{"id":66368,"date":"2025-01-21T15:29:09","date_gmt":"2025-01-21T09:59:09","guid":{"rendered":"https://www.5paisa.com/finschool/?post_type=markets\u0026#038;p=66368"},"modified":"2025-01-21T15:29:17","modified_gmt":"2025-01-21T09:59:17","slug":"examples-of-smart-strategies","status":"publish","type":"markets","link":"https://www.5paisa.com/finschool/course/fno-360-an-ultimate-guide-to-futures-and-options-trading/examples-of-smart-strategies/","title":{"rendered":"Examples of Smart Strategies"},"content":{"rendered":"\u003cdiv data-elementor-type=\u0022wp-post\u0022 data-elementor-id=\u002266368\u0022 class=\u0022elementor elementor-66368\u0022\u003e\u003csection class=\u0022elementor-section elementor-top-section elementor-element elementor-element-23ba90b elementor-section-full_width tab_container elementor-section-height-default elementor-section-height-default\u0022 data-id=\u002223ba90b\u0022 data-element_type=\u0022section\u0022\u003e\u003cdiv class=\u0022elementor-container 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data-title-link=\u0022study-tab\u0022\u003e\u003cp\u003e\u003cdiv class=\u0027white\u0027 style=\u0027background:rgb(255, 255, 255); border:solid 0px rgb(255, 255, 255); border-radius:0px; padding:0px 0px 0px 1px;\u0027\u003e\u003cdiv id=\u0027text_slider\u0027 class=\u0027owl-carousel sa_owl_theme owl-pagination-true\u0027 data-slider-id=\u0027text_slider\u0027 style=\u0027visibility: visible;visibility:visible;\u0027\u003e\u003cdiv id=\u0027text_slider_slide01\u0027 class=\u0027sa_hover_container\u0027 data-hash=\u0027Bullish-Strategies\u0027 style=\u0027padding:4.9% 5%; margin:0px 0%; background-color:rgb(255, 255, 255); min-height:400px; \u0027\u003e\u003ch2\u003e\u003c/h2\u003e\u003ch2\u003e\u003cstrong\u003e9.1 Bullish Strategies Example\u003c/strong\u003e\u003c/h2\u003e\u003cp\u003e\u003cimg fetchpriority=\u0022high\u0022 decoding=\u0022async\u0022 class=\u0022aligncenter wp-image-66190 size-full\u0022 src=\u0022https://www.5paisa.com/hindi/finschool/wp-content/uploads/2025/01/New-course-7-3.png\u0022 alt=\u0022Bullish Strategies examples\u0022 width=\u0022817\u0022 height=\u0022752\u0022 srcset=\u0022https://www.5paisa.com/hindi/finschool/wp-content/uploads/2025/01/New-course-7-3.png 817w, https:/www.5paisa.com/finschool/wp-content/uploads/2025/01/New-course-7-3-300x276.png 300w, https:/www.5paisa.com/finschool/wp-content/uploads/2025/01/New-course-7-3-768x707.png 768w, https:/www.5paisa.com/finschool/wp-content/uploads/2025/01/New-course-7-3-50x46.png 50w, https:/www.5paisa.com/finschool/wp-content/uploads/2025/01/New-course-7-3-100x92.png 100w, https:/www.5paisa.com/finschool/wp-content/uploads/2025/01/New-course-7-3-150x138.png 150w\u0022 sizes=\u0022(max-width: 817px) 100vw, 817px\u0022 /\u003e\u003c/p\u003e\u003ch3\u003e\u003cstrong\u003eA. Long Call\u003c/strong\u003e\u003c/h3\u003e\u003cp\u003e\u003cimg decoding=\u0022async\u0022 class=\u0022aligncenter wp-image-66174 size-full\u0022 src=\u0022https://www.5paisa.com/hindi/finschool/wp-content/uploads/2025/01/Bullish-strategies-Long-call.png\u0022 alt=\u0022Bullish Long Call strategy\u0022 width=\u00221125\u0022 height=\u0022671\u0022 srcset=\u0022https://www.5paisa.com/hindi/finschool/wp-content/uploads/2025/01/Bullish-strategies-Long-call.png 1125w, https:/www.5paisa.com/finschool/wp-content/uploads/2025/01/Bullish-strategies-Long-call-300x179.png 300w, https:/www.5paisa.com/finschool/wp-content/uploads/2025/01/Bullish-strategies-Long-call-1024x611.png 1024w, https:/www.5paisa.com/finschool/wp-content/uploads/2025/01/Bullish-strategies-Long-call-768x458.png 768w, https:/www.5paisa.com/finschool/wp-content/uploads/2025/01/Bullish-strategies-Long-call-50x30.png 50w, https:/www.5paisa.com/finschool/wp-content/uploads/2025/01/Bullish-strategies-Long-call-100x60.png 100w, https:/www.5paisa.com/finschool/wp-content/uploads/2025/01/Bullish-strategies-Long-call-150x89.png 150w\u0022 sizes=\u0022(max-width: 1125px) 100vw, 1125px\u0022 /\u003e\u003c/p\u003e\u003cp\u003eHere\u0026#8217;s the payoff diagram for the Long Call strategy.\u003c/p\u003e\u003cul\u003e\u003cli\u003eThe red dashed line indicates the breakeven price at ₹110, where profit is zero.\u003c/li\u003e\u003cli\u003eThe green dashed line marks the strike price at ₹105.\u003c/li\u003e\u003cli\u003eThe profit curve illustrates how the total profit increases as the stock price rises above the breakeven point.\u003c/li\u003e\u003c/ul\u003e\u003cp\u003eThe Long Call Strategy is a bullish options trading strategy where an investor buys a call option, expecting the price of the underlying asset to rise significantly above the strike price before the option\u0026#8217;s expiration date.\u003c/p\u003e\u003cp\u003e\u003cstrong\u003eExample:\u003c/strong\u003e\u003c/p\u003e\u003cp\u003e\u003cstrong\u003eScenario:\u003c/strong\u003e\u003c/p\u003e\u003cul\u003e\u003cli\u003eStock: ABC Ltd.\u003c/li\u003e\u003cli\u003eCurrent Stock Price: ₹100\u003c/li\u003e\u003cli\u003eCall Option Strike Price: ₹105\u003c/li\u003e\u003cli\u003eCall Option Premium: ₹5\u003c/li\u003e\u003cli\u003eOption Expiry: 1 month\u003c/li\u003e\u003c/ul\u003e\u003cp\u003e\u003cstrong\u003eAction:\u003c/strong\u003e\u003cbr /\u003eThe trader buys 1 call option for ₹5 (premium) per share. Assuming 100 shares per contract, the total cost is:\u003cbr /\u003ePremium Paid=₹5×100=₹500\u003c/p\u003e\u003cp\u003e\u003cstrong\u003eOutcomes at Expiry:\u003c/strong\u003e\u003c/p\u003e\u003cp\u003e\u003cstrong\u003eIf the stock price stays at ₹105 or below\u003c/strong\u003e\u003cbr /\u003eThe option expires worthless as there’s no advantage in buying the stock at ₹105 (strike price) when it costs ₹105 or less in the market.\u003c/p\u003e\u003cp\u003e\u003cstrong\u003eLoss:\u003c/strong\u003e ₹500 (premium paid)\u003c/p\u003e\u003cp\u003e\u003cstrong\u003eIf the stock price rises above ₹105\u003c/strong\u003e\u003cbr /\u003eThe option gains intrinsic value. For example:\u003c/p\u003e\u003col\u003e\u003cli\u003eIf ABC\u0026#8217;s price is ₹120:\u003cbr /\u003eProfit per share = ₹120 (market price) \u0026#8211; ₹105 (strike price) \u0026#8211; ₹5 (premium) = ₹10\u003cbr /\u003eTotal profit = ₹10 × 100 shares = ₹1,000\u003c/li\u003e\u003cli\u003e\u003cstrong\u003eNet Profit:\u003c/strong\u003e\u003cbr /\u003eProfit = Total profit – Premium paid = ₹1,000 – ₹500 = ₹500\u003c/li\u003e\u003c/ol\u003e\u003cp\u003e\u003cstrong\u003eBreakeven Point:\u003c/strong\u003e\u003c/p\u003e\u003cp\u003eThe breakeven stock price is the strike price + premium paid.\u003c/p\u003e\u003cp\u003eIn this case:\u003cbr /\u003eBreakeven=₹105+₹5=₹110\u003c/p\u003e\u003cp\u003eAt ₹110, there is no profit or loss. Above ₹110, the strategy starts making a profit.\u003c/p\u003e\u003cp\u003e\u003cstrong\u003eKey Insights:\u003c/strong\u003e\u003c/p\u003e\u003cul\u003e\u003cli\u003e\u003cstrong\u003eMaximum Loss:\u003c/strong\u003e Limited to the premium paid (₹500).\u003c/li\u003e\u003cli\u003e\u003cstrong\u003eMaximum Profit:\u003c/strong\u003e Unlimited, depending on how high the stock price rises.\u003c/li\u003e\u003cli\u003e\u003cstrong\u003eIdeal Market View:\u003c/strong\u003e The trader expects a significant rise in the stock price.\u003c/li\u003e\u003c/ul\u003e\u003ch3\u003e\u003c/h3\u003e\u003ch3\u003eB. \u003cstrong\u003eBull Call Spread\u003c/strong\u003e\u003c/h3\u003e\u003cp\u003e\u003cimg decoding=\u0022async\u0022 class=\u0022aligncenter wp-image-66175 size-full\u0022 src=\u0022https://www.5paisa.com/hindi/finschool/wp-content/uploads/2025/01/Bull-call-spread.png\u0022 alt=\u0022Bull call spread\u0022 width=\u00221454\u0022 height=\u0022867\u0022 srcset=\u0022https://www.5paisa.com/hindi/finschool/wp-content/uploads/2025/01/Bull-call-spread.png 1454w, https:/www.5paisa.com/finschool/wp-content/uploads/2025/01/Bull-call-spread-300x179.png 300w, https:/www.5paisa.com/finschool/wp-content/uploads/2025/01/Bull-call-spread-1024x611.png 1024w, https:/www.5paisa.com/finschool/wp-content/uploads/2025/01/Bull-call-spread-768x458.png 768w, https:/www.5paisa.com/finschool/wp-content/uploads/2025/01/Bull-call-spread-50x30.png 50w, https:/www.5paisa.com/finschool/wp-content/uploads/2025/01/Bull-call-spread-100x60.png 100w, https:/www.5paisa.com/finschool/wp-content/uploads/2025/01/Bull-call-spread-150x89.png 150w\u0022 sizes=\u0022(max-width: 1454px) 100vw, 1454px\u0022 /\u003e\u003c/p\u003e\u003cp\u003eThe Bull Call Spread is a bullish options strategy that involves buying a call option at a lower strike price and simultaneously selling a call option at a higher strike price. This strategy reduces the upfront cost compared to a long call but caps the maximum profit.\u003c/p\u003e\u003cp\u003eHere is the payoff diagram for the Bull Call Spread strategy:\u003c/p\u003e\u003cul\u003e\u003cli\u003e\u003cstrong\u003eOrange Line\u003c/strong\u003e: Breakeven price at ₹108, where there is no profit or loss.\u003c/li\u003e\u003cli\u003e\u003cstrong\u003eRed Line\u003c/strong\u003e: Maximum loss of ₹300 occurs if the stock price is ₹105 or below at expiration.\u003c/li\u003e\u003cli\u003e\u003cstrong\u003eGreen Line\u003c/strong\u003e: Maximum profit of ₹700 is achieved if the stock price reaches or exceeds ₹115\u003c/li\u003e\u003c/ul\u003e\u003cp\u003e\u003cstrong\u003eExample:\u003c/strong\u003e\u003c/p\u003e\u003cp\u003e\u003cstrong\u003eScenario:\u003c/strong\u003e\u003c/p\u003e\u003cp\u003e\u003cstrong\u003eStock: ABC Ltd.\u003c/strong\u003e\u003c/p\u003e\u003cul\u003e\u003cli\u003eCurrent Stock Price: ₹100\u003c/li\u003e\u003cli\u003eBuy Call Option Strike Price: ₹105 (Lower Strike)\u003c/li\u003e\u003cli\u003ePremium Paid: ₹5\u003c/li\u003e\u003cli\u003eSell Call Option Strike Price: ₹115 (Higher Strike)\u003c/li\u003e\u003cli\u003ePremium Received: ₹2\u003c/li\u003e\u003cli\u003eNet Premium Paid: ₹5 \u0026#8211; ₹2 = ₹3\u003c/li\u003e\u003c/ul\u003e\u003cp\u003e\u003cstrong\u003eKey Points:\u003c/strong\u003e\u003c/p\u003e\u003cul\u003e\u003cli\u003e\u003cstrong\u003eMax Loss: \u003c/strong\u003eLimited to the net premium paid (₹3 × 100 shares = ₹300).\u003c/li\u003e\u003cli\u003e\u003cstrong\u003eMax Profit: \u003c/strong\u003eLimited to the difference between strike prices minus the net premium paid\u003cstrong\u003e.\u003cbr /\u003eMax Profit= \u003c/strong\u003e(₹115−₹105−₹3) ×100=₹700\u003c/li\u003e\u003cli\u003e\u003cstrong\u003eBreakeven Point:\u003c/strong\u003e Lower strike price + net premium paid.\u003cstrong\u003e\u003cbr /\u003eBreakeven= \u003c/strong\u003e₹105+ ₹3= ₹108\u003c/li\u003e\u003c/ul\u003e\u003cp\u003e\u003cstrong\u003eOutcomes at Expiry:\u003c/strong\u003e\u003c/p\u003e\u003col\u003e\u003cli\u003e\u003cstrong\u003eIf Stock Price ≤ ₹105:\u003c/strong\u003e\u003cbr /\u003eBoth options expire worthless.\u003c/li\u003e\u003c/ol\u003e\u003cp style=\u0022padding-left: 40px\u0022\u003eLoss: ₹3 × 100 = ₹300 (net premium paid).\u003c/p\u003e\u003col start=\u00222\u0022\u003e\u003cli\u003e\u003cstrong\u003eIf Stock Price is between ₹105 and ₹115:\u003c/strong\u003e\u003cbr /\u003eThe lower strike call gains intrinsic value, but the upper strike call offsets some profit.\u003c/li\u003e\u003c/ol\u003e\u003cp style=\u0022padding-left: 40px\u0022\u003e\u003cstrong\u003eExample: Stock Price = ₹110:\u003c/strong\u003e\u003cbr /\u003eProfit = (₹110 – ₹105) – ₹3 = ₹2 per share.\u003cbr /\u003eTotal Profit = ₹2 × 100 = ₹200.\u003c/p\u003e\u003col start=\u00223\u0022\u003e\u003cli\u003e\u003cstrong\u003eIf Stock Price ≥ ₹115:\u003c/strong\u003e\u003cbr /\u003eThe lower strike call gains maximum value, but the upper strike call caps the profit.\u003c/li\u003e\u003c/ol\u003e\u003cp style=\u0022padding-left: 40px\u0022\u003eProfit: ₹700.