Top 15 Options Strategies for Income, Unlimited Profit

Top reason behind the wide popularity of options trading, is the uncapped profit target. Risk low & gain high with right usage of different income options strategies. With options with traders can generate regular income monthly, at least 3-4% return per month by properly blending buy & sell option legs. Almost 20-30% yearly gain which is the most demanding profit target among all institutional fund managers. For some strategies, income is more than 100%, we will explain it below.

Strategies:

• 1. Beginners : Long Call
• 2. Beginners : Long Put
• 3. Beginners : Cover Call
• 4. Beginners : Synthetic Call
• 5. Beginners : Synthetic Put
• 6. Intermediate : Bear Call Spread
• 7. Intermediate : Bull Put Spread
• 8. Intermediate : Straddle
• 9. Intermediate : Strangle
• 10. Intermediate : Long Iron Buttefly
• 11. Intermediate : Long Iron Condor
• 12. Advance : Bull Put Ladder
• 13. Advance : Bear Call Ladder
• 14. Expert : Strip
• 15. Expert : Guts

Before proceeding you need understand the basics of options trading, you can learn it from our other post.

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#1 Long Call

Difficulty	Market Direction	Max Risk	Max Reward
Beginners	Upward	Limited	Unlimited

We have explained the basics of long call and long put many times before. Here we will demonstrate once again with a clear example.

Trade Setup:

• Buy a call option

Time Period for Trade:

With this kind of trade, time decay works against it, therefore it its wise to buy at least three months expiry options contracts.

Long Call Example

Stock Name	Google
Stock Exchange	NASDAQ
Current Price	$1140.99
Strike Price	$1100.00
Call Premium	$43.60, amount you pay
Option Status	In money
Max Risk	$43.60 (call premium)
Max Reward	unlimited with the stock price increment
Breakeven	$1100.00 + $43.60 = $1143.60 Call strike + call premium

If google share moves above $1143.60, option contract will start making money.

Long call option payoff graph

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#2 Long Put

Difficulty	Market Direction	Max Risk	Max Reward
Beginners	Downward	Limited	Unlimited

Trade Setup:

• Buy a put option

Time Period for Trade:

Same way before, time decay works against it, therefore it its wise to buy at least three months expiry put options contracts.

Long Put Example

Stock Name	ONGC
Stock Exchange	NSE
Current Price	₹157.35
Strike Price	₹160
Put Premium	₹4.00, amount you pay
Option Status	In money
Max Risk	₹4.00 (put premium)
Max Reward	unlimited with the stock price increment
Breakeven	₹160 – ₹4 = ₹156 Put strike + put premium

That means if ONGC shares moved below ₹156, then put option will start making money.

Long put option payoff graph

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#3 Cover Call

Difficulty	Market Direction	Max Risk	Max Reward
Beginners	Upward	Limited	Limited Call strike – stock price + call premium

Trade Setup:

• Buy stock
• Sell out of money call option

Time Period for Trade:

As this strategy is used for creating monthly dividend from your own stock. So its better to sell the call options monthly.

Covered Call Example

Stock Name	TATAMOTORS
Stock Exchange	NSE
Current Price (Buy stock)	₹225.40
Strike Price	₹235
You pay	₹214.95
Option Status	Out of Money
Max Risk	₹214.95 (100% of total expense)
Max Reward	₹20.05 (9%)
Breakeven	₹214.95 Stock price paid – call premium

April TATATMOTORS stock price ₹225.40, Sell May TATAMOTORS option contract at ₹10.45.

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#4 Synthetic Call

Difficulty	Market Direction	Max Risk	Max Reward
Beginners	Upward	Limited	Unlimited

Trade Setup:

• Buy stock
• Buy at money or out of money put option

Time Period for Trade:

Buy the puts with at least one month extra time period. Longer time period avoid the bad effect of time decay.

Synthetic Call Example

Stock Name	WIPRO
Stock Exchange	NSE
Current Price	₹289.40
Strike Price	₹288.75
Net Debit	₹2894 + ₹13.20 = ₹2907.2 stock price + put premium
Option Status	Out of money
Max Risk	₹1385 stock price + put premium – put strike
Max Reward	unlimited
Breakeven	₹302.6 Strike price + put premium + stock price – put strike price

Buy 100 shares of WIPRO at ₹289.40.
Buy 1 MAY put option contract at ₹13.20 with 288.75 strike.

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#5 Synthetic Put

Difficulty	Market Direction	Max Risk	Max Reward
Beginners	Downward	Limited	Unlimited

Trade Setup:

• Sell stock
• Buy at money or out of money call option

Time Period for Trade:

Buy the call with at least one month extra time period. Longer time period avoid the bad effect of time decay same as before with synthetic put option.

Synthetic Put Example

Stock Name	HDFCBANK
Stock Exchange	NSE
Current Price	₹2287.90
Strike Price	₹288.75
Net Credit	₹2206.90 stock price- call premium
Option Status	In money
Max Risk	₹73.1 call premium + call strike – stock price
Max Reward	₹2206.90 stock price- call premium
Breakeven	₹2206.9 stock price – call premium

Sell 10 shares of HDFCBANK at ₹2287.90 on April.
Buy 1 MAY call option contract at ₹81 with 2280 strike.

