10 Options Strategies To Know
Ten core options strategies that cater to different market outlooks—bullish, bearish, or neutral—and balance profit potential with risk management. These strategies typically involve combinations of calls and puts, allowing traders to tailor positions based on volatility expectations and directional bias.
Top Strategies from the Article
- Covered Call
Hold the underlying stock while selling a call option against it. Generates income but caps upside potential. Ideal when expecting sideways or modest gains. - Married Put (Protective Put)
Buy the stock and a put option. Acts like insurance—protecting against downside while maintaining upside exposure. - Bull Call Spread
Buy a call at a lower strike, sell another at a higher strike (same expiry). Beneficial when moderately bullish, it limits risk and reduces net premium cost. - Bear Put Spread
Buy a put at a higher strike and sell a put at a lower strike. Profits from a limited decline in the underlying asset while controlling cost and risk. - Protective Collar
Combine a covered stock position with buying a put and selling a call. Caps both upside and downside, offering a low-cost protective structure. - Long Straddle
Buy both a call and a put at the same strike and expiration. Best when you expect a large move but aren’t sure which direction. Limited loss (premium paid), unlimited upside. - Long Strangle
Similar to a straddle, but both call and put are purchased out-of-the-money—cheaper, but requires a bigger move to profit. - Butterfly Spread (Long Call Butterfly)
Uses three strike prices in one direction to profit from minimal movement. Offers limited risk and reward with high probability when the underlying stays near mid‑strike. - Iron Condor
Combines a bull put spread and a bear call spread. Profits when the price stays within a defined range. High-probability income strategy with limited risk and reward. - Iron Butterfly
Similar to an iron condor but tighter strikes: simultaneous short call and put at the same (ATM) strike with wings for protection. Suitable for low-volatility environments; capped risk and reward.
When to Use These Spots
- Income generation: Strategies like covered calls, cash‑secured puts, collars, and certain credit spreads offer steady premium income with defined risk.
- Direction plays: Bull spreads for upward bias, bear spreads for expecting declines, with built-in risk limits.
- Volatility trades: Straddles, strangles, and volatility-based conjuncts like iron condors are ideal when you expect large price moves or low volatility, respectively.
- Risk control: Buying options (calls or puts) limits loss to the premium, while selling uncovered options (naked) may expose you to unlimited risk
1. Covered Call
Strategy: Hold a stock and sell a call option on it.
Use Case: You expect the stock to rise modestly or remain flat.
Example:
- You own 100 shares of Tata Motors at ₹900.
- You sell a 1-month ₹950 call option for ₹20 per share.
- If Tata Motors stays below ₹950, you keep the ₹2,000 (₹20 x 100) premium as profit.
- If it goes above ₹950, you’ll be forced to sell at ₹950, but you still earn ₹50 (price appreciation) + ₹20 (premium).
Goal: Earn income on sideways to moderately bullish stocks.
2. Married Put (Protective Put)
Strategy: Buy a stock and simultaneously buy a put option.
Use Case: You are bullish but want protection from downside.
Example:
- You buy 100 shares of Infosys at ₹1,400.
- You also buy a ₹1,350 put option at ₹25 for protection.
- If Infosys falls to ₹1,200, your losses are limited to ₹1,350 − ₹1,400 + ₹25 = ₹75/share.
Goal: Insurance against losses while still enjoying upside.
3. Bull Call Spread
Strategy: Buy a lower-strike call and sell a higher-strike call.
Use Case: You expect a moderate rise in stock.
Example:
- Buy HDFC Bank ₹1,600 Call at ₹30
- Sell ₹1,650 Call at ₹10
- Net cost = ₹20; Max profit = ₹50 – ₹20 = ₹30
- Breakeven = ₹1,620
- If HDFC Bank closes at ₹1,650, you make the max ₹30/share.
Goal: Limit risk and cost while capturing modest gains.
4. Bear Put Spread
Strategy: Buy a higher-strike put and sell a lower-strike put.
Use Case: You expect a moderate decline in the stock.
Example:
- Buy Reliance ₹2,600 Put at ₹40
- Sell ₹2,500 Put at ₹20
- Net cost = ₹20; Max profit = ₹100 – ₹20 = ₹80
- If Reliance falls below ₹2,500, you earn ₹80/share.
Goal: Profitable from modest fall with capped risk.
5. Protective Collar
Strategy: Hold a stock, buy a put, and sell a call.
Use Case: You want to protect gains with no cash outflow.
Example:
- Hold ICICI Bank at ₹1,200
- Buy ₹1,150 Put at ₹25
- Sell ₹1,250 Call at ₹25
- Zero net cost; downside limited below ₹1,150, upside capped above ₹1,250.
Goal: Risk protection and no premium paid.
6. Long Straddle
Strategy: Buy a call and a put at the same strike price.
Use Case: You expect a big move, but unsure of direction.
Example:
- Buy Bajaj Auto ₹5,000 Call at ₹50
- Buy ₹5,000 Put at ₹50
- Total cost = ₹100
- If stock goes to ₹5,300 or ₹4,700, you profit.
- You lose only if it stays near ₹5,000.
Goal: Benefit from volatility in either direction.
7. Long Strangle
Strategy: Buy an out-of-the-money call and an out-of-the-money put.
Use Case: You expect a big move, but want lower cost than a straddle.
Example:
- Buy Airtel ₹1,000 Call at ₹30
- Buy ₹950 Put at ₹30
- Total cost = ₹60
- If stock goes above ₹1,060 or below ₹920, you start profiting.
Goal: Lower-cost volatility play.
8. Butterfly Spread
Strategy: Combine three call options: Buy 1 low-strike, sell 2 mid-strike, buy 1 high-strike.
Use Case: You expect minimal movement.
Example:
- Buy Adani Ent ₹2,000 Call at ₹50
- Sell 2 ₹2,100 Calls at ₹25
- Buy ₹2,200 Call at ₹5
- Net cost = ₹50 − ₹50 + ₹5 = ₹5
- Max profit occurs if stock closes at ₹2,100.
Goal: Earn profit if price stays stable around mid-strike.
9. Iron Condor
Strategy: Combine a bull put spread and bear call spread.
Use Case: You expect a stock to remain in a tight range.
Example:
- Sell Axis Bank ₹980 Put
- Buy ₹960 Put
- Sell ₹1,020 Call
- Buy ₹1,040 Call
- If stock stays between ₹980–₹1,020, you keep the net premium.
Goal: Generate income in low-volatility markets.
10. Iron Butterfly
Strategy: Sell ATM call and put, buy OTM call and put.
Use Case: Expect no major movement; stock should stay near current level.
Example:
- Sell ONGC ₹180 Call and ₹180 Put
- Buy ₹190 Call and ₹170 Put
- Max profit if ONGC closes at ₹180.
- Risk is limited, and so is reward.
Goal: Neutral strategy with higher return than iron condor but narrower range.
Final Thought
Each options strategy has its own unique use depending on market outlook, volatility, risk tolerance, and capital availability. These real-life examples help visualize how options can be powerful tools—not just for speculation, but also for hedging, income, and portfolio protection.