Option Strategies

Trading Option Strategies the Right Way!

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In the last few years, the retail trading community in India has really found a love for options. They are volatile, you can double your money in a day if you get it right and you can buy a truckload of contracts in comparison to futures which require more margin. All great. Then why do most options traders lose money? Because there is a flipside to volatility and leverage. If you don’t have a trading strategy, you can hit the grounder sooner than you expect. Instead of designing a plan, many retail traders go for the jugular by taking a naked position by buying Out of the Money (OTM) Call and Put options hoping to make great returns. I’m not saying this is not viable. It can be, but to think of this approach as a great money making formula is the long run is wrong.

The markets are dynamic and the outcomes of today may not necessarily give you indications of tomorrow. Considering the risk in taking naked positions and hoping for things to pan out your way can be dangerous. I’m sure many silent spectators of the stock market would agree with me here. One has to understand that option trading strategies are extremely flexible in a way that you can manage your risk most effectively. Unlike trading in Nifty or stock futures, where the scope for risk management is based on stop losses, Options give you the choice to do a variety of different things to express your views on the stock market. There are strategies for every kind of market situation and you could possibly make profits in circumstances which you would have previously thought to be impossible.

One of the primary reasons why most retail traders don’t use advanced option strategies is because they are not very easy to design. It will require you to have solid fundamental understanding of how options work and fluency in math. Most people lack either the knowledge or the inclination to sit and design their own option trading strategies.

We understand that it is a hard job and we decided to make it easy for you by building a complex tool which takes care of everything for you which can help you trade option strategies like a pro without having to know anything beyond your view on the stock market.

The success in trading options strategies depend on:

• Whether your market outlook is correct.
• The strike prices you choose to trade.
• The complexity of options strategies used.
• The risk you take (Whether you sell far OTM options or buy ITM options)
• Timing just as any other instruments in trading.

For retail traders, it was very difficult to get ready-made calculators until we developed Options Strategies Calculator.

This tool actually helps you choose strategies based on your market outlook. Something which used to take a long time can now be done in less than 2 minutes.

Let me show you how to use it:

When you’re at the tool, you will be able to see all the 44 option strategies listed down with their payoff graphs so you can recognize and choose immediately if you want to.

option strategies home

But we recommend you use the preferences to filter out the unwanted ones and focus more on what makes sense according to your view on the stock market.

Step 1 – Choose your market outlook:

options strategies outlook

You can choose strategies based on your outlook on the stock market. Rather than just giving two choices of bullish or bearish, we have made it far more precise to help you make superior trading strategies. You can choose from 6 different outlooks:

• Bearish
• Bearish Neutral with high volatility
• Bullish
• Bullish Neutral with high volatility
• Neutral with high volatility
• Neutral with no volatility

It basically covers all possible market scenarios so you can get the right kind of tailor made strategies.

Step 2 – Choose the number of legs:

options strategies number of legs

A leg is a component of the trading strategy. So every contract which is used in a trading strategy is called referred to as a leg. It could be combined with other components to tailor make it to your needs. You can go up-to 4 legs in option strategies.

1 Leg Strategy – They are basically a naked position.
2 Legs Strategy – Simple trading strategies. There’s a lot of variety to choose from here.
3 Legs Strategy – These are more complicated strategies and might need a second reading for semi-pros.
4 legs Strategy – Here you have the Iron butterflies, Iron condors etc. They are more for neutral / range bound strategies because the upside and the downside are protected with limited risk and limited profit potential.

Step 3 – You can segregate based maximum profit (Limited/Unlimited):

options strategies maximum profit

Limited profits are not necessarily bad. It depends on how you manage risk. Most institutional traders are on the selling side of the trade as they target lower but surer returns. They don’t have the urgency to make massive returns in the same expiry. There is a popular misconception about unlimited risk. Practically speaking, the chances of losing all your money by selling options is rare and the risk involved in buying options is much higher considering the risky trader’s mindset. Both contain risk. It just depends on what strike price one is willing to buy or sell that makes all the difference.

Step 4 – Maximum Loss (Limited/Unlimited):

options strategies maximum loss

You can also segregate based on your loss tolerance too. It is based on the same principles of profit potential.

