NEUTRAL STRATEGIES FOR THE NOVICE

Options are versatile investment tools. They can be used for both bullish and bearish strategies. But what separates options from all other investment tools is that they can also be used for neutral strategies. Those are appropriate when:
·         You do not have an opinion on market direction.
·         You believe that the markets will be relatively unchanged over the near term.
Let's discuss some of those strategies.
Note: This article is intended for the novice options trader. More experienced traders can find additional information by clicking the links below.
Market-Neutral Option Strategies
Important note: Unless you are a very experienced trader, always enter these orders as "spreads." A spread order tells your broker that
·         The order contains two or more different options (each option is a "leg")
·         The order requires that the broker fill each leg, and not just one. By  entering a spread order with two legs, you will never find that you bought or sold one of the legs.
If you don't know how to enter such orders, ask your broker's customer service department  how to enter an option spread order. 
Calendar Spread. The trader buys one option (call or put) and sells another option of the same type (i.e., call or put) with these restrictions:
·         The option bought expires after the option sold (i.e., it is "longer-dated")
·         The underlying asset is the same for both options.
·         The strike price is the same for each option.
The longer-dated option always costs more than the near-term option.
Thus, the calendar is a debit spread.
Fact: Shorter-term options decay (i.e., lose value) more quickly than longer term options. (See Theta)
Rationale for buying a calendar spread: When time passes and the stock price remains essentially unchanged, the spread gains value because the option that you bought loses (or gains) value more slowly than the option that was sold.
Therefore, the price of the spread (the difference between the price of the two individual options) increases. This spread is appropriate when you believe that the stock price will remain near its current level.
Risk:
·         If the stock price moves far away from the strike price, then the spread loses money because calendar spreads are worth more when the options are at the money.
·         When the stock price runs higher, the nearer-term option gains value more rapidly than the option that you own (this is due to gamma).

NAKED PUTS; CASH-SECURED PUTS

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Selling puts option for income and for buying stock below market price.
Put writing (put selling) is a conservative option strategy and is ideal when you want to buy stock below current market prices. Cash-secured means that there is enough cash in the account to buy stock if assigned an exercise notice.
SELLING NAKED PUTS; CASH-SECURED PUT OPTIONS
Selling puts is not a high-risk strategy. It is no more risky than buying stock.
Despite everything you may have heard to the contrary, put selling is a strategy worthy of consideration by almost every investor who buys stock. The very bullish trader who expects to see a large upward change in the stock price represents the single class of investor who should not sell puts.
PRUDENCE
The so-called "prudent investor" is told that buying stocks is a good and conservative investment idea.
That investor is also told that selling put options is far too risky. Let's compare two investors who make a trade today:
·         The stock buyer pays for the investment in three days, when the trade "settles." If the stock price moves higher, the trader earns a profit. If the stock price declines, the stockholder incurs a loss. Very straightforward and easy to understand.
·         The put seller collects cash upfront when making the sale. He/she puts up collateral (to meet the margin requirement) to guarantee his/her ability to pay for the stock -- if and when it becomes necessary. If the option expires worthless, the collateral is released and the trader keeps the cash premium as the profit.
In other words, the stock buyer pays for shares at the time of the trade and the put seller promises to pay for stock at a later date. They each have the same risk: If the stock price undergoes a steep decline, each loses money.  This is not a risky proposition for the put seller who understands that he must not sell more than one put for each 100 shares he is willing to own.
Selling too many puts is a risky proposition, but selling too many represents poor risk management skills by the trader. it is not a reflection on the prudence of the strategy.
The put seller agrees (a binding contract) to pay $30 (the strike price) for shares at a later date, but only if he is required to do so. He collects $100 (premium, or option price) for accepting this obligation.  If the stock rallies, both earn a profit. However, the stock holder's potential gain is unlimited while the put seller cannot earn more than the $100 premium that he collected.
If the stock price falls, the stockholder always loses money.
For the put seller to have any loss (assuming that the position is held until the options expire):
·         The stock price must be below the strike price ($30 in this example) by more than the premium.
          EXAMPLE: If the stock is $28, the put seller must pay $30 for the shares. Because they are trading at $28, that is a $200 loss. However, the $100 collected earlier offsets a portion of that loss.
          EXAMPLE: If the stock is $29.40, the put seller earns a $40 profit ($100 premium minus $60 loss on stock price).
·         The put seller often earns a profit when the stockholder loses money. This is the part of the strategy that makes it so appealing. You sell a put option (taking a bullish stance), the stock price declines, and you still earn a profit! 
          EXAMPLE: The stock price moves from $34 to $32 and the stockholder loses $200 for every 100  shares owned. The put seller makes money because the option expires worthless and the profit is $100 (premium collected). 
 Some terminology useful for traders who sell put options
·         ASSIGNED AN EXERCISE NOTICE. When the owner of any option elects to exercise her rights, then the account of a trader who has a short position in that specific option (i.e., XYZ Jun 20 '14 30 puts) is chosen at random and notified.  The notice informs the trader that the option owner exercised an option and that he has been assigned (via a random process) as the person who must honor the terms of the option contract.  
In simple terms: When your account is randomly chosen you must buy 100 shares at the strike price for each option assigned to your account. There is no way out of this. By the time you see your account in the morning, the shares have already been purchased.
·         NAKED PUT OPTION.  A put that is sold unhedged (no offsetting, risk-reducing positions) and the trader does not have enough cash in the account to pay for stock, if it becomes necessary. The trader must borrow that cash from his  broker (using margin).
·         CASH-SECURED PUT. An unhedged put sale, but the trader does have enough cash in the account to but stock, if it becomes necessary. 