\u003c/p\u003e\u003cp\u003e\u003cstrong\u003eBreakeven Calculation:\u003c/strong\u003e\u003c/p\u003e\u003cp\u003eThe breakeven stock price is the lower strike price + net premium paid:\u003cstrong\u003e\u003cbr /\u003eBreakeven=₹105+₹3=₹108\u003c/strong\u003e\u003c/p\u003e\u003cp\u003e\u003cstrong\u003eKey Insights:\u003c/strong\u003e\u003c/p\u003e\u003cul\u003e\u003cli\u003eRisk: Limited to ₹300 (net premium paid).\u003c/li\u003e\u003cli\u003eReward: Capped at ₹700.\u003c/li\u003e\u003cli\u003eMarket View: Mildly bullish.\u003c/li\u003e\u003c/ul\u003e\u003cp\u003e\u003cstrong\u003e\u003c/strong\u003e\u003c/p\u003e\u003ch3\u003e\u003cstrong\u003eC. Bull Put Spread\u003c/strong\u003e\u003c/h3\u003e\u003cp\u003e\u003cimg loading=\u0022lazy\u0022 decoding=\u0022async\u0022 class=\u0022aligncenter wp-image-66178 size-full\u0022 src=\u0022https://www.5paisa.com/hindi/finschool/wp-content/uploads/2025/01/Bull-Put-spread-1.png\u0022 alt=\u0022Bull Put Spread\u0022 width=\u00221473\u0022 height=\u0022869\u0022 srcset=\u0022https://www.5paisa.com/hindi/finschool/wp-content/uploads/2025/01/Bull-Put-spread-1.png 1473w, https:/www.5paisa.com/finschool/wp-content/uploads/2025/01/Bull-Put-spread-1-300x177.png 300w, https:/www.5paisa.com/finschool/wp-content/uploads/2025/01/Bull-Put-spread-1-1024x604.png 1024w, https:/www.5paisa.com/finschool/wp-content/uploads/2025/01/Bull-Put-spread-1-768x453.png 768w, https:/www.5paisa.com/finschool/wp-content/uploads/2025/01/Bull-Put-spread-1-50x29.png 50w, https:/www.5paisa.com/finschool/wp-content/uploads/2025/01/Bull-Put-spread-1-100x59.png 100w, https:/www.5paisa.com/finschool/wp-content/uploads/2025/01/Bull-Put-spread-1-150x88.png 150w\u0022 sizes=\u0022(max-width: 1473px) 100vw, 1473px\u0022 /\u003e\u003c/p\u003e\u003cp\u003e\u0026nbsp;\u003c/p\u003e\u003cp\u003e\u003cstrong\u003eHere\u0026#8217;s the payoff diagram for your Bull put spread strategy:\u003c/strong\u003e\u003c/p\u003e\u003cul\u003e\u003cli\u003eThe blue dashed line represents the payoff for selling a put option with a strike price of ₹860.\u003c/li\u003e\u003cli\u003eThe orange dashed line shows the payoff for buying a put option with a strike price of ₹830.\u003c/li\u003e\u003cli\u003eThe green solid line indicates the net payoff for the strategy\u003c/li\u003e\u003c/ul\u003e\u003cp\u003e\u003cstrong\u003eExample\u003c/strong\u003e\u003c/p\u003e\u003cp\u003eSuppose you believe the price of Reliance Industries, currently trading at ₹850, will rise or remain above a certain level:\u003c/p\u003e\u003cul\u003e\u003cli\u003e\u003cstrong\u003eSell a Put Option\u003c/strong\u003e: Strike price ₹860, premium ₹30.\u003c/li\u003e\u003cli\u003e\u003cstrong\u003eBuy a Put Option\u003c/strong\u003e: Strike price ₹830, premium ₹10.\u003c/li\u003e\u003c/ul\u003e\u003cp\u003e\u003cstrong\u003eProfit and Loss\u003c/strong\u003e\u003c/p\u003e\u003cul\u003e\u003cli\u003e\u003cstrong\u003eMaximum Profit\u003c/strong\u003e: Achieved if the stock price remains at or above the higher strike price (₹860). The profit is the net premium received (₹30 – ₹10 = ₹20).\u003c/li\u003e\u003cli\u003e\u003cstrong\u003eMaximum Loss\u003c/strong\u003e: Occurs if the stock price falls to or below the lower strike price (₹830). The loss is the difference between the strike prices minus the net premium received (₹860 – ₹830 – ₹20 = ₹10).\u003c/li\u003e\u003c/ul\u003e\u003cp\u003e\u003cstrong\u003eBreakeven Point : \u003c/strong\u003eThe breakeven point is the higher strike price minus the net premium received (₹860 – ₹20 = ₹840).\u003c/p\u003e\u003cp\u003e\u003cstrong\u003eKey points on the chart\u003c/strong\u003e:\u003c/p\u003e\u003col\u003e\u003cli\u003eMaximum Profit of ₹20 is achieved when the stock price is at or above ₹860.\u003c/li\u003e\u003cli\u003eMaximum Loss of ₹10 occurs when the stock price is at or below ₹830.\u003c/li\u003e\u003cli\u003eThe breakeven point is at ₹840 (marked by the red dashed vertical line).\u003c/li\u003e\u003c/ol\u003e\u003ch3\u003e\u003cstrong\u003eD. Long Call Butterfly Strategy\u003c/strong\u003e\u003c/h3\u003e\u003cp\u003e\u003cimg loading=\u0022lazy\u0022 decoding=\u0022async\u0022 class=\u0022aligncenter wp-image-66179 size-full\u0022 src=\u0022https://www.5paisa.com/hindi/finschool/wp-content/uploads/2025/01/Long-call-butterfly-strategy-1.png\u0022 alt=\u0022Long call Butterfly Strategy\u0022 width=\u00221017\u0022 height=\u0022653\u0022 srcset=\u0022https://www.5paisa.com/hindi/finschool/wp-content/uploads/2025/01/Long-call-butterfly-strategy-1.png 1017w, https:/www.5paisa.com/finschool/wp-content/uploads/2025/01/Long-call-butterfly-strategy-1-300x193.png 300w, https:/www.5paisa.com/finschool/wp-content/uploads/2025/01/Long-call-butterfly-strategy-1-768x493.png 768w, https:/www.5paisa.com/finschool/wp-content/uploads/2025/01/Long-call-butterfly-strategy-1-50x32.png 50w, https:/www.5paisa.com/finschool/wp-content/uploads/2025/01/Long-call-butterfly-strategy-1-100x64.png 100w, https:/www.5paisa.com/finschool/wp-content/uploads/2025/01/Long-call-butterfly-strategy-1-150x96.png 150w\u0022 sizes=\u0022(max-width: 1017px) 100vw, 1017px\u0022 /\u003e\u003c/p\u003e\u003cp\u003e\u003cstrong\u003eExample\u003c/strong\u003e\u003c/p\u003e\u003cp\u003eLet\u0026#8217;s assume the net premium paid for setting up this strategy is ₹20.\u003c/p\u003e\u003cul\u003e\u003cli\u003e\u003cstrong\u003eLower Strike Price (Buy)\u003c/strong\u003e: ₹950\u003c/li\u003e\u003cli\u003e\u003cstrong\u003eMiddle Strike Price (Sell, double)\u003c/strong\u003e: ₹1,000\u003c/li\u003e\u003cli\u003e\u003cstrong\u003eHigher Strike Price (Buy)\u003c/strong\u003e: ₹1,050\u003c/li\u003e\u003c/ul\u003e\u003cp\u003e\u003cstrong\u003ePayoff and Profit Calculation\u003c/strong\u003e\u003c/p\u003e\u003cul\u003e\u003cli\u003e\u003cstrong\u003eMaximum Profit\u003c/strong\u003e: Occurs if the stock price at expiration is exactly at the middle strike price (₹1,000). The profit is calculated as the difference between the middle and the lower strike prices, minus the net premium paid. In this example: ₹1,000 – ₹950 = ₹50, minus the ₹20 net premium = ₹30 per share.\u003c/li\u003e\u003cli\u003e\u003cstrong\u003eMaximum Loss\u003c/strong\u003e: The maximum loss is limited to the net premium paid to set up the strategy. In this example, the loss is ₹20 per share.\u003c/li\u003e\u003c/ul\u003e\u003cp\u003e\u003cstrong\u003eBreak-even Points\u003c/strong\u003e:\u003c/p\u003e\u003cul\u003e\u003cli\u003eLower Break-even: Lower strike price + net premium = ₹950 + ₹20 = ₹970.\u003c/li\u003e\u003cli\u003eUpper Break-even: Higher strike price \u0026#8211; net premium = ₹1,050 \u0026#8211; ₹20 = ₹1,030.\u003c/li\u003e\u003c/ul\u003e\u003cp\u003eThis strategy is most effective when the trader expects the stock to hover around the ₹1,000 mark by expiration. The Long Call Butterfly offers a limited risk, limited reward profile, making it a conservative strategy suitable for stable market conditions.\u003c/p\u003e\u003ch3\u003eE. \u003cstrong\u003eShort Put Strategy\u003c/strong\u003e\u003c/h3\u003e\u003cp\u003eSell one put option: By selling the put option, the trader receives a premium. For instance, let’s consider an underlying stock currently priced at ₹1,000, and we sell a put option with a strike price of ₹950.\u003c/p\u003e\u003cp\u003e\u003cimg loading=\u0022lazy\u0022 decoding=\u0022async\u0022 class=\u0022aligncenter wp-image-66180 size-full\u0022 src=\u0022https://www.5paisa.com/hindi/finschool/wp-content/uploads/2025/01/Short-Put-Strategy-1.png\u0022 alt=\u0022Short Put Strategy\u0022 width=\u00221160\u0022 height=\u0022746\u0022 srcset=\u0022https://www.5paisa.com/hindi/finschool/wp-content/uploads/2025/01/Short-Put-Strategy-1.png 1160w, https:/www.5paisa.com/finschool/wp-content/uploads/2025/01/Short-Put-Strategy-1-300x193.png 300w, https:/www.5paisa.com/finschool/wp-content/uploads/2025/01/Short-Put-Strategy-1-1024x659.png 1024w, https:/www.5paisa.com/finschool/wp-content/uploads/2025/01/Short-Put-Strategy-1-768x494.png 768w, https:/www.5paisa.com/finschool/wp-content/uploads/2025/01/Short-Put-Strategy-1-50x32.png 50w, https:/www.5paisa.com/finschool/wp-content/uploads/2025/01/Short-Put-Strategy-1-100x64.png 100w, https:/www.5paisa.com/finschool/wp-content/uploads/2025/01/Short-Put-Strategy-1-150x96.png 150w\u0022 sizes=\u0022(max-width: 1160px) 100vw, 1160px\u0022 /\u003e\u003c/p\u003e\u003cp\u003e\u003cstrong\u003e\u003c/strong\u003e\u003c/p\u003e\u003cp\u003e\u003cstrong\u003eExample\u003c/strong\u003e\u003c/p\u003e\u003cp\u003eAssume the premium received for selling this put option is ₹30.\u003c/p\u003e\u003cul\u003e\u003cli\u003e\u003cstrong\u003eStrike Price (Sell)\u003c/strong\u003e: ₹950\u003c/li\u003e\u003c/ul\u003e\u003cp\u003e\u003cstrong\u003ePayoff and Profit Calculation\u003c/strong\u003e\u003c/p\u003e\u003cul\u003e\u003cli\u003e\u003cstrong\u003eMaximum Profit\u003c/strong\u003e: The maximum profit is the premium received from selling the put option. In this example, the profit is ₹30 per share.\u003c/li\u003e\u003cli\u003e\u003cstrong\u003eMaximum Loss\u003c/strong\u003e: The risk is significant since the trader must buy the stock at the strike price if the option is exercised and the stock price falls significantly. The potential loss occurs if the stock price drops below the strike price (₹950).\u003c/li\u003e\u003c/ul\u003e\u003cp\u003eFor instance, if the stock price falls to ₹900, the effective purchase price would be ₹950 (strike price) \u0026#8211; ₹30 (premium received) = ₹920, resulting in a ₹20 loss per share.\u003c/p\u003e\u003cp\u003eThe Short Put strategy benefits from stable to rising stock prices. While the potential profit is limited to the premium received, the risk can be considerable if the stock price declines significantly below the strike price.\u003c/p\u003e\u003cp\u003e\u0026nbsp;\u003c/p\u003e\u003cp\u003e\u0026nbsp;\u003c/p\u003e\u003c/div\u003e\u003cdiv id=\u0027text_slider_slide02\u0027 class=\u0027sa_hover_container\u0027 data-hash=\u0027Bearish-Strategies\u0027 style=\u0027padding:4.9% 5%; margin:0px 0%; background-color:rgb(255, 255, 255); min-height:400px; \u0027\u003e\u003ch2\u003e\u003cstrong\u003e9.2. Bearish Strategies Examples\u003c/strong\u003e\u003c/h2\u003e\u003cp\u003e\u003cimg loading=\u0022lazy\u0022 decoding=\u0022async\u0022 class=\u0022wp-image-66191 size-full aligncenter\u0022 src=\u0022https://www.5paisa.com/hindi/finschool/wp-content/uploads/2025/01/New-course-8-2.png\u0022 alt=\u0022Bearish Strategies examples\u0022 width=\u0022880\u0022 height=\u0022684\u0022 srcset=\u0022https://www.5paisa.com/hindi/finschool/wp-content/uploads/2025/01/New-course-8-2.png 880w, https:/www.5paisa.com/finschool/wp-content/uploads/2025/01/New-course-8-2-300x233.png 300w, https:/www.5paisa.com/finschool/wp-content/uploads/2025/01/New-course-8-2-768x597.png 768w, https:/www.5paisa.com/finschool/wp-content/uploads/2025/01/New-course-8-2-50x39.png 50w, https:/www.5paisa.com/finschool/wp-content/uploads/2025/01/New-course-8-2-100x78.png 100w, https:/www.5paisa.com/finschool/wp-content/uploads/2025/01/New-course-8-2-150x117.png 150w\u0022 sizes=\u0022(max-width: 880px) 100vw, 880px\u0022 /\u003e\u003c/p\u003e\u003ch3\u003e\u003c/h3\u003e\u003ch3\u003e\u003cstrong\u003eA. Bear call spread\u003c/strong\u003e\u003c/h3\u003e\u003ch3\u003e\u003cimg loading=\u0022lazy\u0022 decoding=\u0022async\u0022 class=\u0022aligncenter wp-image-70105 size-full\u0022 src=\u0022https://www.5paisa.com/hindi/finschool/wp-content/uploads/2025/01/Bear-call-spread-2.png\u0022 alt=\u0022Bear call spread\u0022 width=\u00221164\u0022 height=\u0022734\u0022 srcset=\u0022https://www.5paisa.com/hindi/finschool/wp-content/uploads/2025/01/Bear-call-spread-2.png 1164w, https:/www.5paisa.com/finschool/wp-content/uploads/2025/01/Bear-call-spread-2-300x189.png 300w, https:/www.5paisa.com/finschool/wp-content/uploads/2025/01/Bear-call-spread-2-1024x646.png 1024w, https:/www.5paisa.com/finschool/wp-content/uploads/2025/01/Bear-call-spread-2-768x484.png 768w, https:/www.5paisa.com/finschool/wp-content/uploads/2025/01/Bear-call-spread-2-50x32.png 50w, https:/www.5paisa.com/finschool/wp-content/uploads/2025/01/Bear-call-spread-2-100x63.png 100w, https:/www.5paisa.com/finschool/wp-content/uploads/2025/01/Bear-call-spread-2-150x95.png 150w\u0022 sizes=\u0022(max-width: 1164px) 100vw, 1164px\u0022 /\u003e\u003c/h3\u003e\u003cp\u003e\u003cstrong\u003e\u003c/strong\u003eThe graph illustrates the profit and loss profile of a Bear Call Spread strategy for Reliance Industries with the given parameters.