Step 5 – Credit/Debit:

options strategies credit or debit

Lastly, you can select strategies based on whether you have a credit or debit. Our Options Strategies tools have 15 and 16 debit strategies. The wide variety available for option trading is incredibly useful. Once you have arrived at your chosen strategy, the rest becomes easy.

You can either follow the sequence that we have shown above or filter trading strategies using either of the multiple preferences given to arrive at the most optimal choice. Upon selecting any one, everything is explained and you can enter your preferred strike prices and price to get results and pay off graph. This way, you can trade even the most complex strategies using our Option Strategies tool.

Step 6 – Project your future profits:

options strategies pic 5

If you want to learn about the strategy, you can click on the highlighted area as shown above. There you will be able to get the theoretical explanation of the option strategy. In this example, we have the Long Strangle strategy for Nifty. The input fields are already defined and you only need to select your preferred strike prices and enter the current market prices. Based on your inputs, you will get to know:
• Net Premium
• Upper Breakeven Point
• Lower Breakeven Point
• Maximum Profit
• Maximum Loss

If you scroll down a bit, you can view the payoff graph as well.

options strategies pic 6

The X axis shows the underlying price at the expiry.
The Y axis shows the Profit & Loss at the expiry.

You can also calculate your potential Profit & Loss at a specific price based on the strategy. If you’re wondering why there are so many of them it’s because there is no golden rule and the best trading strategies vary depending on the market circumstances. So that’s it. Now you can use this tool to trade 44 options strategies right away for FREE without having to study big text books written on them. If you have any questions or doubts, you can always ask us.

Tejas Khoday

Tejas Khoday

Tejas is the Co-Founder & CEO at FYERS, the youngest team to get NSE’s broker license. He has a specialization in finance and has over 10 years of work experience spanning across proprietary trading, risk management, and broking. Tejas & his team started FYERS, a technology-focused brokerage as a mission to transform the trading/investment landscape in India.

47 Comments

  • Avatar Dev says:

    Hi,
    When can we expect the relaunch of option strategies page?

    • Tejas Khoday Tejas Khoday says:

      Hi Dev, we can launch it but we want to add more functionality to it before that. Hence, it may take some time. Thanks for getting in touch.

  • Avatar Vidyasagar says:

    A Big Thanks for all the work you are doing Mr Tejas, i love Fyers, its smooth and highly informative. Like all other traders i am also eagerly waiting for re introducing option strategies in Fyers One. Hope the wait will be worthy one. And All the best for your endeavors and thanks again for providing a platform of International standards.. Best!!

    • Tejas Khoday Tejas Khoday says:

      Hi there, Glad you like it :). Currently, we’re working on launching MCX. You’ll hear from us soon regarding that. Options Strategies is kept on hold at the moment. We want to take it up as a separate project. Thanks again! Quality over quantity!

      Good day.

  • Avatar deep says:

    fyers must bring platform like sensibull …soon

    • Tejas Khoday Tejas Khoday says:

      Hi, nice attempt to advertise Sensibull Deep :).

      • Avatar Anonymousalone says:

        Sensibull is like lool, it’s like every amature who is trying to make money fall for this.
        But how to access the calculator that you mentioned above

  • Avatar Augustine Balappa says:

    Dear Fyers Team,
    Please bring back the options 43+ options strategies page. It seemed like an ingenious way to help retail traders learn more about options trading apart from the boring traditional methods which only confuse most people. Great work by the founders! Thank you for all the efforts!

    • Tejas Khoday Tejas Khoday says:

      Hi Augustine, We’ll bring it back in a new avatar in the future. Currently, we are working on other features. But I feel you. I know it can add a lot of value to a trader and we will re-launch it with added functionality. thanks for acknowledging our efforts! Be rest assured that our platform will continue to get better.

