TRADING

BOOTCAMP

BOOTCAMP
 GROUND RULES
Note:
1. Have a pen and paper to note down important concepts
2. Message your questions in the chat and Arvind will ask during the QnA session.
3. Study Material will be shared in the WhatsApp group.
FUTURE
 WHAT IS FUTURE

It is a contractual agreement between

two parties to buy/sell an underlying
asset at a certain future date for a
particular price th at is pre‐decided on
the date of contract.
 LOT Size
CONDITION IN
Expiry
CONTRACT
Price
 If a person A buys a contract & person
B sells a contract at 200 (lot size 1000).

Suppose expiry at 250 then person A

CONDITION A got profit of 50 * 1000 = 50000 and B
SITUATION got loss of 50 * 1000 = -50000.

Suppose expiry at 150 then person A

got loss of 50 * 1000 = -50000 and B
got profit of 50 * 1000 = 50000.
 Less Capital Required

ADVANTAGE Overnight carry of short positions

Less Brokerage
 If a person A buys a 2400 share of
ITC then he/she required capital of
2400*200 = 480000 (assume ITC
share price is 200).
If a person A buys a future he/she
required initial margin of 17% of
LESS CAPITAL
contract value .
REQUIRED
Contract Value = Lot size * Future
Price.
Contract Value = 2400 * 200 =
480000
Initial Margin = 17 % of 480000 =
81600
 Future Price > Current price

Future is in premium

TERMINOLOGY
Future Price < Current price

Future is in discount
Pay Off Future
 LONG
STRADDLE
 LONG STRADDLE

What is LS ? When will we use it?

Buy a ATM CALL &

Buy a ATM PUT In volatile scenario
 Company' s quarterly earnings

RBI Policy.

EXAMPLE OF On expiry of derivative contracts.

VOLATILE
SCENARIO Before any event due to which high
movement expected in price of
underlying asset either side.
 Suppose ITC current market price is
180 and tomorrow ITC will release
its quarterly earnings.
EXAMPLE A Person can Buy:
ATM CALL 180 strike price @ 5
ATM PUT 180 strike price @ 5
PAY OFF
CHART
 Total Risk = Total Premium = CE Premium
+ PE Premium = 5+5 =10

Max Reward = Unlimited

FORMULAE Upper Breakeven Point(UBEP) = Call strike

price + Total Premium = 180+10 = 190

Lower Breakeven Point(LBEP) = Put strike

price-Total Premium = 180-10 = 170
 LONG
STRANGLE
 LONG STRANGLE

What is LS ? When will we use it?

Sell a OTM CALL & Sell a

OTM PUT In volatile scenario
 Company' s quarterly earnings

RBI Policy.

EXAMPLE OF On expiry of derivative contracts.

VOLATILE
SCENARIO Before any event due to which high
movement expected in price of
underlying asset either side.
 Suppose ITC current market price is
180 and tomorrow ITC will release
its quarterly earnings.
EXAMPLE A Person can buy:
OTM CALL 185 strike price @ 4
OTM PUT 175 strike price @ 4
PAY OFF
CHART
 Total Risk = Total Premium = CE Premium
+ PE Premium = 4+4 = 8

Max Reward = Unlimited

FORMULAE Upper Breakeven Point(UBEP) = Call strike

price + Total Premium = 185+8 = 193

Lower Breakeven Point(LBEP) = Put strike

price-Total Premium = 175-8 = 167
 Advantages: Total risk is less in long
strangle as compare to long straddle.

Disadvantages: The upper & lower

breakeven boundaries are more wider in
COMPARISON long strangle as compare to long straddle.
So more movement will require in price of
underlying asset.
 SHORT
STRADDLE
 SHORT STRADDLE

What is SS ? When will we use it?

Sell a ATM CALL & In Non Volatile

Sell a ATM PUT scenario
 If you find that underlying asset is
moving in a range.
EXAMPLE OF
NON VOLATILE There is no event in near future due
SCENARIO to which high movement expected
in price of underlying asset in either
side
 Suppose WIPRO current market
price is 200 and WIPRO share price
moving in range in its price chart &
there is no important event in near
EXAMPLE future.

A Person can Sell:

ATM CALL 205 strike price @ 5
ATM PUT 195 strike price @ 5
PAY OFF
CHART
 Total Risk = Unlimited

Total Reward = Total Premium = CE

Premium + PE Premium = 5+5 = 10

FORMULAE Upper Breakeven Point(UBEP) = Call strike

price + Total Premium = 200+10 = 210

Lower Breakeven Point(LBEP) = Put strike

price-Total Premium = 200-10 = 190
 SHORT
STRANGLE
 SHORT STRANGLE

What is SS ? When will we use it?