\u003c/p\u003e\u003cp\u003eKey takeaways from the graph are:\u003c/p\u003e\u003cul\u003e\u003cli\u003eThe maximum profit of ₹10 is achieved when the stock price stays below ₹860.\u003c/li\u003e\u003cli\u003eThe maximum loss of ₹10 occurs when the stock price goes above ₹880.\u003c/li\u003e\u003cli\u003eBetween ₹860 and ₹880, the profit/loss gradually declines.\u003c/li\u003e\u003c/ul\u003e\u003cp\u003e\u003cstrong\u003eExample\u003c/strong\u003e\u003c/p\u003e\u003cp\u003eLet\u0026#8217;s say you believe the price of Reliance Industries, currently at ₹850, will moderately decline1. You decide to implement a Bear Call Spread:\u003c/p\u003e\u003cul\u003e\u003cli\u003e\u003cstrong\u003eSell a Call Option\u003c/strong\u003e: Sell a call option with a strike price of ₹860 for a premium of ₹20.\u003c/li\u003e\u003cli\u003e\u003cstrong\u003eBuy a Call Option\u003c/strong\u003e: Buy a call option with a strike price of ₹880 for a premium of ₹10.\u003c/li\u003e\u003c/ul\u003e\u003cp\u003e\u003cstrong\u003eProfit and Loss\u003c/strong\u003e\u003c/p\u003e\u003cul\u003e\u003cli\u003e\u003cstrong\u003eMaximum Profit\u003c/strong\u003e: The net premium received (₹20 – ₹10 = ₹10) is your maximum profit.\u003c/li\u003e\u003cli\u003e\u003cstrong\u003eMaximum Loss\u003c/strong\u003e: The difference between the strike prices minus the net premium received (₹880 – ₹860 – ₹10 = ₹10) is your maximum loss.\u003c/li\u003e\u003c/ul\u003e\u003ch3\u003e\u003cstrong\u003eB. Bear Put Spread\u003c/strong\u003e\u003c/h3\u003e\u003cp\u003e\u003cimg loading=\u0022lazy\u0022 decoding=\u0022async\u0022 class=\u0022aligncenter wp-image-66183 size-full\u0022 src=\u0022https://www.5paisa.com/hindi/finschool/wp-content/uploads/2025/01/Bear-Put-Spread-.png\u0022 alt=\u0022Bear Put Spread \u0022 width=\u0022927\u0022 height=\u0022596\u0022 srcset=\u0022https://www.5paisa.com/hindi/finschool/wp-content/uploads/2025/01/Bear-Put-Spread-.png 927w, https:/www.5paisa.com/finschool/wp-content/uploads/2025/01/Bear-Put-Spread--300x193.png 300w, https:/www.5paisa.com/finschool/wp-content/uploads/2025/01/Bear-Put-Spread--768x494.png 768w, https:/www.5paisa.com/finschool/wp-content/uploads/2025/01/Bear-Put-Spread--50x32.png 50w, https:/www.5paisa.com/finschool/wp-content/uploads/2025/01/Bear-Put-Spread--100x64.png 100w, https:/www.5paisa.com/finschool/wp-content/uploads/2025/01/Bear-Put-Spread--150x96.png 150w\u0022 sizes=\u0022(max-width: 927px) 100vw, 927px\u0022 /\u003e\u003c/p\u003e\u003cp\u003e\u003cstrong\u003eHere\u0026#8217;s the payoff diagram for the bear put spread strategy involving Tata Motors:\u003c/strong\u003e\u003c/p\u003e\u003cul\u003e\u003cli\u003eThe blue dashed line represents the payoff for buying a put option with a strike price of ₹460.\u003c/li\u003e\u003cli\u003eThe orange dashed line shows the payoff for selling a put option with a strike price of ₹430.\u003c/li\u003e\u003cli\u003eThe green solid line indicates the net payoff for the strategy.\u003c/li\u003e\u003c/ul\u003e\u003cp\u003e\u003cstrong\u003eKey points on the chart:\u003c/strong\u003e\u003c/p\u003e\u003col\u003e\u003cli\u003eMaximum Profit of ₹20 is achieved when the stock price is at or below ₹430.\u003c/li\u003e\u003cli\u003eMaximum Loss of ₹10 occurs when the stock price is at or above ₹460.\u003c/li\u003e\u003cli\u003eThe breakeven point is ₹450, where the strategy neither makes a profit nor incurs a loss\u003c/li\u003e\u003c/ol\u003e\u003cp\u003e\u003cstrong\u003eExample\u003c/strong\u003e\u003c/p\u003e\u003cp\u003eLet’s say you believe the price of Tata Motors, currently at ₹450, will decline:\u003c/p\u003e\u003cul\u003e\u003cli\u003e\u003cstrong\u003eBuy a Put Option\u003c/strong\u003e: Buy a put option with a strike price of ₹460 for a premium of ₹15.\u003c/li\u003e\u003cli\u003e\u003cstrong\u003eSell a Put Option\u003c/strong\u003e: Sell a put option with a strike price of ₹430 for a premium of ₹5.\u003c/li\u003e\u003c/ul\u003e\u003cp\u003e\u003cstrong\u003eProfit and Loss\u003c/strong\u003e\u003c/p\u003e\u003cul\u003e\u003cli\u003e\u003cstrong\u003eMaximum Profit\u003c/strong\u003e: The maximum profit is achieved if the stock price falls to or below the lower strike price (₹430). The profit is calculated as the difference between the strike prices minus the net premium paid (₹460 – ₹430 – ₹10 = ₹20).\u003c/li\u003e\u003cli\u003e\u003cstrong\u003eMaximum Loss\u003c/strong\u003e: The maximum loss occurs if the stock price remains at or above the higher strike price (₹460). The loss is limited to the net premium paid (₹15 – ₹5 = ₹10).\u003c/li\u003e\u003c/ul\u003e\u003ch3\u003e\u003cstrong\u003eC. Bear Iron Condor\u003c/strong\u003e\u003c/h3\u003e\u003cp\u003e\u003cimg loading=\u0022lazy\u0022 decoding=\u0022async\u0022 class=\u0022aligncenter wp-image-70104 size-full\u0022 src=\u0022https://www.5paisa.com/hindi/finschool/wp-content/uploads/2025/01/Bear-Iron-Condor-Payoff-Diagram.png\u0022 alt=\u0022Bear Iron Condor Payoff Diagram\u0022 width=\u00221145\u0022 height=\u0022734\u0022 srcset=\u0022https://www.5paisa.com/hindi/finschool/wp-content/uploads/2025/01/Bear-Iron-Condor-Payoff-Diagram.png 1145w, https:/www.5paisa.com/finschool/wp-content/uploads/2025/01/Bear-Iron-Condor-Payoff-Diagram-300x192.png 300w, https:/www.5paisa.com/finschool/wp-content/uploads/2025/01/Bear-Iron-Condor-Payoff-Diagram-1024x656.png 1024w, https:/www.5paisa.com/finschool/wp-content/uploads/2025/01/Bear-Iron-Condor-Payoff-Diagram-768x492.png 768w, https:/www.5paisa.com/finschool/wp-content/uploads/2025/01/Bear-Iron-Condor-Payoff-Diagram-50x32.png 50w, https:/www.5paisa.com/finschool/wp-content/uploads/2025/01/Bear-Iron-Condor-Payoff-Diagram-100x64.png 100w, https:/www.5paisa.com/finschool/wp-content/uploads/2025/01/Bear-Iron-Condor-Payoff-Diagram-150x96.png 150w\u0022 sizes=\u0022(max-width: 1145px) 100vw, 1145px\u0022 /\u003e\u003c/p\u003e\u003cp\u003eHere\u0026#8217;s the payoff chart for your Bear Iron Condor strategy on Reliance Industries.\u003c/p\u003e\u003cp\u003eKey Observations:\u003c/p\u003e\u003col\u003e\u003cli\u003eMaximum Profit: ₹20, achieved when the stock price is between ₹830 and ₹860 at expiry.\u003c/li\u003e\u003cli\u003eMaximum Loss: ₹20, incurred when the stock price is below ₹810 or above ₹880 at expiry.\u003c/li\u003e\u003cli\u003eBreakeven Range: ₹810 to ₹880. Within this range, the strategy remains profitable.\u003c/li\u003e\u003c/ol\u003e\u003cp\u003e\u003cstrong\u003e\u003c/strong\u003e\u003cstrong\u003eExample\u003c/strong\u003e\u003c/p\u003e\u003cp\u003eLet\u0026#8217;s say you believe the price of Reliance Industries, currently at ₹850, will moderately decline and you decide to implement a Bear Iron Condor:\u003c/p\u003e\u003cp\u003e\u003cstrong\u003eSell a Call Spread:\u003c/strong\u003e\u003c/p\u003e\u003cul\u003e\u003cli\u003eSell a Call Option: Strike price ₹860, premium ₹20.\u003c/li\u003e\u003cli\u003eBuy a Call Option: Strike price ₹880, premium ₹10.\u003c/li\u003e\u003c/ul\u003e\u003cp\u003e\u003cstrong\u003eSell a Put Spread:\u003c/strong\u003e\u003c/p\u003e\u003cul\u003e\u003cli\u003eSell a Put Option: Strike price ₹830, premium ₹15.\u003c/li\u003e\u003cli\u003eBuy a Put Option: Strike price ₹810, premium ₹5.\u003c/li\u003e\u003c/ul\u003e\u003cp\u003e\u003cstrong\u003eProfit and Loss\u003c/strong\u003e\u003c/p\u003e\u003cul\u003e\u003cli\u003eMaximum Profit: Achieved if the asset\u0026#8217;s price is between the middle strike prices (₹830 and ₹860). The profit is the net premium received (₹20 + ₹15 \u0026#8211; ₹10 \u0026#8211; ₹5 = ₹20).\u003c/li\u003e\u003cli\u003eMaximum Loss: Occurs if the asset\u0026#8217;s price moves significantly away from the middle strike prices. The loss is the difference between the adjacent strike prices minus the net premium received (₹20 in this example).\u003c/li\u003e\u003c/ul\u003e\u003cp\u003e\u003cstrong\u003eBreakeven Points\u003c/strong\u003e\u003c/p\u003e\u003cul\u003e\u003cli\u003eThe lower breakeven point is the lower sold put strike price minus the net premium received.\u003c/li\u003e\u003cli\u003eThe upper breakeven point is the higher sold call strike price plus the net premium received.\u003c/li\u003e\u003c/ul\u003e\u003ch3\u003e\u003cstrong\u003eD. Bear Butterfly Spread\u003c/strong\u003e\u003c/h3\u003e\u003cp\u003e\u003cimg loading=\u0022lazy\u0022 decoding=\u0022async\u0022 class=\u0022wp-image-66185 size-full aligncenter\u0022 src=\u0022https://www.5paisa.com/hindi/finschool/wp-content/uploads/2025/01/Bear-Butterfly-Spread.png\u0022 alt=\u0022Bear Butterfly Spread \u0022 width=\u00221342\u0022 height=\u0022893\u0022 srcset=\u0022https://www.5paisa.com/hindi/finschool/wp-content/uploads/2025/01/Bear-Butterfly-Spread.png 1342w, https:/www.5paisa.com/finschool/wp-content/uploads/2025/01/Bear-Butterfly-Spread-300x200.png 300w, https:/www.5paisa.com/finschool/wp-content/uploads/2025/01/Bear-Butterfly-Spread-1024x681.png 1024w, https:/www.5paisa.com/finschool/wp-content/uploads/2025/01/Bear-Butterfly-Spread-768x511.png 768w, https:/www.5paisa.com/finschool/wp-content/uploads/2025/01/Bear-Butterfly-Spread-50x33.png 50w, https:/www.5paisa.com/finschool/wp-content/uploads/2025/01/Bear-Butterfly-Spread-100x67.png 100w, https:/www.5paisa.com/finschool/wp-content/uploads/2025/01/Bear-Butterfly-Spread-150x100.png 150w\u0022 sizes=\u0022(max-width: 1342px) 100vw, 1342px\u0022 /\u003e\u003c/p\u003e\u003cp\u003e\u003cstrong\u003e\u003c/strong\u003eHere is the payoff diagram for the option strategy you described. It visualizes the profit and loss at different stock prices at expiration:\u003c/p\u003e\u003cul\u003e\u003cli\u003e\u003cstrong\u003eStrike Price ₹860 (Sell Put):\u003c/strong\u003e The red dashed line marks the strike price for the sold puts. The position of the price relative to this strike affects the loss from the sold puts.\u003c/li\u003e\u003cli\u003e\u003cstrong\u003eStrike Price ₹830 (Buy Put):\u003c/strong\u003e The green dashed line marks the strike price for the bought put. The profit from the bought put increases as the stock price declines below ₹830.\u003c/li\u003e\u003cli\u003e\u003cstrong\u003eStrike Price ₹800 (Buy Put):\u003c/strong\u003e The orange dashed line marks the strike price for the second bought puts, providing additional profit as the stock price falls further below ₹800.\u003c/li\u003e\u003c/ul\u003e\u003cp\u003e\u003cstrong\u003e\u003c/strong\u003e\u003cstrong\u003eExample\u003c/strong\u003e\u003c/p\u003e\u003cp\u003eLet\u0026#8217;s say you believe the price of Reliance Industries, currently at ₹850, will moderately decline:\u003c/p\u003e\u003cul\u003e\u003cli\u003e\u003cstrong\u003eSell Two Put Options\u003c/strong\u003e: Sell put options with a strike price of ₹860 for a premium of ₹20 each.\u003c/li\u003e\u003cli\u003e\u003cstrong\u003eBuy One Put Option\u003c/strong\u003e: Buy a put option with a strike price of ₹830 for a premium of ₹15.