SELLING PUTS VS. BUYING CALLS

The bullish trader has a variety of strategies that can be adopted. Buying calls or selling put spreads are two of the most popular choices.
Let's look at the choices for the typical bullish option trader. The market is rising and he wants to makes some money from that rally. Not having a specific stock in mind, he decides to trade index options and chooses SPY, an ETF (exchange traded fund) that mimics the performance of the S&P 500 Index.
Using live data, it is Jun 12, 2014, 9:15 am CT. 
SPX is priced at 194.62.
Let's assume that we prefer options for which expiration Friday is Jul 18, 2014.
Our trader has a few possible choices. Keep in mind that most newer option traders prefer to buy out-of-the-money (OTM) options because they cost less than in-the-money options. More experienced traders understand that buying OTM options is a losing strategy over the longer term, but rookie traders have not yet reached that level of sophistication.
An at-the-money call option, the SPY Jul 18 ‘14 195 calls option costs $1.82, or $182 per contract.
Partial list of OTM options, and their premium (cost to buy):

·         SPY Jul 18 '14 196 call; $1.32

·         SPY Jul 18 '14 197 call; $0.98 

·         SPY Jul 18 '14 198 call; $0.68

Partial list of OTM put spreads and the premium available from selling them:

·         SPY Jul 18 '14 193/194 put spread; $0.39

·         SPY Jul 18 '14 192/193; put spread  $0.33

·         SPY Jul 18 '14 189/190 put spread; $0.20

Although there are other choices, let's assume that your choice is limited to these.
Call buyers, especially buyers of out-of-the-money calls must see the index price increase before they have any chance to earn a profit. That increase must come before the options expire, and the sooner the better.

THOUGHTS ON TRADING IRON CONDORS

"BUY DLF 85 PUT @ .90 TGT 1.65/2.2"
The iron condor is an option strategy usually adopted by traders with some option trading experience. That is as it should be because managing these positions requires an understanding of how money is made and lost -- something that most novice traders are unaware that they have not yet learned.

Below are some of my thoughts about trading iron condors.

Is trading iron condors the same as gambling in the stock market?

·         If you open a randomly chosen iron condor, you are gambling. When choosing a specific iron condor, it is important to pay attention to the underlying asset, the premium collected (i.e., the maximum possible profit), the money at risk (position size and worst possible loss), and your willingness to own a market-neutral position. 
·         If you open an iron condor, but have an edge -- perhaps the implied volatility is very high, or there is a good reason to believe that the underlying asset will not be too volatile during the lifetime of the options -- then you are not gambling. However, because you must pay commissions to own the investment, you need a significant edge to place the trade.
·         If you open an iron condor based on a stock market prediction -- bullish, bearish, or neutral -- then you are gambling if your proven track record of predicting direction is poor. You are not gambling when you truly have a proven, successful, track record of predicting market direction. A 60/40 profit/loss record -- after commissions -- meets that need.

PLAIN VANILA STRATEGY FOLLOW UP ; HINDUNILVR BOOKED PROFIT

OPTION STRATEGY GIVEN ON 3 FEB 2016
HINDUNILVR 820 CALL ACHIVED THE TGT OF 36 HOPE U HAVE BOOKED PARTIAL PROFIT (1 LOT)….

PROFIT IN 1LOT IS 10800/-

CONTINUE TO HOLD 2^ND LOT...
NEXT TGT WILL BE UPDATED SOON.....
KEEP READING.....

PLAIN VANILA STRATEGY FOLLOW UP ; HINDUNILVR BOOK PROFIT

OPTION STRATEGY GIVEN ON 3 FEB 2016
BOOK PARTIAL PROFIT (1 LOT)  IN HINDUNILVR 820 CALL @ 35
KEEP READING FOR FURTHER UPDATE......