      • Avatar Lalit Singh says:

        Dear Tejas,
        Hi,i hope you are doing fine,i want to make a request to you,there is no doubt that fyers software is best trading platform in india as of now but i am a options trader and i miss one important aspect of option trading that is live option greeks in fyers tool,i mean to say when we trade in option strategy we should be able to see live status of our strategy like prices,pay off graphs,implied volatility and most important live greeks values so that we could adjust strategy accordingly during market hours and if possible all legs of strategy execution in single order .this will attract more clients especially big fish option sellers,currently zerodha and sharekhan doing that but i don’t like them,also inform me when you are starting trading in commodities.
        thanks a lot for your reply in advance and excuse me for my typo error.

      • Tejas Khoday Tejas Khoday says:

        Hi Lalit Singh, thanks for taking the initiative to write to me. We’ll certainly look at implementing this in the future. Currently, it’s about going live with MCX, BSE and cross currency pairs. Believe me, it’s a really long process to enable new segments and exchanges. Several layers of complications which we have overcome. Look forward to MCX this month itself. I will write a post regarding that soon.

  • Avatar Rohit says:

    The lack of option strategy handling, due to you bringing down the options lab is currently a deterrent for me to open an account with you. Was checking if fyers one allowed for placing multiple orders together, for multi leg strategies, but i did not find any information on this line. If you can give me a guaranteed date by which you will reintroduce the options lab, i might consider. Thanks

    • Tejas Khoday Tejas Khoday says:

      Rohit, We have intentionally disabled options strategies page. We will be re-introducing it in the future after making some upgradations and increasing it’s functionality. Believe me, it will be better than what it was.

      • Avatar T C Venkata Reddy says:

        I have just opened the Account Today.. Since then, searching for Option strategies.. I just found that it was removed…

        This feature is very much important and this feature can outplay all other brokers in the market… Please bring it back soon

      • Tejas Khoday Tejas Khoday says:

        Yes, we have removed it temporarily. We want to re-introduce it in a better way with added functionality in the future.

        Hope this helps.

      • Avatar Tapasi says:

        I read from quora that Option Strategies are one of the features why I should go with Fyres. Why such feature is removed? And if a better one is underway, then at least back the old one before introduce a new one?

      • Tejas Khoday Tejas Khoday says:

        Hello Tapasi, Yeah we have temporarily disabled it and re-launch it at a later date with an end-to-end integrated order placement functionality. We shall look into it once we have successfully launched Phase 2 of bracket orders, MCX and BSE. :-).

  • Avatar Priya says:

    Dear Sir
    Great job.
    how can i get all your strategies??

    • Tejas Khoday Tejas Khoday says:

      Hi Priya, we had implemented all 43+ strategies on our website but then took them all down. We will be re-introducing options strategies at a later date. We hope you enjoy our other features on Fyers Web until then.

  • Avatar Kailas says:

    Dear Mr.Tejas
    Impressed with this feature.I plan to use it and trade in your platform.I have joined Fyers recently and started trading today.
    However I am unable to find these strategies in your website and Fyers one. customer Service informed it is not available.

    Kindly bring the feature back.

    • Tejas Khoday Tejas Khoday says:

      Hi Kailas, Yeah we have temporarily disabled options strategies from our website. We will try to reintroduce it in a better format in the future. We were just restructuring our offerings/tools so we didn’t feel this one fit the needs well so we took it off. But be positive, as whenever we do introduce it, it will be an improvised version.

  • Avatar Apoorv says:

    Can you add data so that it is easier to use? Calculators are very useful but I have to manually input values which takes time.

  • Avatar adarsh says:

    Hi tejas
    I have enrolled for trading in fyers and as of now, yet to receive id and pw for the same.

    Is there any strategies other than zero collar to hedge with futures .

    Is there any strategy with same strike price but nxt expiry

    • Tejas Khoday Tejas Khoday says:

      Thanks for enrolling Adarsh. Well, yes you can use zero cost collar strategy by doing the following, but it’s really up to you:

      1. Buy the underlying
      2. Sell OTM call option of the current month.
      3. Buy OTM put option of the next month (Leg-in when the premiums are lower).

      This is one way of doing it.

  • Avatar Huma Masood says:

    Hi,

    Great tools.

    I have a suggestion however, if you could in addition to predefined strategies also offer an option to customize the legs and also include the no of lots to each leg it will be helpful for those who like to adjust strategies and also perhaps hedge positions.