\u003c/li\u003e\u003cli\u003e\u003cstrong\u003eBuy Two Put Options\u003c/strong\u003e: Buy put options with a strike price of ₹800 for a premium of ₹10 each.\u003c/li\u003e\u003c/ul\u003e\u003cp\u003e\u003cstrong\u003eProfit and Loss\u003c/strong\u003e\u003c/p\u003e\u003cul\u003e\u003cli\u003e\u003cstrong\u003eMaximum Profit\u003c/strong\u003e: Achieved if the asset’s price falls to the lower strike price (₹800). The profit is calculated as the difference between the strike prices minus the net premium paid (₹860 – ₹800 – ₹25 = ₹35).\u003c/li\u003e\u003cli\u003e\u003cstrong\u003eMaximum Loss\u003c/strong\u003e: Occurs if the asset’s price remains at or above the higher strike price (₹860). The loss is limited to the net premium paid (₹20 + ₹20 – ₹15 – ₹10 – ₹10 = ₹25).\u003c/li\u003e\u003c/ul\u003e\u003c/div\u003e\u003cdiv id=\u0027text_slider_slide03\u0027 class=\u0027sa_hover_container\u0027 data-hash=\u0027Neutral-Strategies\u0027 style=\u0027padding:4.9% 5%; margin:0px 0%; background-color:rgb(255, 255, 255); min-height:400px; \u0027\u003e\u003ch2\u003e\u003cstrong\u003e9.3. Neutral Strategies Examples\u003c/strong\u003e\u003c/h2\u003e\u003cp\u003e\u003cimg loading=\u0022lazy\u0022 decoding=\u0022async\u0022 class=\u0022aligncenter wp-image-66192 size-full\u0022 src=\u0022https://www.5paisa.com/hindi/finschool/wp-content/uploads/2025/01/New-course-9-1.png\u0022 alt=\u0022Neutral Strategies example\u0022 width=\u0022934\u0022 height=\u0022652\u0022 srcset=\u0022https://www.5paisa.com/hindi/finschool/wp-content/uploads/2025/01/New-course-9-1.png 934w, https:/www.5paisa.com/finschool/wp-content/uploads/2025/01/New-course-9-1-300x209.png 300w, https:/www.5paisa.com/finschool/wp-content/uploads/2025/01/New-course-9-1-768x536.png 768w, https:/www.5paisa.com/finschool/wp-content/uploads/2025/01/New-course-9-1-50x35.png 50w, https:/www.5paisa.com/finschool/wp-content/uploads/2025/01/New-course-9-1-100x70.png 100w, https:/www.5paisa.com/finschool/wp-content/uploads/2025/01/New-course-9-1-150x105.png 150w\u0022 sizes=\u0022(max-width: 934px) 100vw, 934px\u0022 /\u003e\u003c/p\u003e\u003ch3\u003e\u003cstrong\u003eA. Calendar Call\u003c/strong\u003e\u003c/h3\u003e\u003cp\u003e\u003cimg loading=\u0022lazy\u0022 decoding=\u0022async\u0022 class=\u0022aligncenter wp-image-66186 size-full\u0022 src=\u0022https://www.5paisa.com/hindi/finschool/wp-content/uploads/2025/01/Calendar-Call.png\u0022 alt=\u0022Calendar Call\u0022 width=\u0022527\u0022 height=\u0022413\u0022 srcset=\u0022https://www.5paisa.com/hindi/finschool/wp-content/uploads/2025/01/Calendar-Call.png 527w, https:/www.5paisa.com/finschool/wp-content/uploads/2025/01/Calendar-Call-300x235.png 300w, https:/www.5paisa.com/finschool/wp-content/uploads/2025/01/Calendar-Call-50x39.png 50w, https:/www.5paisa.com/finschool/wp-content/uploads/2025/01/Calendar-Call-100x78.png 100w, https:/www.5paisa.com/finschool/wp-content/uploads/2025/01/Calendar-Call-150x118.png 150w\u0022 sizes=\u0022(max-width: 527px) 100vw, 527px\u0022 /\u003e\u003c/p\u003e\u003cp\u003eHere is the profit and loss diagram for the Calendar Call option strategy based on the example you provided. The chart illustrates the profit/loss based on the stock price at expiration:\u003c/p\u003e\u003cul\u003e\u003cli\u003eMaximum Profit occurs when the stock price remains at or below the strike price (₹860), where the net premium received (₹10) is the profit.\u003c/li\u003e\u003cli\u003eMaximum Loss is experienced if the stock price rises significantly above ₹860, and the loss is limited to the net premium paid for the longer-term call (₹10).\u003c/li\u003e\u003c/ul\u003e\u003cp\u003e\u003cstrong\u003eThe red dashed line at ₹860 represents the strike price for both options. \u003c/strong\u003e\u003cstrong\u003e​\u003c/strong\u003e\u003c/p\u003e\u003cp style=\u0022padding-left: 40px\u0022\u003e\u003cstrong\u003eExample\u003c/strong\u003e\u003c/p\u003e\u003cp style=\u0022padding-left: 40px\u0022\u003eLet\u0026#8217;s say you believe the price of Reliance Industries, currently at ₹850, will remain stable in the near term but might rise in the longer term:\u003c/p\u003e\u003cul\u003e\u003cli\u003e\u003cstrong\u003eSell a Near-Term Call Option\u003c/strong\u003e: Sell a call option with a strike price of ₹860 and an expiration date one month from now for a premium of ₹20.\u003c/li\u003e\u003cli\u003e\u003cstrong\u003eBuy a Longer-Term Call Option\u003c/strong\u003e: Buy a call option with the same strike price of ₹860 but with an expiration date three months from now for a premium of ₹10.\u003c/li\u003e\u003c/ul\u003e\u003cp style=\u0022padding-left: 40px\u0022\u003e\u003cstrong\u003eProfit and Loss\u003c/strong\u003e\u003c/p\u003e\u003cul\u003e\u003cli\u003e\u003cstrong\u003eMaximum Profit\u003c/strong\u003e: The maximum profit is achieved if the stock price remains at or below the strike price (₹860) at the expiration of the near-term call option. The profit is the net premium received (₹20 – ₹10 = ₹10).\u003c/li\u003e\u003cli\u003e\u003cstrong\u003eMaximum Loss\u003c/strong\u003e: The maximum loss occurs if the stock price rises significantly above the strike price before the expiration of the near-term call option. The loss is the net premium paid (₹10).\u003c/li\u003e\u003c/ul\u003e\u003ch3\u003e\u003c/h3\u003e\u003ch3\u003e\u003cstrong\u003eB Callendar Put\u003c/strong\u003e\u003c/h3\u003e\u003cp\u003e\u003cimg loading=\u0022lazy\u0022 decoding=\u0022async\u0022 class=\u0022aligncenter wp-image-66187 size-full\u0022 src=\u0022https://www.5paisa.com/hindi/finschool/wp-content/uploads/2025/01/Calendar-Put.png\u0022 alt=\u0022Calendar Put\u0022 width=\u00221454\u0022 height=\u0022934\u0022 srcset=\u0022https://www.5paisa.com/hindi/finschool/wp-content/uploads/2025/01/Calendar-Put.png 1454w, https:/www.5paisa.com/finschool/wp-content/uploads/2025/01/Calendar-Put-300x193.png 300w, https:/www.5paisa.com/finschool/wp-content/uploads/2025/01/Calendar-Put-1024x658.png 1024w, https:/www.5paisa.com/finschool/wp-content/uploads/2025/01/Calendar-Put-768x493.png 768w, https:/www.5paisa.com/finschool/wp-content/uploads/2025/01/Calendar-Put-50x32.png 50w, https:/www.5paisa.com/finschool/wp-content/uploads/2025/01/Calendar-Put-100x64.png 100w, https:/www.5paisa.com/finschool/wp-content/uploads/2025/01/Calendar-Put-150x96.png 150w\u0022 sizes=\u0022(max-width: 1454px) 100vw, 1454px\u0022 /\u003e\u003c/p\u003e\u003cp\u003eThe payoff diagram above illustrates the following:\u003c/p\u003e\u003cp\u003eNear-Term Put Option Payoff (Orange Dashed Line): This option generates a profit if the stock price falls below ₹840 before its expiration. However, as it expires, its maximum loss is the premium received (-₹10).\u003c/p\u003e\u003cp\u003eLong-Term Put Option Payoff (Blue Dashed Line): This option gains value if the stock price drops significantly below ₹840 over the longer term. Its cost is the premium paid (-₹20).\u003c/p\u003e\u003cp\u003eNet Payoff (Green Line):\u003c/p\u003e\u003cul\u003e\u003cli\u003eRepresents the combined effect of selling the near-term put and buying the longer-term put.\u003c/li\u003e\u003cli\u003eIf the stock price stays above ₹840, the near-term put expires worthless, and the strategy incurs a net cost of ₹10 (the premium difference).\u003c/li\u003e\u003cli\u003eIf the stock price falls significantly, the longer-term put\u0026#8217;s profit outweighs the loss on the near-term put, limiting the downside.\u003c/li\u003e\u003c/ul\u003e\u003cp\u003e\u003cstrong\u003e\u003c/strong\u003e\u003cstrong\u003eExample\u003c/strong\u003e\u003c/p\u003e\u003cp\u003eImagine you believe the price of Reliance Industries, currently at ₹850, will remain stable in the near term but might decline in the longer term:\u003c/p\u003e\u003cul\u003e\u003cli\u003e\u003cstrong\u003eSell a Near-Term Put Option\u003c/strong\u003e: Sell a put option with a strike price of ₹840 and an expiration date one month from now for a premium of ₹10.\u003c/li\u003e\u003cli\u003e\u003cstrong\u003eBuy a Longer-Term Put Option\u003c/strong\u003e: Buy a put option with the same strike price of ₹840 but with an expiration date three months from now for a premium of ₹20.\u003c/li\u003e\u003c/ul\u003e\u003cp\u003e\u003cstrong\u003eProfit and Loss\u003c/strong\u003e\u003c/p\u003e\u003cul\u003e\u003cli\u003e\u003cstrong\u003eMaximum Profit\u003c/strong\u003e: The maximum profit is achieved if the stock price remains at or above the strike price (₹840) at the expiration of the near-term put option. The profit is the net premium received (₹10 – ₹20 = -₹10, which means you initially paid a net premium of ₹10, but as the near-term put expires worthless, you can sell the longer-term put).\u003c/li\u003e\u003cli\u003e\u003cstrong\u003eMaximum Loss\u003c/strong\u003e: The maximum loss occurs if the stock price declines significantly below the strike price before the expiration of the longer-term put option. The loss is limited to the net premium paid (₹20 – ₹10 = ₹10).\u003c/li\u003e\u003c/ul\u003e\u003ch3\u003e\u003cstrong\u003eC. Short Straddle\u003c/strong\u003e\u003c/h3\u003e\u003cp\u003e\u003cimg loading=\u0022lazy\u0022 decoding=\u0022async\u0022 class=\u0022aligncenter wp-image-66188 size-full\u0022 src=\u0022https://www.5paisa.com/hindi/finschool/wp-content/uploads/2025/01/Short-Straddle-Neutral.png\u0022 alt=\u0022Short Straddle\u0022 width=\u00221454\u0022 height=\u0022934\u0022 srcset=\u0022https://www.5paisa.com/hindi/finschool/wp-content/uploads/2025/01/Short-Straddle-Neutral.png 1454w, https:/www.5paisa.com/finschool/wp-content/uploads/2025/01/Short-Straddle-Neutral-300x193.png 300w, https:/www.5paisa.com/finschool/wp-content/uploads/2025/01/Short-Straddle-Neutral-1024x658.png 1024w, https:/www.5paisa.com/finschool/wp-content/uploads/2025/01/Short-Straddle-Neutral-768x493.png 768w, https:/www.5paisa.com/finschool/wp-content/uploads/2025/01/Short-Straddle-Neutral-50x32.png 50w, https:/www.5paisa.com/finschool/wp-content/uploads/2025/01/Short-Straddle-Neutral-100x64.png 100w, https:/www.5paisa.com/finschool/wp-content/uploads/2025/01/Short-Straddle-Neutral-150x96.png 150w\u0022 sizes=\u0022(max-width: 1454px) 100vw, 1454px\u0022 /\u003e\u003c/p\u003e\u003cp\u003eThe payoff diagram above illustrates the short straddle strategy:\u003c/p\u003e\u003col\u003e\u003cli\u003eCall Option Payoff (Orange Dashed Line): This represents the payoff for selling the call option. The loss increases as the stock price rises above ₹850, while the maximum profit is limited to the premium received (₹30).\u003c/li\u003e\u003cli\u003ePut Option Payoff (Blue Dashed Line): This represents the payoff for selling the put option. The loss increases as the stock price falls below ₹850, with the maximum profit also limited to the premium received (₹30).\u003c/li\u003e\u003cli\u003eNet Payoff (Green Line):\u003c/li\u003e\u003c/ol\u003e\u003cul\u003e\u003cli\u003eThe combined payoff shows the strategy\u0026#8217;s overall performance.\u003c/li\u003e\u003cli\u003eMaximum Profit: ₹60, achieved when the stock price remains at ₹850 at expiration.\u003c/li\u003e\u003cli\u003eBreakeven Points: ₹790 (lower) and ₹910 (upper). The strategy incurs losses if the stock price moves outside this range.\u003c/li\u003e\u003cli\u003eMaximum Loss: Theoretically unlimited, as the stock price moves significantly away from ₹850 in either direction.\u003c/li\u003e\u003c/ul\u003e\u003cp\u003e\u003cstrong\u003e\u003c/strong\u003e\u003cstrong\u003eExample\u003c/strong\u003e\u003c/p\u003e\u003cp\u003eSuppose you believe the price of Reliance Industries, currently at ₹850, will remain relatively stable:\u003c/p\u003e\u003cul\u003e\u003cli\u003e\u003cstrong\u003eSell a Call Option\u003c/strong\u003e: Strike price ₹850, premium ₹30.