Long call, long put, straddle, strangle, iron condor, calendar spreads, covered call, bull call spread, bear put spread — when to use each, with India-specific lot sizes and examples.
Options strategies fall into a small number of categories based on what they're designed to do: capture direction, capture volatility, or harvest time decay. Knowing which strategy fits the current market regime is more important than knowing every strategy in detail.
This guide covers the ten options strategies that matter most for Indian-market traders, with specific NIFTY and BANK NIFTY examples, lot-size context, and notes on when each strategy fits. Skip the exotics — most Indian retail trading lives in 5-6 of these and that's plenty.
Each section ends with a 'when to use this' note so you can quickly match a current market view to the strategy that expresses it efficiently.
Long Call. Buy a call. Profit if underlying rises above strike + premium. Max loss = premium paid. Best for strong bullish conviction in a high-IV environment doesn't apply (don't overpay for premium). NIFTY 22,000 CE for 100 premium = breakeven at 22,100, max loss ₹2,500 per lot.
Long Put. Buy a put. Profit if underlying falls below strike - premium. Max loss = premium paid. Best for hedging an existing portfolio or for tactical bearish trades.
Bull Call Spread. Buy a lower-strike call, sell a higher-strike call. Reduces cost vs buying the call outright, but caps the upside at the higher strike. Best for moderate bullish views in high-IV environments — you give up some upside to make the trade affordable.
Bear Put Spread. Buy a higher-strike put, sell a lower-strike put. Same logic as bull call spread but on the downside.
When to use directional: when you have a specific catalyst-driven view (RBI policy, earnings, sector rotation) with a defined timeframe.
Long Straddle. Buy ATM call AND ATM put at the same strike. Profit if underlying moves either direction beyond the combined premium. Max loss = combined premium paid. Best before major catalysts when IV hasn't already priced in the move.
Long Strangle. Buy OTM call AND OTM put at different strikes. Cheaper than straddle but needs a bigger move to profit. Same logic.
Short Straddle. Sell ATM call AND ATM put. Profit if underlying stays near the strike. Max loss = unlimited in theory. Very dangerous on event days. Best in low-IV environments with no upcoming catalysts.
Short Strangle. Sell OTM call AND OTM put. Same logic as short straddle but with breathing room — wider profit zone, smaller premium collected. Most popular Indian-market 'income' strategy on weekly options.
When to use volatility: long volatility before known events; short volatility after events when IV crushes; short strangle on quiet weekly cycles with no catalysts.
Iron Condor. Sell OTM call + buy further OTM call (call credit spread) + sell OTM put + buy further OTM put (put credit spread). Profit zone between the two short strikes. Max loss is defined by the spread widths.
Iron Butterfly. Sell ATM straddle + buy OTM strangle. Tighter profit zone, higher premium collected. Higher reward, narrower window.
Covered Call. Own the underlying stock + sell a call against it. Generates income; caps upside at the strike. Common on stocks you'd be willing to sell at the strike anyway.
Calendar Spread. Sell a near-dated option, buy the same strike further-dated option. Profit from differential time decay — the near-dated bleeds faster than the further-dated.
When to use income: in sideways markets, low-IV environments, or as a position-management overlay on existing holdings.
Trending market, strong conviction: long call or long put. Or directional spread if IV is rich.
Pre-event, expecting big move: long straddle or strangle.
Post-event, IV elevated: short straddle or strangle to capture IV crush.
Sideways, quiet: iron condor or short strangle on weekly options.
Holding stock long-term: covered call for income; protective put for downside protection.
Strota's strategy builder accepts any multi-leg combination and shows the resulting Greeks, max profit/loss, breakeven points, and payoff diagram before you commit capital.
STT (Securities Transaction Tax). Options sellers pay STT only on the premium received. Options buyers pay STT only if they exercise (let the option expire ITM). This is why holding ITM options to expiry can sting — STT is calculated on the full notional value, not just the premium.
Lot sizes. NIFTY = 25, BANK NIFTY = 15, FIN NIFTY = 40, MIDCAP NIFTY = 50 (subject to NSE periodic revisions). Stock F&O lot sizes vary by stock — Strota's option chain page shows the current lot for any symbol.
Settlement. NSE settles based on the closing price (volume-weighted average of last 30 minutes: 3:00-3:30 PM IST). ITM options auto-exercise; OTM options expire worthless.
European-style. All NSE index and stock options are European-style — they can only be exercised at expiry, not before. This affects some American-style strategies that don't translate directly.
Both involve buying both a call and a put. A straddle uses the same strike for both (typically ATM). A strangle uses different OTM strikes — call above spot, put below spot. Strangle is cheaper (lower premium) but needs a bigger move to break even.
Risk is defined — max loss equals the spread width minus premium collected. So iron condor is one of the safest income strategies in terms of bounded risk. The win rate is high (60-75% typical on properly-sized condors) but each loss can be 3-5x a typical win, so position sizing and exits matter.
Short strangle if you accept unlimited theoretical risk and use stop losses. Iron condor if you want defined risk. Both harvest time decay and profit when the underlying stays in a range. Most popular on weekly NIFTY and BANK NIFTY options.
Statistically, option sellers have a slight edge because most options expire worthless. But option sellers also face occasional large losses, while buyers have defined losses (the premium paid). Most successful retail Indian options traders blend: sell premium in income strategies + buy options for tactical directional bets around catalysts.
Securities Transaction Tax. Options writers pay STT only on the premium received. Option buyers don't pay STT on entry but pay it on the full notional if the option is in-the-money at expiry and they let it auto-exercise. This is why holding ITM options to expiry can produce surprise tax hits — usually better to close the position before expiry.
Capturing differential time decay between near-dated and further-dated options at the same strike. Profits when the underlying stays near the strike (near-dated bleeds faster than the further-dated). Best in low-IV environments. Roll the near-dated leg into the next expiry to maintain the position.