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#6 Bear Call Spread

Difficulty	Market Direction	Max Risk	Max Reward
Intermediate	Downward	Limited	Limited

Trade Setup:

• Sell lower strike call option
• buy higher strike call option with same amount & same expiray date. Both strike price should be higher than current market price.

Time Period for Trade:

Can be traded on short term, one month or less expiray dates.

Bear Call Spread Example

Stock Name	LUPIN
Stock Exchange	NSE
Current Price	₹827.45
Net Credit	₹9.75 sell premium – buy premium
Max Risk	₹10.25 higher strike – lower strike – net credit
Max Reward	₹9.75 net credit
Breakeven	₹829.75 lower strike + net credit

LUPIN is trading at ₹827.45.
Sell May option call with strike rate of 820 at ₹46.80.
Buy May option call with strike rate of 840 at ₹37.05.

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#7 Bull Put Spread

Difficulty	Market Direction	Max Risk	Max Reward
Intermediate	Upward	Limited	Limited

Trade Setup:

• Buy lower strike put option
• Sell higher strike put option with same amount & same expiray date. Both strike price should be lower than current market price.

Time Period for Trade:

Can be traded on short term, one month or less expiray dates.

Bull Put Spread Example

Stock Name	ICICI Bank
Stock Exchange	NSE
Current Price	₹403.90
Net Credit	₹8.3 sell premium – buy premium
Max Risk	₹6.7 higher strike – lower strike – net credit
Max Reward	₹8.3 net credit
Breakeven	₹403.3 higher strike – net credit

ICICIBANK is trading at ₹403.90.
Buy May option put with strike rate of 395 at ₹12.25.
Sell May option put with strike rate of 410 at ₹20.55.

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#8 Straddle

Difficulty	Market Direction	Volatility	Max Risk	Max Reward
Intermediate	Range	High	Limited	Unlimited

Trade Setup:

• Buy at money strike put
• Buy at money strike call with same expiry date & same strike price.

Time Period for Trade:

Longer time is better, 2-3 months expiry is reasonable.

Straddle Example

Stock Name	IDEA
Stock Exchange	NSE
Current Price	₹18.05
Net Debit	₹3.15 Total premium
Max Risk	₹3.15 Net debit
Max Reward	unlimited
Breakeven up	₹14.85 strike – net debit
Breakeven down	₹21.15 strike + net debit

IDEA is trading at ₹18.05 April.
Buy May option put with a strike rate of 18 at ₹2.40.
Buy May option call with a strike rate of 18 at ₹0.75.

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#9 Strangle

Difficulty	Market Direction	Volatility	Max Risk	Max Reward
Intermediate	Range	High	Limited	Unlimited

Trade Setup:

• Buy out of money lower strike put
• Buy out of money strike call with same expiry date & with higher strike price.

Time Period for Trade:

Longer time is better, 2-3 months expiry is reasonable.

Strangle Example

Stock Name	Suzlon
Stock Exchange	NSE
Current Price	₹7.40
Net Debit	₹2.5 Total premium
Max Risk	₹2.5 Net debit
Max Reward	unlimited
Breakeven down	₹3.35 low strike – net debit
Breakeven up	₹10.5 high strike + net debit

Suzlon is trading at ₹7.40 April.
Buy May option put with a strike rate of 6 at ₹1.5.
Buy May option call with a strike rate of 8 at ₹1.

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#10 Long Iron Buttefly

Difficulty	Market Direction	Volatility	Max Risk	Max Reward
Intermediate	Range	Low	Limited	Limited

Trade Setup:

• Buy out of money lower strike put option.
• Sell at money middle strike put option.
• Sell at money middle strike call option.
• Buy out of money higher strike call option.

Time Period for Trade:

When position in profit, time decay is positve when positive in loss, time decay is negative.

Strangle Example

Stock Name	ASIANPAINT
Stock Exchange	NSE
Current Price	₹1468.45
Net Credit	₹31.85 Net premium
Max Risk	₹8.15 differenence in strike – net credit
Max Reward	₹31.85 net credit
Breakeven down	₹1428.15 middle strike – net credit
Breakeven up	₹1491.85 middle strike + net credit

ASIANPAINT is trading at ₹1468.45 April.
Buy May put option with a strike rate of 1420 at ₹27.85.
Sell May put option with a strike rate of 1460 at ₹40.
Sell May call option with a strike rate of 1460 at ₹61.20.
Buy May call option with a strike rate of 1500 at ₹41.50.

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#11 Long Iron Condor

Difficulty	Market Direction	Volatility	Max Risk	Max Reward
Intermediate	Range	Low	Limited	Limited

Trade Setup:

• Buy out of money lower strike put option.
• Sell out of money lower middle strike put option.
• Sell out of money higher middle strike call option.
• Buy out of money higher strike call option.