Sell a OTM CALL & In Non Volatile

Sell a OTM PUT scenario
 If you find that underlying asset is
moving in a range.
EXAMPLE OF
NON VOLATILE There is no event in near future due
SCENARIO to which high movement expected
in price of underlying asset in either
side
 Suppose WIPRO current market
price is 200 and WIPRO share price
moving in range in its price chart &
there is no important event in near
EXAMPLE future.

A Person can Sell:

OTM CALL 205 strike price @ 4
OTM PUT 195 strike price @ 4
PAY OFF
CHART
 Total Risk = Unlimited

Total Reward = Total Premium = CE

Premium + PE Premium = 4+4 = 8

FORMULAE Upper Breakeven Point(UBEP) = Call strike

price + Total Premium = 205+8 = 213

Lower Breakeven Point(LBEP) = Put strike

price-Total Premium = 195-8 = 188
 Advantages: The upper & lower
breakeven boundaries are more wider in
short strangle as compare to short
straddle. So we will have more protective
COMPARISON area.

Disadvantages: Less reward short

strangle as compare to short straddle.
LONG CALL
BUTTERFLY
 LONG CALL BUTTERFLY

What is LCB ? When will we use it?

Buy a ITM CALL ,

In Non Volatile
Sell two ATM CALL &
scenario
Buy a OTM CALL

Limited loss
Limited profit
 If you find that underlying asset is
moving in a range.
EXAMPLE OF
NON VOLATILE There is no event in near future due
SCENARIO to which high movement expected
in price of underlying asset in either
side
 Suppose WIPRO current market price
is 200 and WIPRO share price moving
in range in its price chart & there is no
important event in near future.
EXAMPLE
A Person can :
Buy ITM CALL 195 strike price @8
Sell two ATM CALL 200 strike price @5
Buy OTM CALL 205 strike price @3
PAY OFF
CHART
 Max Risk = Net Premium = Total
premium spend - Total premium received
= 11 - 10 = 1
Max Reward = Difference b/w two
adjacent strike price - Net premium
=5-1=4
FORMULAE Upper Breakeven Point (UBEP) = Strike
Price of Higher Strike Long Call - Net
Premium = 205 - 1 = 204
Lower Breakeven Point (LBEP) = Strike
Price of Lower Strike Long Call + Net
Premium = 195 + 1 = 196
SHORT CALL
BUTTERFLY
 SHORT CALL BUTTERFLY

What is SCB ? When will we use it?

Sell a ITM CALL ,

In Volatile scenario
Buy two ATM CALL &
Sell a OTM CALL

Limited loss
Limited profit
 Company' s quarterly earnings

RBI Policy.
EXAMPLE OF
VOLATILE On expiry of derivative contracts.
SCENARIO
Before any event due to which high
movement expected in price of
underlying asset either side.
 Suppose WIPRO current market price is
200 tomorrow WIPRO will release its
quarterly earnings.

EXAMPLE A Person can :

Sell ITM CALL 195 strike price @8
Buy two ATM CALL 200 strike price @5
Sell OTM CALL 205 strike price @ 3
PAY OFF
CHART
 Max Risk = Difference b/w two adjacent
strike price-Net premium = 5 - 1 = 4
Max Reward = Net Premium = Total
premium spend - Total premium received
= 11 - 10 = 1
Upper Breakeven Point (UBEP) = Strike
FORMULAE Price of Higher Strike Long Call - Net
Premium= 205 - 1 = 204
Lower Breakeven Point (LBEP) = Strike
Price of Lower Strike Long Call + Net
Premium = 195 + 1 = 196
LONG CALL
CONDOR
 LONG CALL CONDOR
What is LCC ? When will we use it?
Sell a ITM CALL ,
Buy a ITM CALL (Lower Strike) , In Non Volatile
Sell a OTM CALL & scenario
Buy a OTM CALL (Higher Strike)

Limited loss
Limited profit
 If you find that underlying asset is
moving in a range.
EXAMPLE OF
NON VOLATILE There is no event in near future due
SCENARIO to which high movement expected
in price of underlying asset in either
side
 Suppose WIPRO current market price
is 200 and WIPRO share price moving
in range in its price chart & there is no
important event in near future.
EXAMPLE
A Person can :
Buy ITM CALL 190 strike price @ 12
Sell ITM CALL 195 strike price @ 8
Sell OTM CALL 205 strike price @ 3
Buy OTM CALL 210 strike price @ 2
PAY OFF
CHART
 Max Risk = Net Premium = Total
premium spend - Total premium received
= 14 - 11 = 3
Max Reward = Strike Price of Lower Strike
Long Call - Strike Price of Lower Strike
Short Call - Net Premium = 5 - 3 = 2
FORMULAE Upper Breakeven Point (UBEP) = Strike
Price of Highest Strike Short Call - Net
Premium = 210 - 3 = 207
Lower Breakeven Point (LBEP) = Strike
Price of Lowest Strike Short Call + Net
Premium = 190 + 3 = 193
SHORT CALL
CONDOR
 SHORT CALL CONDOR
What is SCC ? When will we use it?
Buy a ITM CALL ,
Sell a ITM CALL (Lower Strike) ,
In Volatile scenario
Buy a OTM CALL &
Sell a OTM CALL (Higher Strike)