\u003c/li\u003e\u003cli\u003e\u003cstrong\u003eSell a Put Option\u003c/strong\u003e: Strike price ₹850, premium ₹30.\u003c/li\u003e\u003c/ul\u003e\u003cp\u003e\u003cstrong\u003eProfit and Loss\u003c/strong\u003e\u003c/p\u003e\u003cul\u003e\u003cli\u003e\u003cstrong\u003eMaximum Profit\u003c/strong\u003e: The maximum profit is achieved if the stock price remains exactly at the strike price (₹850) at expiration. The profit is the total premium received (₹30 + ₹30 = ₹60).\u003c/li\u003e\u003cli\u003e\u003cstrong\u003eMaximum Loss\u003c/strong\u003e: The maximum loss is theoretically unlimited if the stock price moves significantly in either direction. The loss increases as the stock price moves further away from the strike price.\u003c/li\u003e\u003c/ul\u003e\u003cp\u003e\u003cstrong\u003eBreakeven Points\u003c/strong\u003e\u003c/p\u003e\u003cul\u003e\u003cli\u003eThe lower breakeven point is the strike price minus the total premium received (₹850 \u0026#8211; ₹60 = ₹790).\u003c/li\u003e\u003cli\u003eThe upper breakeven point is the strike price plus the total premium received (₹850 + ₹60 = ₹910).\u003c/li\u003e\u003c/ul\u003e\u003ch3\u003e\u003cstrong\u003eD. Short Strangle\u003c/strong\u003e\u003c/h3\u003e\u003cp\u003e\u003cimg loading=\u0022lazy\u0022 decoding=\u0022async\u0022 class=\u0022aligncenter wp-image-66189 size-full\u0022 src=\u0022https://www.5paisa.com/hindi/finschool/wp-content/uploads/2025/01/Short-Strangle-neutral.png\u0022 alt=\u0022Short Strangle\u0022 width=\u00221454\u0022 height=\u0022934\u0022 srcset=\u0022https://www.5paisa.com/hindi/finschool/wp-content/uploads/2025/01/Short-Strangle-neutral.png 1454w, https:/www.5paisa.com/finschool/wp-content/uploads/2025/01/Short-Strangle-neutral-300x193.png 300w, https:/www.5paisa.com/finschool/wp-content/uploads/2025/01/Short-Strangle-neutral-1024x658.png 1024w, https:/www.5paisa.com/finschool/wp-content/uploads/2025/01/Short-Strangle-neutral-768x493.png 768w, https:/www.5paisa.com/finschool/wp-content/uploads/2025/01/Short-Strangle-neutral-50x32.png 50w, https:/www.5paisa.com/finschool/wp-content/uploads/2025/01/Short-Strangle-neutral-100x64.png 100w, https:/www.5paisa.com/finschool/wp-content/uploads/2025/01/Short-Strangle-neutral-150x96.png 150w\u0022 sizes=\u0022(max-width: 1454px) 100vw, 1454px\u0022 /\u003e\u003c/p\u003e\u003cp\u003eThe payoff diagram above illustrates the short strangle strategy:\u003c/p\u003e\u003col\u003e\u003cli\u003ePut Option Payoff (Blue Dashed Line): This represents the payoff for selling the put option with a strike price of ₹820. The loss increases if the stock price falls below ₹820, while the maximum profit is capped at the premium received (₹20).\u003c/li\u003e\u003c/ol\u003e\u003col start=\u00222\u0022\u003e\u003cli\u003eCall Option Payoff (Orange Dashed Line): This represents the payoff for selling the call option with a strike price of ₹880. The loss increases if the stock price rises above ₹880, with the maximum profit capped at the premium received (₹20).\u003c/li\u003e\u003c/ol\u003e\u003col start=\u00223\u0022\u003e\u003cli\u003eNet Payoff (Green Line): The combined payoff shows the overall performance of the strategy.\u003c/li\u003e\u003c/ol\u003e\u003cul\u003e\u003cli\u003e\u003cstrong\u003eMaximum Profit:\u003c/strong\u003e ₹40, achieved if the stock price remains between ₹820 and ₹880 at expiration.\u003c/li\u003e\u003cli\u003e\u003cstrong\u003eBreakeven Points:\u003c/strong\u003e ₹780 (lower) and ₹920 (upper). Losses occur if the stock price moves outside this range.\u003c/li\u003e\u003cli\u003e\u003cstrong\u003eMaximum Loss:\u003c/strong\u003e Theoretically unlimited, as the stock price moves significantly away from ₹820 or ₹880.\u003c/li\u003e\u003c/ul\u003e\u003cp\u003e\u003cstrong\u003e\u003c/strong\u003e\u003cstrong\u003eExample\u003c/strong\u003e\u003c/p\u003e\u003cp\u003eSuppose you believe the price of Reliance Industries, currently at ₹850, will remain relatively stable:\u003c/p\u003e\u003cul\u003e\u003cli\u003e\u003cstrong\u003eSell an Out-of-the-Money Call Option\u003c/strong\u003e: Strike price ₹880, premium ₹20.\u003c/li\u003e\u003cli\u003e\u003cstrong\u003eSell an Out-of-the-Money Put Option\u003c/strong\u003e: Strike price ₹820, premium ₹20.\u003c/li\u003e\u003c/ul\u003e\u003cp\u003e\u003cstrong\u003eProfit and Loss\u003c/strong\u003e\u003c/p\u003e\u003cul\u003e\u003cli\u003e\u003cstrong\u003eMaximum Profit\u003c/strong\u003e: The maximum profit is achieved if the stock price remains between the strike prices (₹820 and ₹880) at expiration. The profit is the total premium received (₹20 + ₹20 = ₹40).\u003c/li\u003e\u003cli\u003e\u003cstrong\u003eMaximum Loss\u003c/strong\u003e: The maximum loss is theoretically unlimited if the stock price moves significantly in either direction beyond the strike prices. The loss increases as the stock price moves further away from the strike prices.\u003c/li\u003e\u003c/ul\u003e\u003cp\u003e\u003cstrong\u003eBreakeven Points \u003c/strong\u003e\u003c/p\u003e\u003cul\u003e\u003cli\u003eThe lower breakeven point is the put strike price minus the total premium received (₹820 \u0026#8211; ₹40 = ₹780).\u003c/li\u003e\u003cli\u003eThe upper breakeven point is the call strike price plus the total premium received (₹880 + ₹40 = ₹\u003c/li\u003e\u003c/ul\u003e\u003c/div\u003e\u003c/div\u003e\u003c/div\u003e\u003cscript type=\u0027text/javascript\u0027\u003ejQuery(document).ready(function()  {jQuery(\u0027#text_slider\u0027).owlCarousel({items  :  1,smartSpeed  :  400,autoplay  :  false,autoplayHoverPause  :  false,smartSpeed  :  400,fluidSpeed  :  400,autoplaySpeed  :  400,navSpeed  :  400,dotsSpeed  :  400,dotsEach  :  1,loop  :  false,nav  :  true,navText  :  [\u0027Previous\u0027,\u0027Next\u0027],dots  :  true,responsiveRefreshRate  :  200,slideBy  :  1,mergeFit  :  true,autoHeight  :  true,mouseDrag  :  false,touchDrag  :  true});jQuery(\u0027#text_slider\u0027).css(\u0027visibility\u0027, \u0027visible\u0027);var  owl_goto  =  jQuery(\u0027#text_slider\u0027);jQuery(\u0027.text_slider_goto1\u0027).click(function(event){owl_goto.trigger(\u0027to.owl.carousel\u0027,  0);});jQuery(\u0027.text_slider_goto2\u0027).click(function(event){owl_goto.trigger(\u0027to.owl.carousel\u0027,  1);});jQuery(\u0027.text_slider_goto3\u0027).click(function(event){owl_goto.trigger(\u0027to.owl.carousel\u0027,  2);});var  resize_66173  =  jQuery(\u0027.owl-carousel\u0027);resize_66173.on(\u0027initialized.owl.carousel\u0027,  function(e)  {if  (typeof(Event)  === \u0027function\u0027)  {window.dispatchEvent(new  Event(\u0027resize\u0027));}  else  {var  evt  =  window.document.createEvent(\u0027UIEvents\u0027);evt.initUIEvent(\u0027resize\u0027,  true,  false,  window,  0);window.dispatchEvent(evt);}});});\u003c/script\u003e\u003c/p\u003e\u003c/div\u003e\u003cdiv id=\u0022slides-tab\u0022 class=\u0022clearfix eael-tab-content-item \u0022 data-title-link=\u0022slides-tab\u0022\u003e\u003cp\u003e\u003cdiv class=\u0027white\u0027 style=\u0027background:rgb(255, 255, 255); border:solid 0px rgb(255, 255, 255); border-radius:0px; padding:0px 0px 0px 1px;\u0027\u003e\u003cdiv id=\u0027text_slider\u0027 class=\u0027owl-carousel sa_owl_theme owl-pagination-true\u0027 data-slider-id=\u0027text_slider\u0027 style=\u0027visibility: visible;visibility:visible;\u0027\u003e\u003cdiv id=\u0027text_slider_slide01\u0027 class=\u0027sa_hover_container\u0027 data-hash=\u0027Bullish-Strategies\u0027 style=\u0027padding:4.9% 5%; margin:0px 0%; background-color:rgb(255, 255, 255); min-height:400px; \u0027\u003e\u003ch2\u003e\u003c/h2\u003e\u003ch2\u003e\u003cstrong\u003e9.1 Bullish Strategies Example\u003c/strong\u003e\u003c/h2\u003e\u003cp\u003e\u003cimg fetchpriority=\u0022high\u0022 decoding=\u0022async\u0022 class=\u0022aligncenter wp-image-66190 size-full\u0022 src=\u0022https://www.5paisa.com/hindi/finschool/wp-content/uploads/2025/01/New-course-7-3.png\u0022 alt=\u0022Bullish Strategies examples\u0022 width=\u0022817\u0022 height=\u0022752\u0022 srcset=\u0022https://www.5paisa.com/hindi/finschool/wp-content/uploads/2025/01/New-course-7-3.png 817w, https:/www.5paisa.com/finschool/wp-content/uploads/2025/01/New-course-7-3-300x276.png 300w, https:/www.5paisa.com/finschool/wp-content/uploads/2025/01/New-course-7-3-768x707.png 768w, https:/www.5paisa.com/finschool/wp-content/uploads/2025/01/New-course-7-3-50x46.png 50w, https:/www.5paisa.com/finschool/wp-content/uploads/2025/01/New-course-7-3-100x92.png 100w, https:/www.5paisa.com/finschool/wp-content/uploads/2025/01/New-course-7-3-150x138.png 150w\u0022 sizes=\u0022(max-width: 817px) 100vw, 817px\u0022 /\u003e\u003c/p\u003e\u003ch3\u003e\u003cstrong\u003eA. Long Call\u003c/strong\u003e\u003c/h3\u003e\u003cp\u003e\u003cimg decoding=\u0022async\u0022 class=\u0022aligncenter wp-image-66174 size-full\u0022 src=\u0022https://www.5paisa.com/hindi/finschool/wp-content/uploads/2025/01/Bullish-strategies-Long-call.png\u0022 alt=\u0022Bullish Long Call strategy\u0022 width=\u00221125\u0022 height=\u0022671\u0022 srcset=\u0022https://www.5paisa.com/hindi/finschool/wp-content/uploads/2025/01/Bullish-strategies-Long-call.png 1125w, https:/www.5paisa.com/finschool/wp-content/uploads/2025/01/Bullish-strategies-Long-call-300x179.png 300w, https:/www.5paisa.com/finschool/wp-content/uploads/2025/01/Bullish-strategies-Long-call-1024x611.png 1024w, https:/www.5paisa.com/finschool/wp-content/uploads/2025/01/Bullish-strategies-Long-call-768x458.png 768w, https:/www.5paisa.com/finschool/wp-content/uploads/2025/01/Bullish-strategies-Long-call-50x30.png 50w, https:/www.5paisa.com/finschool/wp-content/uploads/2025/01/Bullish-strategies-Long-call-100x60.png 100w, https:/www.5paisa.com/finschool/wp-content/uploads/2025/01/Bullish-strategies-Long-call-150x89.png 150w\u0022 sizes=\u0022(max-width: 1125px) 100vw, 1125px\u0022 /\u003e\u003c/p\u003e\u003cp\u003eHere\u0026#8217;s the payoff diagram for the Long Call strategy.\u003c/p\u003e\u003cul\u003e\u003cli\u003eThe red dashed line indicates the breakeven price at ₹110, where profit is zero.\u003c/li\u003e\u003cli\u003eThe green dashed line marks the strike price at ₹105.\u003c/li\u003e\u003cli\u003eThe profit curve illustrates how the total profit increases as the stock price rises above the breakeven point.\u003c/li\u003e\u003c/ul\u003e\u003cp\u003eThe Long Call Strategy is a bullish options trading strategy where an investor buys a call option, expecting the price of the underlying asset to rise significantly above the strike price before the option\u0026#8217;s expiration date.\u003c/p\u003e\u003cp\u003e\u003cstrong\u003eExample:\u003c/strong\u003e\u003c/p\u003e\u003cp\u003e\u003cstrong\u003eScenario:\u003c/strong\u003e\u003c/p\u003e\u003cul\u003e\u003cli\u003eStock: ABC Ltd.\u003c/li\u003e\u003cli\u003eCurrent Stock Price: ₹100\u003c/li\u003e\u003cli\u003eCall Option Strike Price: ₹105\u003c/li\u003e\u003cli\u003eCall Option Premium: ₹5\u003c/li\u003e\u003cli\u003eOption Expiry: 1 month\u003c/li\u003e\u003c/ul\u003e\u003cp\u003e\u003cstrong\u003eAction:\u003c/strong\u003e\u003cbr /\u003eThe trader buys 1 call option for ₹5 (premium) per share. Assuming 100 shares per contract, the total cost is:\u003cbr /\u003ePremium Paid=₹5×100=₹500\u003c/p\u003e\u003cp\u003e\u003cstrong\u003eOutcomes at Expiry:\u003c/strong\u003e\u003c/p\u003e\u003cp\u003e\u003cstrong\u003eIf the stock price stays at ₹105 or below\u003c/strong\u003e\u003cbr /\u003eThe option expires worthless as there’s no advantage in buying the stock at ₹105 (strike price) when it costs ₹105 or less in the market.