Time Period for Trade:

When position in profit, time decay is positve when positive in loss, time decay is negative.

Strangle Example

Stock Name	GAIL
Stock Exchange	NSE
Current Price	₹352.10
Net Credit	₹2 Net premium
Max Risk	₹3 differenence in strike – net credit
Max Reward	₹2 net credit
Breakeven down	₹348 lower middle strike – net credit
Breakeven up	₹357 uper middle strike + net credit

GAIL is trading at ₹352.10 April.
Buy May put option with a strike rate of 345 at ₹10.80.
Sell May put option with a strike rate of 350 at ₹11.70.
Sell May call option with a strike rate of 355 at ₹15.15.
Buy May call option with a strike rate of 360 at ₹14.05.

Long iron condor option payoff graph

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#12 Bull Put Ladder

Difficulty	Market Direction	Volatility	Max Risk	Max Reward
Advance	Downward	High	Limited	Unlimited

Trade Setup:

• Buy lower strike put
• Sell middle strike put with same expiry date & with same amount.
• Sell higher strike put with same expiry date .

Time Period for Trade:

Medium to longer time is better, 2-3 months expiry is reasonable.

Bull Put Ladder Example

Stock Name	INDIGO
Stock Exchange	NSE
Current Price	₹1637.95
Net Debit	₹68.95 Total premium paid – premium receive
Max Risk	₹88.95 Difference between middle & higher strike price + net debit
Max Reward	unlimited
Breakeven down	₹1511.05 low strike – max risk
Breakeven up	₹1728.95 high strike + max risk

INDIGO is trading at ₹1637.95 April.
Buy May put option with a strike rate of 1600 at ₹80.
Buy May put option with a strike rate of 1620 at ₹90.25.
Sell May put option with a strike rate of 1640 at ₹101.30.

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#13 Bear Call Ladder

Difficulty	Market Direction	Volatility	Max Risk	Max Reward
Advance	Upward	High	Limited	Unlimited

Trade Setup:

• Sell lower strike call
• Buy middle strike call with same expiry date & with same amount.
• Buy higher strike put with same expiry date & with same amount.

Time Period for Trade:

Medium to longer time is better, 2-3 months expiry is reasonable.

Bear Call Ladder Example

Stock Name	YESBANK
Stock Exchange	NSE
Current Price	₹257.20
Net Debit	₹10.70 Total premium paid – premium receive
Max Risk	₹20.70 Difference between middle & higher strike price + net debit
Max Reward	unlimited
Breakeven down	₹239.30 low strike – net debit or (+ net credit)
Breakeven up	₹290.70 high strike + max risk

YESBANK is trading at ₹257.20 April.
Sell May call option with a strike rate of 250 at ₹24.
Buy May call option with a strike rate of 260 at ₹19.45.
Buy May call option with a strike rate of 270 at ₹15.25.

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#14 Strip

Difficulty	Market Direction	Volatility	Max Risk	Max Reward
Expert	Downward	High	Limited	Unlimited

Trade Setup:

• Buy two at money put option
• Buy one at money call option with same expiry date.

Time Period for Trade:

Medium to longer time is better, 2-3 months expiry is reasonable.

Strip Example

Stock Name	JETAIRWAYS
Stock Exchange	NSE
Current Price	₹175.50
Net Debit	(₹34.30×2)+ ₹32.15 = ₹100.75 Total premium
Max Risk	₹100.75 net debit
Max Reward	unlimited
Breakeven down	₹119.62 strike – (net debit/2)
Breakeven up	₹270.75 strike + net debit

JETAIRWAYS is trading at ₹175.70 April.
Buy two May put option with a strike rate of 170 at ₹34.30.
Buy one May call option with a strike rate of 170 at ₹32.15.

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#15 Guts

Difficulty	Market Direction	Volatility	Max Risk	Max Reward
Expert	Range	High	Limited	Unlimited

Trade Setup:

• Buy in money lower strike call option
• Buy in money put option with same expiry date.

Time Period for Trade:

Medium to longer time is better, 2-3 months expiry is reasonable. Never setup guts on the last month of the expiry dates. Closer to the expiry date value loses faster with the effect of time decay.

Guts Option Example

Stock Name	DHFL
Stock Exchange	NSE
Current Price	₹160.70
Net Debit	₹49.55 Total premium
Max Risk	₹29.55 net debit – difference in strike price
Max Reward	unlimited
Breakeven down	₹120.45 low strike – max risk
Breakeven up	₹199.55 high strike + max risk

DHFL is trading at ₹160.70 April.
Buy May call option with a strike rate of 150 at ₹26.50.
Buy May put option with a strike rate of 170 at ₹23.05.

Conclusion:

It is always advised to use technical analysis side by side before making an option trading decision. Each strategy mentioned above work for different types of markets based on their metrics. Some are for a bearish high volatile market. Some are for the bullish high volatile market. Even some are for range market. So first find stocks, index, currency options matching with these metrics, then confirm its trend with technical analysis. Find a sweet spot & make an entry with good price & risk-reward ratio.