    Also fyers has a great workplace choices, maybe later you could add one specifically for options trading with all the tools placed on one screen.

    Thanks in advance.
    Huma

    • Tejas Khoday Tejas Khoday says:

      Thanks for your suggestions Huma, we’ll try doing that in the future once we finish our existing development work. Good feedback. Thx!

    • Tejas Khoday Tejas Khoday says:

      We made it simple to avoid a lot of things which might actually confuse the users. We’ll figure it out.

  • Avatar Dinesh Bhalla says:

    Very useful tool for sure.. Fyers doing great stuff! Explained well. Easy to use your tool on mobile app.

    • Tejas Khoday Tejas Khoday says:

      Thanks.. yeah we added options strategies on Fyers Markets recently. Do give us your review on the play store / app store when you have the time.

      • Avatar anup says:

        does it mean now can we place multilegs order on fyres?

      • Tejas Khoday Tejas Khoday says:

        Not yet Anup, but we will develop that functionality too. Right now we developing some interesting things which you will get to see soon. 🙂

  • Avatar anony says:

    Is there a way the tool could take some of the data (IV etc..) from NSE options page and include it in the calculations to get the real time profit /loss charts?

  • Avatar Anony says:

    Does your trading tool allow, buying/shorting all legs at once ? Is there a video that shows how to go about it? I’m currently customer of another discount broker, seriously considering fyers..

    thanks

    • Tejas Khoday Tejas Khoday says:

      Hi Anony, Currently this tool is for manual simulation only. We shall come up with order integration
      soon. Work in progress. We shall also make videos and post them in the future. It does take time to
      implement. We’re on it.

    • Tejas Khoday Tejas Khoday says:

      Hi Anony, currently we don’t have multi-leg orders. We are working on it and will have it very soon. I suggest you open an account with us for free and get started. Once we finish our existing development projects, that will be our next focus.

      • Avatar MP says:

        Hi Tejas,

        What is the ETA for the introduction of the multi-leg orders in Fyers? Thanks and kudos on having one of the best platforms.

      • Tejas Khoday Tejas Khoday says:

        Hi MP, It’s not on the horizon right now and hence no timelines. It will be done in a separate project in the future.

  • Thanks Mr. Jai Shankar,

    Your review is highly motivating, we will maintain and put up our standards all the time.

  • Avatar JAISANKAR E says:

    FYERS TEAM.. YOUR SERVICE, CUSTOMER HANDLING,PROBLEM SOLVING..EVERY THING ARE PERFECT. REALLY PERFECT. I APPRECIATE YOUR SERVICE. FYER WILL EMERGE AS A ROCKING STAR VERY SOON IN FUTURE. ALL THE TEAM MATE OF FYERS ARE HIGHLY TRAINED AND KNOWLEDGE PERSONS. KEEP ROCKING FYERS…

  • Avatar Chirag Arora says:

    Hello Fyers, when should I use the “Iron Condor” Strategy? I am confused with this!

    • Tejas Khoday Tejas Khoday says:

      Iron Condor is ideal if your market outlook is neutral. basically you’re looking to eat premiums
      with a pre-decided final stop loss.

  • Avatar Prateek says:

    Really impressive!
    there are so many strategies. when should i use which strategy? there are 2 many to choose from

    • Tejas Khoday Tejas Khoday says:

      Prateek, use the filters. That’s the whole point here. If you have more than 1 choice,
      then I recommend you read up about them and choose manually. The filters will narrow down
      to exactly what you’re looking for and from there on, it is up-to you. It would be helpful if you
      are more specific.

  • Avatar David korah says:

    I really like the fact that you have added these much Option Strategies to choose from. I checked the Strategies in your website, but I am facing a problem.
    How can I decide which Strategy to use? I am not able to make a proper decision on this. Can you guide me through the process?

    • Tejas Khoday Tejas Khoday says:

      You can choose which strategy to use based on your market view. The strategies
      are segregated based on several filters. So if you’re bullish, you can choose bullish strategies.
      Then depending on your other choices, your search keeps narrowing down. At the end of it if you
      are left with more than 1, you’ll have to pick the one you prefer. Try using it once and if you have any
      doubts, feel free to ask again.

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