\u003c/p\u003e\u003cp\u003e\u003cstrong\u003eLoss:\u003c/strong\u003e ₹500 (premium paid)\u003c/p\u003e\u003cp\u003e\u003cstrong\u003eIf the stock price rises above ₹105\u003c/strong\u003e\u003cbr /\u003eThe option gains intrinsic value. For example:\u003c/p\u003e\u003col\u003e\u003cli\u003eIf ABC\u0026#8217;s price is ₹120:\u003cbr /\u003eProfit per share = ₹120 (market price) \u0026#8211; ₹105 (strike price) \u0026#8211; ₹5 (premium) = ₹10\u003cbr /\u003eTotal profit = ₹10 × 100 shares = ₹1,000\u003c/li\u003e\u003cli\u003e\u003cstrong\u003eNet Profit:\u003c/strong\u003e\u003cbr /\u003eProfit = Total profit – Premium paid = ₹1,000 – ₹500 = ₹500\u003c/li\u003e\u003c/ol\u003e\u003cp\u003e\u003cstrong\u003eBreakeven Point:\u003c/strong\u003e\u003c/p\u003e\u003cp\u003eThe breakeven stock price is the strike price + premium paid.\u003c/p\u003e\u003cp\u003eIn this case:\u003cbr /\u003eBreakeven=₹105+₹5=₹110\u003c/p\u003e\u003cp\u003eAt ₹110, there is no profit or loss. Above ₹110, the strategy starts making a profit.\u003c/p\u003e\u003cp\u003e\u003cstrong\u003eKey Insights:\u003c/strong\u003e\u003c/p\u003e\u003cul\u003e\u003cli\u003e\u003cstrong\u003eMaximum Loss:\u003c/strong\u003e Limited to the premium paid (₹500).\u003c/li\u003e\u003cli\u003e\u003cstrong\u003eMaximum Profit:\u003c/strong\u003e Unlimited, depending on how high the stock price rises.\u003c/li\u003e\u003cli\u003e\u003cstrong\u003eIdeal Market View:\u003c/strong\u003e The trader expects a significant rise in the stock price.\u003c/li\u003e\u003c/ul\u003e\u003ch3\u003e\u003c/h3\u003e\u003ch3\u003eB. \u003cstrong\u003eBull Call Spread\u003c/strong\u003e\u003c/h3\u003e\u003cp\u003e\u003cimg decoding=\u0022async\u0022 class=\u0022aligncenter wp-image-66175 size-full\u0022 src=\u0022https://www.5paisa.com/hindi/finschool/wp-content/uploads/2025/01/Bull-call-spread.png\u0022 alt=\u0022Bull call spread\u0022 width=\u00221454\u0022 height=\u0022867\u0022 srcset=\u0022https://www.5paisa.com/hindi/finschool/wp-content/uploads/2025/01/Bull-call-spread.png 1454w, https:/www.5paisa.com/finschool/wp-content/uploads/2025/01/Bull-call-spread-300x179.png 300w, https:/www.5paisa.com/finschool/wp-content/uploads/2025/01/Bull-call-spread-1024x611.png 1024w, https:/www.5paisa.com/finschool/wp-content/uploads/2025/01/Bull-call-spread-768x458.png 768w, https:/www.5paisa.com/finschool/wp-content/uploads/2025/01/Bull-call-spread-50x30.png 50w, https:/www.5paisa.com/finschool/wp-content/uploads/2025/01/Bull-call-spread-100x60.png 100w, https:/www.5paisa.com/finschool/wp-content/uploads/2025/01/Bull-call-spread-150x89.png 150w\u0022 sizes=\u0022(max-width: 1454px) 100vw, 1454px\u0022 /\u003e\u003c/p\u003e\u003cp\u003eThe Bull Call Spread is a bullish options strategy that involves buying a call option at a lower strike price and simultaneously selling a call option at a higher strike price. This strategy reduces the upfront cost compared to a long call but caps the maximum profit.\u003c/p\u003e\u003cp\u003eHere is the payoff diagram for the Bull Call Spread strategy:\u003c/p\u003e\u003cul\u003e\u003cli\u003e\u003cstrong\u003eOrange Line\u003c/strong\u003e: Breakeven price at ₹108, where there is no profit or loss.\u003c/li\u003e\u003cli\u003e\u003cstrong\u003eRed Line\u003c/strong\u003e: Maximum loss of ₹300 occurs if the stock price is ₹105 or below at expiration.\u003c/li\u003e\u003cli\u003e\u003cstrong\u003eGreen Line\u003c/strong\u003e: Maximum profit of ₹700 is achieved if the stock price reaches or exceeds ₹115\u003c/li\u003e\u003c/ul\u003e\u003cp\u003e\u003cstrong\u003eExample:\u003c/strong\u003e\u003c/p\u003e\u003cp\u003e\u003cstrong\u003eScenario:\u003c/strong\u003e\u003c/p\u003e\u003cp\u003e\u003cstrong\u003eStock: ABC Ltd.\u003c/strong\u003e\u003c/p\u003e\u003cul\u003e\u003cli\u003eCurrent Stock Price: ₹100\u003c/li\u003e\u003cli\u003eBuy Call Option Strike Price: ₹105 (Lower Strike)\u003c/li\u003e\u003cli\u003ePremium Paid: ₹5\u003c/li\u003e\u003cli\u003eSell Call Option Strike Price: ₹115 (Higher Strike)\u003c/li\u003e\u003cli\u003ePremium Received: ₹2\u003c/li\u003e\u003cli\u003eNet Premium Paid: ₹5 \u0026#8211; ₹2 = ₹3\u003c/li\u003e\u003c/ul\u003e\u003cp\u003e\u003cstrong\u003eKey Points:\u003c/strong\u003e\u003c/p\u003e\u003cul\u003e\u003cli\u003e\u003cstrong\u003eMax Loss: \u003c/strong\u003eLimited to the net premium paid (₹3 × 100 shares = ₹300).\u003c/li\u003e\u003cli\u003e\u003cstrong\u003eMax Profit: \u003c/strong\u003eLimited to the difference between strike prices minus the net premium paid\u003cstrong\u003e.\u003cbr /\u003eMax Profit= \u003c/strong\u003e(₹115−₹105−₹3) ×100=₹700\u003c/li\u003e\u003cli\u003e\u003cstrong\u003eBreakeven Point:\u003c/strong\u003e Lower strike price + net premium paid.\u003cstrong\u003e\u003cbr /\u003eBreakeven= \u003c/strong\u003e₹105+ ₹3= ₹108\u003c/li\u003e\u003c/ul\u003e\u003cp\u003e\u003cstrong\u003eOutcomes at Expiry:\u003c/strong\u003e\u003c/p\u003e\u003col\u003e\u003cli\u003e\u003cstrong\u003eIf Stock Price ≤ ₹105:\u003c/strong\u003e\u003cbr /\u003eBoth options expire worthless.\u003c/li\u003e\u003c/ol\u003e\u003cp style=\u0022padding-left: 40px\u0022\u003eLoss: ₹3 × 100 = ₹300 (net premium paid).\u003c/p\u003e\u003col start=\u00222\u0022\u003e\u003cli\u003e\u003cstrong\u003eIf Stock Price is between ₹105 and ₹115:\u003c/strong\u003e\u003cbr /\u003eThe lower strike call gains intrinsic value, but the upper strike call offsets some profit.\u003c/li\u003e\u003c/ol\u003e\u003cp style=\u0022padding-left: 40px\u0022\u003e\u003cstrong\u003eExample: Stock Price = ₹110:\u003c/strong\u003e\u003cbr /\u003eProfit = (₹110 – ₹105) – ₹3 = ₹2 per share.\u003cbr /\u003eTotal Profit = ₹2 × 100 = ₹200.\u003c/p\u003e\u003col start=\u00223\u0022\u003e\u003cli\u003e\u003cstrong\u003eIf Stock Price ≥ ₹115:\u003c/strong\u003e\u003cbr /\u003eThe lower strike call gains maximum value, but the upper strike call caps the profit.\u003c/li\u003e\u003c/ol\u003e\u003cp style=\u0022padding-left: 40px\u0022\u003eProfit: ₹700.\u003c/p\u003e\u003cp\u003e\u003cstrong\u003eBreakeven Calculation:\u003c/strong\u003e\u003c/p\u003e\u003cp\u003eThe breakeven stock price is the lower strike price + net premium paid:\u003cstrong\u003e\u003cbr /\u003eBreakeven=₹105+₹3=₹108\u003c/strong\u003e\u003c/p\u003e\u003cp\u003e\u003cstrong\u003eKey Insights:\u003c/strong\u003e\u003c/p\u003e\u003cul\u003e\u003cli\u003eRisk: Limited to ₹300 (net premium paid).\u003c/li\u003e\u003cli\u003eReward: Capped at ₹700.\u003c/li\u003e\u003cli\u003eMarket View: Mildly bullish.\u003c/li\u003e\u003c/ul\u003e\u003cp\u003e\u003cstrong\u003e\u003c/strong\u003e\u003c/p\u003e\u003ch3\u003e\u003cstrong\u003eC. Bull Put Spread\u003c/strong\u003e\u003c/h3\u003e\u003cp\u003e\u003cimg loading=\u0022lazy\u0022 decoding=\u0022async\u0022 class=\u0022aligncenter wp-image-66178 size-full\u0022 src=\u0022https://www.5paisa.com/hindi/finschool/wp-content/uploads/2025/01/Bull-Put-spread-1.png\u0022 alt=\u0022Bull Put Spread\u0022 width=\u00221473\u0022 height=\u0022869\u0022 srcset=\u0022https://www.5paisa.com/hindi/finschool/wp-content/uploads/2025/01/Bull-Put-spread-1.png 1473w, https:/www.5paisa.com/finschool/wp-content/uploads/2025/01/Bull-Put-spread-1-300x177.png 300w, https:/www.5paisa.com/finschool/wp-content/uploads/2025/01/Bull-Put-spread-1-1024x604.png 1024w, https:/www.5paisa.com/finschool/wp-content/uploads/2025/01/Bull-Put-spread-1-768x453.png 768w, https:/www.5paisa.com/finschool/wp-content/uploads/2025/01/Bull-Put-spread-1-50x29.png 50w, https:/www.5paisa.com/finschool/wp-content/uploads/2025/01/Bull-Put-spread-1-100x59.png 100w, https:/www.5paisa.com/finschool/wp-content/uploads/2025/01/Bull-Put-spread-1-150x88.png 150w\u0022 sizes=\u0022(max-width: 1473px) 100vw, 1473px\u0022 /\u003e\u003c/p\u003e\u003cp\u003e\u0026nbsp;\u003c/p\u003e\u003cp\u003e\u003cstrong\u003eHere\u0026#8217;s the payoff diagram for your Bull put spread strategy:\u003c/strong\u003e\u003c/p\u003e\u003cul\u003e\u003cli\u003eThe blue dashed line represents the payoff for selling a put option with a strike price of ₹860.\u003c/li\u003e\u003cli\u003eThe orange dashed line shows the payoff for buying a put option with a strike price of ₹830.\u003c/li\u003e\u003cli\u003eThe green solid line indicates the net payoff for the strategy\u003c/li\u003e\u003c/ul\u003e\u003cp\u003e\u003cstrong\u003eExample\u003c/strong\u003e\u003c/p\u003e\u003cp\u003eSuppose you believe the price of Reliance Industries, currently trading at ₹850, will rise or remain above a certain level:\u003c/p\u003e\u003cul\u003e\u003cli\u003e\u003cstrong\u003eSell a Put Option\u003c/strong\u003e: Strike price ₹860, premium ₹30.\u003c/li\u003e\u003cli\u003e\u003cstrong\u003eBuy a Put Option\u003c/strong\u003e: Strike price ₹830, premium ₹10.\u003c/li\u003e\u003c/ul\u003e\u003cp\u003e\u003cstrong\u003eProfit and Loss\u003c/strong\u003e\u003c/p\u003e\u003cul\u003e\u003cli\u003e\u003cstrong\u003eMaximum Profit\u003c/strong\u003e: Achieved if the stock price remains at or above the higher strike price (₹860). The profit is the net premium received (₹30 – ₹10 = ₹20).\u003c/li\u003e\u003cli\u003e\u003cstrong\u003eMaximum Loss\u003c/strong\u003e: Occurs if the stock price falls to or below the lower strike price (₹830). The loss is the difference between the strike prices minus the net premium received (₹860 – ₹830 – ₹20 = ₹10).\u003c/li\u003e\u003c/ul\u003e\u003cp\u003e\u003cstrong\u003eBreakeven Point : \u003c/strong\u003eThe breakeven point is the higher strike price minus the net premium received (₹860 – ₹20 = ₹840).\u003c/p\u003e\u003cp\u003e\u003cstrong\u003eKey points on the chart\u003c/strong\u003e:\u003c/p\u003e\u003col\u003e\u003cli\u003eMaximum Profit of ₹20 is achieved when the stock price is at or above ₹860.\u003c/li\u003e\u003cli\u003eMaximum Loss of ₹10 occurs when the stock price is at or below ₹830.\u003c/li\u003e\u003cli\u003eThe breakeven point is at ₹840 (marked by the red dashed vertical line).\u003c/li\u003e\u003c/ol\u003e\u003ch3\u003e\u003cstrong\u003eD. Long Call Butterfly Strategy\u003c/strong\u003e\u003c/h3\u003e\u003cp\u003e\u003cimg loading=\u0022lazy\u0022 decoding=\u0022async\u0022 class=\u0022aligncenter wp-image-66179 size-full\u0022 src=\u0022https://www.5paisa.com/hindi/finschool/wp-content/uploads/2025/01/Long-call-butterfly-strategy-1.png\u0022 alt=\u0022Long call Butterfly Strategy\u0022 width=\u00221017\u0022 height=\u0022653\u0022 srcset=\u0022https://www.5paisa.com/hindi/finschool/wp-content/uploads/2025/01/Long-call-butterfly-strategy-1.png 1017w, https:/www.5paisa.com/finschool/wp-content/uploads/2025/01/Long-call-butterfly-strategy-1-300x193.png 300w, https:/www.5paisa.com/finschool/wp-content/uploads/2025/01/Long-call-butterfly-strategy-1-768x493.png 768w, https:/www.5paisa.com/finschool/wp-content/uploads/2025/01/Long-call-butterfly-strategy-1-50x32.png 50w, https:/www.5paisa.com/finschool/wp-content/uploads/2025/01/Long-call-butterfly-strategy-1-100x64.png 100w, https:/www.5paisa.com/finschool/wp-content/uploads/2025/01/Long-call-butterfly-strategy-1-150x96.png 150w\u0022 sizes=\u0022(max-width: 1017px) 100vw, 1017px\u0022 /\u003e\u003c/p\u003e\u003cp\u003e\u003cstrong\u003eExample\u003c/strong\u003e\u003c/p\u003e\u003cp\u003eLet\u0026#8217;s assume the net premium paid for setting up this strategy is ₹20.\u003c/p\u003e\u003cul\u003e\u003cli\u003e\u003cstrong\u003eLower Strike Price (Buy)\u003c/strong\u003e: ₹950\u003c/li\u003e\u003cli\u003e\u003cstrong\u003eMiddle Strike Price (Sell, double)\u003c/strong\u003e: ₹1,000\u003c/li\u003e\u003cli\u003e\u003cstrong\u003eHigher Strike Price (Buy)\u003c/strong\u003e: ₹1,050\u003c/li\u003e\u003c/ul\u003e\u003cp\u003e\u003cstrong\u003ePayoff and Profit Calculation\u003c/strong\u003e\u003c/p\u003e\u003cul\u003e\u003cli\u003e\u003cstrong\u003eMaximum Profit\u003c/strong\u003e: Occurs if the stock price at expiration is exactly at the middle strike price (₹1,000). The profit is calculated as the difference between the middle and the lower strike prices, minus the net premium paid. In this example: ₹1,000 – ₹950 = ₹50, minus the ₹20 net premium = ₹30 per share.