For intraday trading in options in India, here are some trade setups and strategies that can
be effective in the fast-paced options market:
1. Breakout Strategy
Setup: Identify stocks or indices near key resistance or support levels (often found using
previous day’s high/low or pivot points).
Action: Enter a position if the price breaks out or breaks down from this level with significant
volume.
Options Trade: Use ATM (At-The-Money) options or slightly OTM (Out-The-Money) options
for a quick move. In breakouts, choose call options, and in breakdowns, go with put options.
2. Moving Average Crossover Strategy
Setup: Use shorter and longer exponential moving averages (e.g., 5 EMA and 20 EMA).
When the shorter EMA crosses above the longer one, it signals a potential uptrend; when it
crosses below, a downtrend.
Action: Enter a call option when the short EMA crosses above the long EMA, and a put
option when it crosses below.
Options Trade: Use options that are near-the-money for quicker responsiveness. Exit if
there’s a reverse crossover or if a trailing stop is hit.
3. Relative Strength Index (RSI) Reversal
Setup: RSI levels of 70 or above can signal overbought conditions, while levels of 30 or
below suggest oversold conditions.
Action: Enter a put option when the RSI is above 70 and starts to drop; enter a call option
when it’s below 30 and starts to rise.
Options Trade: Use weekly options or near-term options. This works best when paired with
other confirmation signals like candlestick patterns.
4. VWAP Strategy (Volume Weighted Average Price)
Setup: VWAP is useful for identifying market sentiment during the trading day. If the price is
above the VWAP, it indicates an uptrend; if below, a downtrend.
Action: Enter call options if the price breaks above VWAP with good volume and put options
if it breaks below.
Options Trade: Enter ATM options, aiming for quick entries and exits around VWAP-based
reversals or continuations.
5. Scalping with Bollinger Bands
Setup: Use Bollinger Bands (20-period SMA with 2 standard deviations). When price moves
to the upper or lower band, it suggests overbought/oversold conditions.
Action: Enter a put option when price touches the upper band and shows signs of reversal;
enter a call option when it touches the lower band.
Options Trade: Opt for very short-term options (same-day expiry or weekly), focusing on
small price movements.
Tips for Intraday Options Trading
Set Tight Stop Losses: Volatility in options is high, so always use a stop loss.
Avoid Holding Positions Near Expiry: Time decay (theta) accelerates as options near
expiration.
Watch News and Events: Major economic announcements or events can cause spikes in
volatility, affecting options prices.
Make sure to practice these strategies on paper or through a demo account to refine your
approach before trading with real capital.
