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Traders should note - Following option trading tactics are based on some general analysis and logic and may differ and dissimilar from others experience and analysis.

Important - Traders should take their own risk to trade on below mentioned option tactics. We strongly advice to monitor and see how they work before putting your money and if you feel these strategies works then you can plan your strategies accordingly.

Following are option trading tactics
1. Short selling deep out of money calls and puts (low risk high profits)
2. Trading on “At the money calls and puts”
3. Trading on “Deep in the money calls and puts” (low risk high profits)

1.Short selling deep out of money calls and puts(low risk high profits)

“Successful trading in calls and puts requires appropriate analyzing and monitoring”.

What is Deep out of money call?
Suppose if Nifty Index is trading at 2700 then the deep out of money calls will be 3100C, 3200C, 3300 etc.
Deep out of money calls become inactive or shows very less movement near the expiry date.
Even if Nifty Index moves down at least few points like 50 to 100 then there is high probability that deep out of money calls may get expired (get expired means value becomes zero).

As the date of expiry approaches nearer (options expiry date is at every last Thursday of the month) the “deep out of money calls and puts” becomes very responsive to expire if market moves against them even very few points like 50 to 100.

How to get profit from short selling deep out of money Put?
Put is bought then the underlying is expected to go DOWN and short selling of Put is done when the underlying is expected to move Up.

What is the deep out of money put?
Suppose if Nifty Index is trading at 3000 then the deep out of money puts will be 2500P, 2550, 2600P etc.
Deep out of money puts become inactive or shows less movement near the expiry date.
Even if Nifty index moves up at least few points like 50 to 100 then there is high probability that the deep out of money puts may get expired (get expired means value becomes zero).

How to get profit from short selling deep out of money Put?
Suppose if Nifty Index is trading at 3000 and 2600 Put is trading at Rs.22 then you can short sell one lot of Nifty.

If Nifty moves in upward direction then there is high probability that this deep out of money put may get expired.

So Rs.22 x 50 quantities (one lot of Nifty) profit is Rs.1100 per lot.
So such profits levels can be earned in last 4 or even in 2 days.

So for example if you short sell 4 lots then your profit would be Rs.1100 x 4 lots = 4400.

Please note
The example explained above is for sake of clarification. Short selling can be done even on stock options.

Important notes -
1. In short sell if Nifty moves against the expectation then losses can be huge, so short selling should be done only when you are sure
about the Nifty direction.
2. Short selling options require future derivative margin.
3. Above mentioned strategy works fine if traded near the option expiry date like 3 to 5 days left for expiry.

To see how trading “at the money calls and puts provide profits then please visit below link http://www.daytradingshares.com/futures_and_options/online_trading_techniques2.html

To see how trading “Deep in the money calls and outs provide profits then please visit below link http://www.daytradingshares.com/futures_and_options/online_trading_techniques3.html

How to get profit from short selling deep out of money Call?
Call is bought when underlying is expected to go UP and short selling of call is done when underlying is expected to do DOWN.

Suppose if Nifty Index is trading at 2700 and 3200 call is trading at Rs.20 and you have short sell one lot of Nifty (Nifty one lot consists of 50 quantities).
Short selling options (calls and puts) require future margin.

So the margin required to short sell 3200 call at Rs 20 requires approx Rs 30,000.(approximately)

If Nifty moves in downward direction then there is high probability that this call may get expired.

Please note - Generally it is observed that Nifty goes into profit booking (Nifty will go down) or short covering (nifty will go up) during expiry session based on how nifty reacted in the previous weeks.

For example
Profit booking takes place if nifty has rallied during the month and Short covering will takes place if Nifty has fallen during the month.

So Rs.1000 per lot (Rs 20 x 50 qty per lot) will be the profit in last 4 to 5 days towards expiry session.
So such profits levels can be earned in last 4 or even in 2 days.
For example - If you short sell 4 lots than your profit would be Rs.1000 x 4 lots = Rs 4000.

Please note -
The example explained above is for sake of clarification.
Short selling can be done even on stock options.

Precaution - The short selling options involves limited profits and unlimited losses.
Like in above example if Nifty turns back and start moving in upper direction then your short sell call will turn into loss.
Basically during expiry period such sudden turn back is unexpected unless some breaking news enters the market or traders have taken wrong trade.
Wrong trades like if nifty had rallied during the month then some profit booking is expected during the expiry so nifty will go down in such scenario short selling of calls will work.

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