\u003c/li\u003e\u003cli\u003e\u003cstrong\u003eMaximum Loss\u003c/strong\u003e: The maximum loss is limited to the net premium paid to set up the strategy. In this example, the loss is ₹20 per share.\u003c/li\u003e\u003c/ul\u003e\u003cp\u003e\u003cstrong\u003eBreak-even Points\u003c/strong\u003e:\u003c/p\u003e\u003cul\u003e\u003cli\u003eLower Break-even: Lower strike price + net premium = ₹950 + ₹20 = ₹970.\u003c/li\u003e\u003cli\u003eUpper Break-even: Higher strike price \u0026#8211; net premium = ₹1,050 \u0026#8211; ₹20 = ₹1,030.\u003c/li\u003e\u003c/ul\u003e\u003cp\u003eThis strategy is most effective when the trader expects the stock to hover around the ₹1,000 mark by expiration. The Long Call Butterfly offers a limited risk, limited reward profile, making it a conservative strategy suitable for stable market conditions.\u003c/p\u003e\u003ch3\u003eE. \u003cstrong\u003eShort Put Strategy\u003c/strong\u003e\u003c/h3\u003e\u003cp\u003eSell one put option: By selling the put option, the trader receives a premium. For instance, let’s consider an underlying stock currently priced at ₹1,000, and we sell a put option with a strike price of ₹950.\u003c/p\u003e\u003cp\u003e\u003cimg loading=\u0022lazy\u0022 decoding=\u0022async\u0022 class=\u0022aligncenter wp-image-66180 size-full\u0022 src=\u0022https://www.5paisa.com/hindi/finschool/wp-content/uploads/2025/01/Short-Put-Strategy-1.png\u0022 alt=\u0022Short Put Strategy\u0022 width=\u00221160\u0022 height=\u0022746\u0022 srcset=\u0022https://www.5paisa.com/hindi/finschool/wp-content/uploads/2025/01/Short-Put-Strategy-1.png 1160w, https:/www.5paisa.com/finschool/wp-content/uploads/2025/01/Short-Put-Strategy-1-300x193.png 300w, https:/www.5paisa.com/finschool/wp-content/uploads/2025/01/Short-Put-Strategy-1-1024x659.png 1024w, https:/www.5paisa.com/finschool/wp-content/uploads/2025/01/Short-Put-Strategy-1-768x494.png 768w, https:/www.5paisa.com/finschool/wp-content/uploads/2025/01/Short-Put-Strategy-1-50x32.png 50w, https:/www.5paisa.com/finschool/wp-content/uploads/2025/01/Short-Put-Strategy-1-100x64.png 100w, https:/www.5paisa.com/finschool/wp-content/uploads/2025/01/Short-Put-Strategy-1-150x96.png 150w\u0022 sizes=\u0022(max-width: 1160px) 100vw, 1160px\u0022 /\u003e\u003c/p\u003e\u003cp\u003e\u003cstrong\u003e\u003c/strong\u003e\u003c/p\u003e\u003cp\u003e\u003cstrong\u003eExample\u003c/strong\u003e\u003c/p\u003e\u003cp\u003eAssume the premium received for selling this put option is ₹30.\u003c/p\u003e\u003cul\u003e\u003cli\u003e\u003cstrong\u003eStrike Price (Sell)\u003c/strong\u003e: ₹950\u003c/li\u003e\u003c/ul\u003e\u003cp\u003e\u003cstrong\u003ePayoff and Profit Calculation\u003c/strong\u003e\u003c/p\u003e\u003cul\u003e\u003cli\u003e\u003cstrong\u003eMaximum Profit\u003c/strong\u003e: The maximum profit is the premium received from selling the put option. In this example, the profit is ₹30 per share.\u003c/li\u003e\u003cli\u003e\u003cstrong\u003eMaximum Loss\u003c/strong\u003e: The risk is significant since the trader must buy the stock at the strike price if the option is exercised and the stock price falls significantly. The potential loss occurs if the stock price drops below the strike price (₹950).\u003c/li\u003e\u003c/ul\u003e\u003cp\u003eFor instance, if the stock price falls to ₹900, the effective purchase price would be ₹950 (strike price) \u0026#8211; ₹30 (premium received) = ₹920, resulting in a ₹20 loss per share.\u003c/p\u003e\u003cp\u003eThe Short Put strategy benefits from stable to rising stock prices. While the potential profit is limited to the premium received, the risk can be considerable if the stock price declines significantly below the strike price.\u003c/p\u003e\u003cp\u003e\u0026nbsp;\u003c/p\u003e\u003cp\u003e\u0026nbsp;\u003c/p\u003e\u003c/div\u003e\u003cdiv id=\u0027text_slider_slide02\u0027 class=\u0027sa_hover_container\u0027 data-hash=\u0027Bearish-Strategies\u0027 style=\u0027padding:4.9% 5%; margin:0px 0%; background-color:rgb(255, 255, 255); min-height:400px; \u0027\u003e\u003ch2\u003e\u003cstrong\u003e9.2. Bearish Strategies Examples\u003c/strong\u003e\u003c/h2\u003e\u003cp\u003e\u003cimg loading=\u0022lazy\u0022 decoding=\u0022async\u0022 class=\u0022wp-image-66191 size-full aligncenter\u0022 src=\u0022https://www.5paisa.com/hindi/finschool/wp-content/uploads/2025/01/New-course-8-2.png\u0022 alt=\u0022Bearish Strategies examples\u0022 width=\u0022880\u0022 height=\u0022684\u0022 srcset=\u0022https://www.5paisa.com/hindi/finschool/wp-content/uploads/2025/01/New-course-8-2.png 880w, https:/www.5paisa.com/finschool/wp-content/uploads/2025/01/New-course-8-2-300x233.png 300w, https:/www.5paisa.com/finschool/wp-content/uploads/2025/01/New-course-8-2-768x597.png 768w, https:/www.5paisa.com/finschool/wp-content/uploads/2025/01/New-course-8-2-50x39.png 50w, https:/www.5paisa.com/finschool/wp-content/uploads/2025/01/New-course-8-2-100x78.png 100w, https:/www.5paisa.com/finschool/wp-content/uploads/2025/01/New-course-8-2-150x117.png 150w\u0022 sizes=\u0022(max-width: 880px) 100vw, 880px\u0022 /\u003e\u003c/p\u003e\u003ch3\u003e\u003c/h3\u003e\u003ch3\u003e\u003cstrong\u003eA. Bear call spread\u003c/strong\u003e\u003c/h3\u003e\u003ch3\u003e\u003cimg loading=\u0022lazy\u0022 decoding=\u0022async\u0022 class=\u0022aligncenter wp-image-70105 size-full\u0022 src=\u0022https://www.5paisa.com/hindi/finschool/wp-content/uploads/2025/01/Bear-call-spread-2.png\u0022 alt=\u0022Bear call spread\u0022 width=\u00221164\u0022 height=\u0022734\u0022 srcset=\u0022https://www.5paisa.com/hindi/finschool/wp-content/uploads/2025/01/Bear-call-spread-2.png 1164w, https:/www.5paisa.com/finschool/wp-content/uploads/2025/01/Bear-call-spread-2-300x189.png 300w, https:/www.5paisa.com/finschool/wp-content/uploads/2025/01/Bear-call-spread-2-1024x646.png 1024w, https:/www.5paisa.com/finschool/wp-content/uploads/2025/01/Bear-call-spread-2-768x484.png 768w, https:/www.5paisa.com/finschool/wp-content/uploads/2025/01/Bear-call-spread-2-50x32.png 50w, https:/www.5paisa.com/finschool/wp-content/uploads/2025/01/Bear-call-spread-2-100x63.png 100w, https:/www.5paisa.com/finschool/wp-content/uploads/2025/01/Bear-call-spread-2-150x95.png 150w\u0022 sizes=\u0022(max-width: 1164px) 100vw, 1164px\u0022 /\u003e\u003c/h3\u003e\u003cp\u003e\u003cstrong\u003e\u003c/strong\u003eThe graph illustrates the profit and loss profile of a Bear Call Spread strategy for Reliance Industries with the given parameters.\u003c/p\u003e\u003cp\u003eKey takeaways from the graph are:\u003c/p\u003e\u003cul\u003e\u003cli\u003eThe maximum profit of ₹10 is achieved when the stock price stays below ₹860.\u003c/li\u003e\u003cli\u003eThe maximum loss of ₹10 occurs when the stock price goes above ₹880.\u003c/li\u003e\u003cli\u003eBetween ₹860 and ₹880, the profit/loss gradually declines.\u003c/li\u003e\u003c/ul\u003e\u003cp\u003e\u003cstrong\u003eExample\u003c/strong\u003e\u003c/p\u003e\u003cp\u003eLet\u0026#8217;s say you believe the price of Reliance Industries, currently at ₹850, will moderately decline1. You decide to implement a Bear Call Spread:\u003c/p\u003e\u003cul\u003e\u003cli\u003e\u003cstrong\u003eSell a Call Option\u003c/strong\u003e: Sell a call option with a strike price of ₹860 for a premium of ₹20.\u003c/li\u003e\u003cli\u003e\u003cstrong\u003eBuy a Call Option\u003c/strong\u003e: Buy a call option with a strike price of ₹880 for a premium of ₹10.\u003c/li\u003e\u003c/ul\u003e\u003cp\u003e\u003cstrong\u003eProfit and Loss\u003c/strong\u003e\u003c/p\u003e\u003cul\u003e\u003cli\u003e\u003cstrong\u003eMaximum Profit\u003c/strong\u003e: The net premium received (₹20 – ₹10 = ₹10) is your maximum profit.\u003c/li\u003e\u003cli\u003e\u003cstrong\u003eMaximum Loss\u003c/strong\u003e: The difference between the strike prices minus the net premium received (₹880 – ₹860 – ₹10 = ₹10) is your maximum loss.\u003c/li\u003e\u003c/ul\u003e\u003ch3\u003e\u003cstrong\u003eB. Bear Put Spread\u003c/strong\u003e\u003c/h3\u003e\u003cp\u003e\u003cimg loading=\u0022lazy\u0022 decoding=\u0022async\u0022 class=\u0022aligncenter wp-image-66183 size-full\u0022 src=\u0022https://www.5paisa.com/hindi/finschool/wp-content/uploads/2025/01/Bear-Put-Spread-.png\u0022 alt=\u0022Bear Put Spread \u0022 width=\u0022927\u0022 height=\u0022596\u0022 srcset=\u0022https://www.5paisa.com/hindi/finschool/wp-content/uploads/2025/01/Bear-Put-Spread-.png 927w, https:/www.5paisa.com/finschool/wp-content/uploads/2025/01/Bear-Put-Spread--300x193.png 300w, https:/www.5paisa.com/finschool/wp-content/uploads/2025/01/Bear-Put-Spread--768x494.png 768w, https:/www.5paisa.com/finschool/wp-content/uploads/2025/01/Bear-Put-Spread--50x32.png 50w, https:/www.5paisa.com/finschool/wp-content/uploads/2025/01/Bear-Put-Spread--100x64.png 100w, https:/www.5paisa.com/finschool/wp-content/uploads/2025/01/Bear-Put-Spread--150x96.png 150w\u0022 sizes=\u0022(max-width: 927px) 100vw, 927px\u0022 /\u003e\u003c/p\u003e\u003cp\u003e\u003cstrong\u003eHere\u0026#8217;s the payoff diagram for the bear put spread strategy involving Tata Motors:\u003c/strong\u003e\u003c/p\u003e\u003cul\u003e\u003cli\u003eThe blue dashed line represents the payoff for buying a put option with a strike price of ₹460.\u003c/li\u003e\u003cli\u003eThe orange dashed line shows the payoff for selling a put option with a strike price of ₹430.\u003c/li\u003e\u003cli\u003eThe green solid line indicates the net payoff for the strategy.\u003c/li\u003e\u003c/ul\u003e\u003cp\u003e\u003cstrong\u003eKey points on the chart:\u003c/strong\u003e\u003c/p\u003e\u003col\u003e\u003cli\u003eMaximum Profit of ₹20 is achieved when the stock price is at or below ₹430.\u003c/li\u003e\u003cli\u003eMaximum Loss of ₹10 occurs when the stock price is at or above ₹460.\u003c/li\u003e\u003cli\u003eThe breakeven point is ₹450, where the strategy neither makes a profit nor incurs a loss\u003c/li\u003e\u003c/ol\u003e\u003cp\u003e\u003cstrong\u003eExample\u003c/strong\u003e\u003c/p\u003e\u003cp\u003eLet’s say you believe the price of Tata Motors, currently at ₹450, will decline:\u003c/p\u003e\u003cul\u003e\u003cli\u003e\u003cstrong\u003eBuy a Put Option\u003c/strong\u003e: Buy a put option with a strike price of ₹460 for a premium of ₹15.\u003c/li\u003e\u003cli\u003e\u003cstrong\u003eSell a Put Option\u003c/strong\u003e: Sell a put option with a strike price of ₹430 for a premium of ₹5.\u003c/li\u003e\u003c/ul\u003e\u003cp\u003e\u003cstrong\u003eProfit and Loss\u003c/strong\u003e\u003c/p\u003e\u003cul\u003e\u003cli\u003e\u003cstrong\u003eMaximum Profit\u003c/strong\u003e: The maximum profit is achieved if the stock price falls to or below the lower strike price (₹430). The profit is calculated as the difference between the strike prices minus the net premium paid (₹460 – ₹430 – ₹10 = ₹20).\u003c/li\u003e\u003cli\u003e\u003cstrong\u003eMaximum Loss\u003c/strong\u003e: The maximum loss occurs if the stock price remains at or above the higher strike price (₹460). The loss is limited to the net premium paid (₹15 – ₹5 = ₹10).