON EXPIRY HCLTECH CLOSED AT OR
BELOW 1200
MAX PROFIT = STRIKE SPREAD – NET DEBIT = 10 – 4 = 6 POINTS
TOTAL PROFIT = ₹4200 ( 6 X 700)
MAX PROFIT WILL HAPPEN IF ON EXPIRY PRICE CLOSED AT OR
ABOVE 1210
MARGIN REQUIRED – HCLTECH – BULL
CALL SPREAD
BEAR PUT SPREAD (DEBIT SPREAD)
1) WHEN TO DESIGN?
-WHEN YOU HAVE A BEARISH VIEW
2) HOW TO DESIGN?
-BUY PUT OPTION WITH HIGHER STRIKE PRICE
-SELL CALL OPTION WITH LOWER STRIKE PRICE
3) BREAKEVEN POINT
-HIGHER STRIKE PRICE - NET DEBIT
4) MAX LOSS
-LIMITED TO THE NET DEBIT (IF ON EXPIRY PRICE CLOSED AT OR ABOVE
HIGHER STRIKE)
5) MAX PROFIT
-STRIKE SPREAD – NET DEBIT (IF ON EXPIRY PRICE CLOSED AT OR BELOW
LOWER STRIKE)
CROMPTON – SUPPORT BREAKDOWN
HOW TO DESIGN BEAR PUT SPREAD
CROMPTON CMP 436 (BREAKOUT TRADE FROM RESISTANCE)
BUY 430 PUT OPTION AT (14)
SELL 420 PUT OPTION AT 10
NET DEBIT = 4 POINTS
LOT SIZE = 1100
BEP = HIGHER STRIKE PRICE – NET DEBIT = 430-4=426
MAX LOSS = 4 POINTS; TOTAL LOSS ₹4400 (1100 X4)
MAX LOSS IS POSSIBLE IF ON EXPIRY CROMPTON CLOSED AT OR
ABOVE 430
MAX PROFIT = STRIKE SPREAD – NET DEBIT = 10 – 4 = 6 POINTS
TOTAL PROFIT = ₹6600 ( 6 X 1100)
MAX PROFIT WILL HAPPEN IF ON EXPIRY PRICE CLOSED AT OR BELOW
420
MARGIN REQUIRED – CROMPTON –
BEAR PUT SPREAD
BEAR CALL SPREAD (CREDIT SPREAD)
1) WHEN TO DESIGN?
-WHEN YOU HAVE A BEARISH VIEW
2) HOW TO DESIGN?
-SHORT CALL OPTION WITH LOWER STRIKE AND BUY CALL
OPTION WITH HIGHER STRIKE
3) BEP = LOWER STRIKE + NET CREDIT
4) MAX PROFIT = NET CREDIT (IF ON EXPIRY PRICE CLOSED
AT OR BELOW LOWER STRIKE)
5) MAX LOSS = STRIKE SPREAD – NET CREDIT (IF ON
EXPIRY PRICE CLOSED AT OR ABOVE HIGHER STRIKE)
BULL PUT SPREAD (CREDIT SPREAD)
1) WHEN TO DESIGN?
-WHEN YOU HAVE A BULLISH VIEW
2) HOW TO DESIGN?
-SELL PUT OPTION WITH HIGHER STRIKE AND BUY PUT OPTION
WITH LOWER STRIKE
3) BEP = HIGHER STRIKE – NET CREDIT
4) MAX PROFIT = NET CREDIT (IF ON EXPIRY PRICE CLOSED AT
OR ABOVE HIGHER STRIKE)
5) MAX LOSS = STRIKE SPREAD – NET CREDIT (IF ON EXPIRY
PRICE CLOSED AT OR BELOW LOWER STRIKE)
THANK YOU!

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