DIRECTIONAL STRATEGIES

Long Call

Investor View

Bullish on stock / index

Risk Limited to the amount of premium

Reward Unlimited

Breakeven Strike price + Premium

Short Call

Investor View

Very aggressive and very bearish about the stock / index

Risk Unlimited

Reward Limited to the amount of premium

Breakeven Strike price + Premium

Long Put

Investor View

Bearish about the stock / index

Risk Limited to the amount of premium

Reward Unlimited

Breakeven Strike price - Premium

Short Put

Investor View

Bullish on stock / index

Risk Unlimited

Reward Limited to the amount of premium received

Breakeven Put Strike price - Premium

Strategy Stock / Index Type Strike Premium Inflow

Short Put NIFTY (Lot Size 50)

Sell PUT 5500 50

Illustration

Bull Call Spread Strategy

Investor View

Moderately Bullish

Strategy Buy 1 ITM Call , Sell 1 OTM Call

Risk Limited to any initial premium paid in establishing the position

Reward Limited to the difference between the two strikes minus net premium cost

Breakeven Strike Price of Purchased call + Net Premium Paid

Illustration

Payoff Schedule

Bear Put Spread Strategy

Investor View

Moderately Bearish

Strategy Buy 1 ITM Put , Sell 1 OTM Put

Risk Limited to the net amount paid for the spread. i.e. the premium paid for long position less premium received for

short position

Reward Limited to the difference between the two strike prices minus the net premium paid for the position

Breakeven Strike Price of Long Put - Net Premium Paid

Illustration

Payoff Schedule

Long Call / Bull Call Ladder Strategy

Investor View

Neutral on direction & bearish on stock / index volatility

Strategy Buy 1 ATM Call , Sell 1 ATM Call , Sell 1 OTM Call

Risk Unlimited

Reward Limited

Breakeven Upper BEP: Higher strike – Lower strike – Net debit

Lower BEP: Lower strike + Net debit

Illustration

Strategy Stock / Index Type Strike Premium

Long Call Ladder

NIFTY (Lot Size 50)

Buy CALL 5400 200

(Outflow)

Sell CALL 5500 130

(Inflow)

Sell CALL 5600 80

(Inflow)

Payoff Schedule Payoff Chart

Long Put / Bear Put Ladder Strategy

Investor View

Neutral on direction & bearish on stock / index volatility

Strategy Buy 1 ITM Put , Sell 1 ATM Put , Sell 1 OTM Put

Risk Unlimited

Reward Limited

Breakeven Upper BEP: Strike price of long put – Net premium paid

Lower BEP: Total strike prices of short puts – Strike price

of long put + Net premium paid

Illustration

Strategy Stock / Index Type Strike Premium

Long Put Ladder

NIFTY (Lot Size 50)

Sell PUT 5400 60

(Inflow)

Sell PUT 5500 100

(Inflow)

Buy PUT 5600 140

(Outflow)

Payoff Schedule Payoff Chart

Short Call / Bear Call Ladder Strategy

Investor View

Neutral on direction & bullish on stock / index volatility

Strategy Sell 1 ITM Call , Buy 1 ATM Call , Buy 1 OTM Call

Risk Limited

Reward Unlimited

Breakeven Upper BEP: Higher strike + Maximum Risk

Lower BEP: Lower strike + Net debit (or Net Credit)

Illustration

Strategy Stock / Index Type Strike Premium

Short Call Ladder

NIFTY (Lot Size 50)

Sell CALL 5400 200

(Inflow)

Buy CALL 5500 130

(Outflow)

Buy CALL 5600 80

(Outflow)

Payoff Schedule Payoff Chart

Short Put / Bull Put Ladder Strategy

Investor View

Neutral on direction & bullish on stock / index volatility

Strategy Sell 1 ITM Put , Buy 1 ATM Put , Buy 1 OTM Put

Risk Limited

Reward Unlimited

Breakeven Upper BEP: Higher strike + Net Debit (OR) – Net Credit

Lower BEP: Lower strike – Maximum Risk

Strategy Stock / Index Type Strike Premium

Short Put Ladder

NIFTY (Lot Size 50)

Buy PUT 5400 60

(Outflow)

Buy PUT 5500 100

(Outflow)

Sell PUT 5600 140

(Inflow)

Illustration

Payoff Schedule Payoff Chart

Ratio Call Spread

Investor View

Bearish Market Opinion

Strategy But 1 ITM Call , Sell 2 OTM Calls

Risk Unlimited

Reward Limited

Breakeven Upper BEP: Strike price of short call + (Points of max

profit / No. of uncovered calls)

Lower BEP: Strike price of Long call +/- Net Premium

paid or received

Ratio Put Spread

Investor View

Neutral to Bullish

Strategy But 1 ITM Put , Sell 2 OTM Puts

Risk Unlimited

Reward Limited

Breakeven Upper BEP: Strike price of long put +/- Net Premium

paid or received

Lower BEP: Strike price of Short Puts - (Points of max

profit / No. of uncovered calls)