OPTION STRATEGY FOR FEBRUARY SERIES ; PLAIN VANILA STRATEGY

"BUY 2 LOTS HINDUNILVR 820 CALL @ 18"
FOR TGT UPDATE KEEP READING.............

RBI CREDIT POLICY ; 2 FEB 2016

RBI LEAVES REPO RATE, CRR, SLR UNCHANGED

3 TIPS FOR USING OPTIONS

TATAMOTORS CALL GIVEN ON 29 JAN ACHIEVED 1ST TGT
Options have been misunderstood by the majority of individual investors for as long as they existed. Options have been around for a long time (since biblical times when a clever person bought call options on as many olive presses as possible and reaped large profits when the harvest was huge and people had to come to him to gain access to the presses), but they have been traded on an exchange only since 1973 (when the CBOE opened its doors).
Despite the fears of uneducated investors, these two statements are true: 
·         Options are risk-reducing investment tools.
·         Many option traders adopt very risky strategies using options, despite the fact that far more conservative strategies are available.
TIPS: HOW TO USE OPTIONS EFFECTIVELY WITH LIMITED RISK
1.       DON'T BE GREEDY.
Be willing to own positions where profit potential is limited, rather than unlimited. 
Adopt strategies where losses are capped -- preventing a financial disaster -- and with a high probability of success.
Bullish traders can sell out-of-the-money put spreads.
Bearish traders can sell out-of-the-money call spreads.
In either scenario, do not sell spreads with a tiny premium.
Selling naked options places the seller at risk of a large loss. Remember that markets do unexpected things every so often, and it is important to practice sound risk management by avoiding owning positions that could -- no matter how unlikely -- blow up your account.
Note: It is acceptable to sell naked put options if two conditions are met: (a) You want to own shares of the underlying stock, even if the price plunges below the strike price; (b) you have enough cash in your account to buy those shares, if you are assigned an exercise notice on those puts.
2.      Understand that using options as mini-lottery tickets is a money-losing proposition. It is understandable that you want to dream big dreams. However, when placing your money at risk (every trade comes with some risk), it is important for traders to consider the probability of earning a profit, and not only the size of that potential profit. 
Do not make a habit of buying inexpensive, low-Delta, out-of-the-money options. Sure it is tempting to buy an option for $10 or $20 when there is a chance of scoring a 10-bagger (i.e., earning 10 times the cost of the option), but those options have very little chance of performing as you hope. 
You may believe that the price of a specific stock has a good chance rise from $44 to $57 over the next couple of months, but that is a very unrealistic expectation (unless you have inside information -- in which case it is against the law to buy options). Buying calls with a $55 strike price options is just foolish because such options tend to expire worthless. Sure the loss is small, but the chances of earning money with this strategy are even smaller.

TRADING WITH ADDITIONAL RISK

It concerns risk taking, and although the statement may seem to be trivial, it is far from it. It is an important concept. 
Don’t expect to make more money for taking risk; just know you have to take additional risk to make more money.
If you don’t understand the difference, you should not be taking risk.
One of the basic concepts regarding investing is that there are no free lunches and that you, the investor, must take some risk in order to earn a return on your investment.
If you are a very skilled trader, you may be able to get away with taking very little risk. However, for the vast majority of investors/traders, we must take on additional risk when we seek to earn a higher profit.
I hope that makes sense. If you were able to earn a high reward on your investments with very low risk, then almost every investor on the planet would go after those rewards.
Usually, no further discussion is required because we all understand when many people go after the same investment product, then there are often those who are willing to accept a slightly lower reward. That in turn drives down the overall reward available to investors. To understand why this is true, just imagine a $100 bond that returned $10 every year. You love that 10% annual return. But another investor may we willing to accept less and may bid $105 for that bond. When that happens, you can no longer buy the bond for $100. The price is now higher and the reward is now less. The process continues (i.e., the cost of the bond increases) until equilibrium is reached and no one is willing to pay a higher price.
By the time that happens, the bond could easily be selling for $120 and the annual return would be 8.33%.
THE MAJOR POINT IS THAT EXTRA RISK DOES NOT GUARANTEE ANY EXTRA REWARD. IN FACT THERE MAY BE NO REWARD. Imagine a careless, inexperienced trader adding risk to his/her portfolio with the expectation that it will lead to greater gains.
Using the above bond example, the fact that the business had to pay as much as 10% to sell the bonds initially suggests that the company may never be able to repay the debt. Financially sound companies do not have to pay so far about current market rates when selling bonds. The fact that this company has to pay so much in order to attract lenders says a lot about the high risk involved when lending money to them. It's great to earn $10/year per $100 investment, but if the company defaults and you never get back any of the $100 invested, that is an example of no reward.