Limited loss
Limited profit
 Company' s quarterly earnings

RBI Policy.
EXAMPLE OF
VOLATILE On expiry of derivative contracts.
SCENARIO
Before any event due to which high
movement expected in price of
underlying asset either side.
 Suppose WIPRO current market price is
200 tomorrow WIPRO will release its
quarterly earnings.

EXAMPLE A Person can :

Sell ITM CALL 190 strike price @ 12
Buy ITM CALL 195 strike price @ 8
Buy OTM CALL 205 strike price @ 3
Sell OTM CALL 210 strike price @ 2
PAY OFF
CHART
 Max Risk = Strike Price of Lower Strike
Long Call - Strike Price of Lower Strike
Short Call - Net Premium = 5 - 3 = 2
Max Reward = Net Premium=Total
premium spend - Total premium received
= 14 - 11 = 3
FORMULAE Upper Breakeven Point (UBEP) = Strike
Price of Highest Strike Short Call - Net
Premium= 210 - 3 = 207
Lower Breakeven Point (LBEP) = Strike
Price of Lowest Strike Short Call + Net
Premium = 190 + 3 = 193
PROTECTIVE
PUT
 PROTECTIVE PUT

What is PP ? When will we use it?

Buy a FUTURE &

In Bullish View
Buy a PUT

Limited loss
Unlimited profit
 PAY OFF
CHART CP : 350
FP : 352
ITM PE : 360 @17
 Max Risk = Time value in put premium +
premium value in future price = 7+2 = 9

FORMULAE Max Reward = Unlimited

Breakeven Point (BEP) = Put premium +

future price = 352+ 17 = 369
 PAY OFF
CHART CP : 350
FP : 352
ATM PE : 350 @10
 Max Risk = Time value in put premium +
premium value in future price = 10+2 = 12

FORMULAE Max Reward = Unlimited

Breakeven Point (BEP) = Put premium +

future price = 352+ 10 = 362
 PAY OFF
CHART CP : 350
FP : 352
OTM PE : 340 @7
 Max Risk = Time value in put premium +
premium value in future price +
difference between cash and strike of put
FORMULAE = 7+2+10 = 19

Max Reward = Unlimited

Breakeven Point (BEP) = Put premium +

future price = 352+ 10 = 362
PROTECTIVE
CALL
 PROTECTIVE CALL

What is PC ? When will we use it?

Short a FUTURE &

In Bearish View
Buy a CALL

Limited loss
Unlimited profit
 PAY OFF
CHART CP : 350
FP : 352
ITM CE : 340 @17
 Max Risk = Time value in call premium -
premium value in future price = 7-2 = 5

FORMULAE Max Reward = Unlimited

Breakeven Point (BEP) = future price - call

premium = 352 - 17 = 335
 PAY OFF
CHART CP : 350
FP : 352
ATM CE : 350 @10
 Max Risk = Time value in call premium -
premium value in future price = 10-2 = 8

FORMULAE Max Reward = Unlimited

Breakeven Point (BEP) = Future price - Call

premium = 352 - 10 = 342
 PAY OFF
CHART CP : 350
FP : 352
OTM CE : 360 @7
 Max Risk = Time value in call premium +
difference between cash value and call
strike - premium value in future price =
7+10-2 = 15
FORMULAE
Max Reward = Unlimited

Breakeven Point (BEP) = Future price -

Call premium = 352 - 7 = 345
CALL RATIO
BACK
SPREAD
 CALL RATIO BACK SPREAD

What is CBR ? When will we use it?

Sell a ITM CALL &

In Bullish View
Buy two OTM CALL

Unlimited profit if the market goes up,

Limited profit if market goes down,
Predefined loss if the market stay within a range
 Suppose NIFTY current market price is
9000 and someone has bullish view on
NIFTY.

EXAMPLE A Person can :

Sell ITM CALL 8900 strike price @ 150
Buy two lot OTM CALL 9050 strike price
@ 50
PAY OFF
CHART
 Spread = Higher Strike – Lower Strike =
9050-8900 = 150
Max Risk = Spread - net premium= 150 -
50 = 100
FORMULAE Max Reward = Unlimited
Upper Breakeven Point (UBEP) = Higher
Strike + Max Loss = 9050 + 100 = 9150
Lower Breakeven Point (LBEP) = Lower
Strike + Net Premium = 8900 + 50 = 8950
THANK
YOU