\u003c/li\u003e\u003c/ul\u003e\u003ch3\u003e\u003cstrong\u003eC. Bear Iron Condor\u003c/strong\u003e\u003c/h3\u003e\u003cp\u003e\u003cimg loading=\u0022lazy\u0022 decoding=\u0022async\u0022 class=\u0022aligncenter wp-image-70104 size-full\u0022 src=\u0022https://www.5paisa.com/hindi/finschool/wp-content/uploads/2025/01/Bear-Iron-Condor-Payoff-Diagram.png\u0022 alt=\u0022Bear Iron Condor Payoff Diagram\u0022 width=\u00221145\u0022 height=\u0022734\u0022 srcset=\u0022https://www.5paisa.com/hindi/finschool/wp-content/uploads/2025/01/Bear-Iron-Condor-Payoff-Diagram.png 1145w, https:/www.5paisa.com/finschool/wp-content/uploads/2025/01/Bear-Iron-Condor-Payoff-Diagram-300x192.png 300w, https:/www.5paisa.com/finschool/wp-content/uploads/2025/01/Bear-Iron-Condor-Payoff-Diagram-1024x656.png 1024w, https:/www.5paisa.com/finschool/wp-content/uploads/2025/01/Bear-Iron-Condor-Payoff-Diagram-768x492.png 768w, https:/www.5paisa.com/finschool/wp-content/uploads/2025/01/Bear-Iron-Condor-Payoff-Diagram-50x32.png 50w, https:/www.5paisa.com/finschool/wp-content/uploads/2025/01/Bear-Iron-Condor-Payoff-Diagram-100x64.png 100w, https:/www.5paisa.com/finschool/wp-content/uploads/2025/01/Bear-Iron-Condor-Payoff-Diagram-150x96.png 150w\u0022 sizes=\u0022(max-width: 1145px) 100vw, 1145px\u0022 /\u003e\u003c/p\u003e\u003cp\u003eHere\u0026#8217;s the payoff chart for your Bear Iron Condor strategy on Reliance Industries.\u003c/p\u003e\u003cp\u003eKey Observations:\u003c/p\u003e\u003col\u003e\u003cli\u003eMaximum Profit: ₹20, achieved when the stock price is between ₹830 and ₹860 at expiry.\u003c/li\u003e\u003cli\u003eMaximum Loss: ₹20, incurred when the stock price is below ₹810 or above ₹880 at expiry.\u003c/li\u003e\u003cli\u003eBreakeven Range: ₹810 to ₹880. Within this range, the strategy remains profitable.\u003c/li\u003e\u003c/ol\u003e\u003cp\u003e\u003cstrong\u003e\u003c/strong\u003e\u003cstrong\u003eExample\u003c/strong\u003e\u003c/p\u003e\u003cp\u003eLet\u0026#8217;s say you believe the price of Reliance Industries, currently at ₹850, will moderately decline and you decide to implement a Bear Iron Condor:\u003c/p\u003e\u003cp\u003e\u003cstrong\u003eSell a Call Spread:\u003c/strong\u003e\u003c/p\u003e\u003cul\u003e\u003cli\u003eSell a Call Option: Strike price ₹860, premium ₹20.\u003c/li\u003e\u003cli\u003eBuy a Call Option: Strike price ₹880, premium ₹10.\u003c/li\u003e\u003c/ul\u003e\u003cp\u003e\u003cstrong\u003eSell a Put Spread:\u003c/strong\u003e\u003c/p\u003e\u003cul\u003e\u003cli\u003eSell a Put Option: Strike price ₹830, premium ₹15.\u003c/li\u003e\u003cli\u003eBuy a Put Option: Strike price ₹810, premium ₹5.\u003c/li\u003e\u003c/ul\u003e\u003cp\u003e\u003cstrong\u003eProfit and Loss\u003c/strong\u003e\u003c/p\u003e\u003cul\u003e\u003cli\u003eMaximum Profit: Achieved if the asset\u0026#8217;s price is between the middle strike prices (₹830 and ₹860). The profit is the net premium received (₹20 + ₹15 \u0026#8211; ₹10 \u0026#8211; ₹5 = ₹20).\u003c/li\u003e\u003cli\u003eMaximum Loss: Occurs if the asset\u0026#8217;s price moves significantly away from the middle strike prices. The loss is the difference between the adjacent strike prices minus the net premium received (₹20 in this example).\u003c/li\u003e\u003c/ul\u003e\u003cp\u003e\u003cstrong\u003eBreakeven Points\u003c/strong\u003e\u003c/p\u003e\u003cul\u003e\u003cli\u003eThe lower breakeven point is the lower sold put strike price minus the net premium received.\u003c/li\u003e\u003cli\u003eThe upper breakeven point is the higher sold call strike price plus the net premium received.\u003c/li\u003e\u003c/ul\u003e\u003ch3\u003e\u003cstrong\u003eD. Bear Butterfly Spread\u003c/strong\u003e\u003c/h3\u003e\u003cp\u003e\u003cimg loading=\u0022lazy\u0022 decoding=\u0022async\u0022 class=\u0022wp-image-66185 size-full aligncenter\u0022 src=\u0022https://www.5paisa.com/hindi/finschool/wp-content/uploads/2025/01/Bear-Butterfly-Spread.png\u0022 alt=\u0022Bear Butterfly Spread \u0022 width=\u00221342\u0022 height=\u0022893\u0022 srcset=\u0022https://www.5paisa.com/hindi/finschool/wp-content/uploads/2025/01/Bear-Butterfly-Spread.png 1342w, https:/www.5paisa.com/finschool/wp-content/uploads/2025/01/Bear-Butterfly-Spread-300x200.png 300w, https:/www.5paisa.com/finschool/wp-content/uploads/2025/01/Bear-Butterfly-Spread-1024x681.png 1024w, https:/www.5paisa.com/finschool/wp-content/uploads/2025/01/Bear-Butterfly-Spread-768x511.png 768w, https:/www.5paisa.com/finschool/wp-content/uploads/2025/01/Bear-Butterfly-Spread-50x33.png 50w, https:/www.5paisa.com/finschool/wp-content/uploads/2025/01/Bear-Butterfly-Spread-100x67.png 100w, https:/www.5paisa.com/finschool/wp-content/uploads/2025/01/Bear-Butterfly-Spread-150x100.png 150w\u0022 sizes=\u0022(max-width: 1342px) 100vw, 1342px\u0022 /\u003e\u003c/p\u003e\u003cp\u003e\u003cstrong\u003e\u003c/strong\u003eHere is the payoff diagram for the option strategy you described. It visualizes the profit and loss at different stock prices at expiration:\u003c/p\u003e\u003cul\u003e\u003cli\u003e\u003cstrong\u003eStrike Price ₹860 (Sell Put):\u003c/strong\u003e The red dashed line marks the strike price for the sold puts. The position of the price relative to this strike affects the loss from the sold puts.\u003c/li\u003e\u003cli\u003e\u003cstrong\u003eStrike Price ₹830 (Buy Put):\u003c/strong\u003e The green dashed line marks the strike price for the bought put. The profit from the bought put increases as the stock price declines below ₹830.\u003c/li\u003e\u003cli\u003e\u003cstrong\u003eStrike Price ₹800 (Buy Put):\u003c/strong\u003e The orange dashed line marks the strike price for the second bought puts, providing additional profit as the stock price falls further below ₹800.\u003c/li\u003e\u003c/ul\u003e\u003cp\u003e\u003cstrong\u003e\u003c/strong\u003e\u003cstrong\u003eExample\u003c/strong\u003e\u003c/p\u003e\u003cp\u003eLet\u0026#8217;s say you believe the price of Reliance Industries, currently at ₹850, will moderately decline:\u003c/p\u003e\u003cul\u003e\u003cli\u003e\u003cstrong\u003eSell Two Put Options\u003c/strong\u003e: Sell put options with a strike price of ₹860 for a premium of ₹20 each.\u003c/li\u003e\u003cli\u003e\u003cstrong\u003eBuy One Put Option\u003c/strong\u003e: Buy a put option with a strike price of ₹830 for a premium of ₹15.\u003c/li\u003e\u003cli\u003e\u003cstrong\u003eBuy Two Put Options\u003c/strong\u003e: Buy put options with a strike price of ₹800 for a premium of ₹10 each.\u003c/li\u003e\u003c/ul\u003e\u003cp\u003e\u003cstrong\u003eProfit and Loss\u003c/strong\u003e\u003c/p\u003e\u003cul\u003e\u003cli\u003e\u003cstrong\u003eMaximum Profit\u003c/strong\u003e: Achieved if the asset’s price falls to the lower strike price (₹800). The profit is calculated as the difference between the strike prices minus the net premium paid (₹860 – ₹800 – ₹25 = ₹35).\u003c/li\u003e\u003cli\u003e\u003cstrong\u003eMaximum Loss\u003c/strong\u003e: Occurs if the asset’s price remains at or above the higher strike price (₹860). The loss is limited to the net premium paid (₹20 + ₹20 – ₹15 – ₹10 – ₹10 = ₹25).\u003c/li\u003e\u003c/ul\u003e\u003c/div\u003e\u003cdiv id=\u0027text_slider_slide03\u0027 class=\u0027sa_hover_container\u0027 data-hash=\u0027Neutral-Strategies\u0027 style=\u0027padding:4.9% 5%; margin:0px 0%; background-color:rgb(255, 255, 255); min-height:400px; \u0027\u003e\u003ch2\u003e\u003cstrong\u003e9.3. Neutral Strategies Examples\u003c/strong\u003e\u003c/h2\u003e\u003cp\u003e\u003cimg loading=\u0022lazy\u0022 decoding=\u0022async\u0022 class=\u0022aligncenter wp-image-66192 size-full\u0022 src=\u0022https://www.5paisa.com/hindi/finschool/wp-content/uploads/2025/01/New-course-9-1.png\u0022 alt=\u0022Neutral Strategies example\u0022 width=\u0022934\u0022 height=\u0022652\u0022 srcset=\u0022https://www.5paisa.com/hindi/finschool/wp-content/uploads/2025/01/New-course-9-1.png 934w, https:/www.5paisa.com/finschool/wp-content/uploads/2025/01/New-course-9-1-300x209.png 300w, https:/www.5paisa.com/finschool/wp-content/uploads/2025/01/New-course-9-1-768x536.png 768w, https:/www.5paisa.com/finschool/wp-content/uploads/2025/01/New-course-9-1-50x35.png 50w, https:/www.5paisa.com/finschool/wp-content/uploads/2025/01/New-course-9-1-100x70.png 100w, https:/www.5paisa.com/finschool/wp-content/uploads/2025/01/New-course-9-1-150x105.png 150w\u0022 sizes=\u0022(max-width: 934px) 100vw, 934px\u0022 /\u003e\u003c/p\u003e\u003ch3\u003e\u003cstrong\u003eA. Calendar Call\u003c/strong\u003e\u003c/h3\u003e\u003cp\u003e\u003cimg loading=\u0022lazy\u0022 decoding=\u0022async\u0022 class=\u0022aligncenter wp-image-66186 size-full\u0022 src=\u0022https://www.5paisa.com/hindi/finschool/wp-content/uploads/2025/01/Calendar-Call.png\u0022 alt=\u0022Calendar Call\u0022 width=\u0022527\u0022 height=\u0022413\u0022 srcset=\u0022https://www.5paisa.com/hindi/finschool/wp-content/uploads/2025/01/Calendar-Call.png 527w, https:/www.5paisa.com/finschool/wp-content/uploads/2025/01/Calendar-Call-300x235.png 300w, https:/www.5paisa.com/finschool/wp-content/uploads/2025/01/Calendar-Call-50x39.png 50w, https:/www.5paisa.com/finschool/wp-content/uploads/2025/01/Calendar-Call-100x78.png 100w, https:/www.5paisa.com/finschool/wp-content/uploads/2025/01/Calendar-Call-150x118.png 150w\u0022 sizes=\u0022(max-width: 527px) 100vw, 527px\u0022 /\u003e\u003c/p\u003e\u003cp\u003eHere is the profit and loss diagram for the Calendar Call option strategy based on the example you provided. The chart illustrates the profit/loss based on the stock price at expiration:\u003c/p\u003e\u003cul\u003e\u003cli\u003eMaximum Profit occurs when the stock price remains at or below the strike price (₹860), where the net premium received (₹10) is the profit.\u003c/li\u003e\u003cli\u003eMaximum Loss is experienced if the stock price rises significantly above ₹860, and the loss is limited to the net premium paid for the longer-term call (₹10).\u003c/li\u003e\u003c/ul\u003e\u003cp\u003e\u003cstrong\u003eThe red dashed line at ₹860 represents the strike price for both options. \u003c/strong\u003e\u003cstrong\u003e​\u003c/strong\u003e\u003c/p\u003e\u003cp style=\u0022padding-left: 40px\u0022\u003e\u003cstrong\u003eExample\u003c/strong\u003e\u003c/p\u003e\u003cp style=\u0022padding-left: 40px\u0022\u003eLet\u0026#8217;s say you believe the price of Reliance Industries, currently at ₹850, will remain stable in the near term but might rise in the longer term:\u003c/p\u003e\u003cul\u003e\u003cli\u003e\u003cstrong\u003eSell a Near-Term Call Option\u003c/strong\u003e: Sell a call option with a strike price of ₹860 and an expiration date one month from now for a premium of ₹20.\u003c/li\u003e\u003cli\u003e\u003cstrong\u003eBuy a Longer-Term Call Option\u003c/strong\u003e: Buy a call option with the same strike price of ₹860 but with an expiration date three months from now for a premium of ₹10.\u003c/li\u003e\u003c/ul\u003e\u003cp style=\u0022padding-left: 40px\u0022\u003e\u003cstrong\u003eProfit and Loss\u003c/strong\u003e\u003c/p\u003e\u003cul\u003e\u003cli\u003e\u003cstrong\u003eMaximum Profit\u003c/strong\u003e: The maximum profit is achieved if the stock price remains at or below the strike price (₹860) at the expiration of the near-term call option. The profit is the net premium received (₹20 – ₹10 = ₹10).\u003c/li\u003e\u003cli\u003e\u003cstrong\u003eMaximum Loss\u003c/strong\u003e: The maximum loss occurs if the stock price rises significantly above the strike price before the expiration of the near-term call option. The loss is the net premium paid (₹10).\u003c/li\u003e\u003c/ul\u003e\u003ch3\u003e\u003c/h3\u003e\u003ch3\u003e\u003cstrong\u003eB Callendar Put\u003c/strong\u003e\u003c/h3\u003e\u003cp\u003e\u003cimg loading=\u0022lazy\u0022 decoding=\u0022async\u0022 class=\u0022aligncenter wp-image-66187 size-full\u0022 src=\u0022https://www.5paisa.com/hindi/finschool/wp-content/uploads/2025/01/Calendar-Put.png\u0022 alt=\u0022Calendar Put\u0022 width=\u00221454\u0022 height=\u0022934\u0022 srcset=\u0022https://www.5paisa.com/hindi/finschool/wp-content/uploads/2025/01/Calendar-Put.png 1454w, https:/www.5paisa.com/finschool/wp-content/uploads/2025/01/Calendar-Put-300x193.png 300w, https:/www.5paisa.com/finschool/wp-content/uploads/2025/01/Calendar-Put-1024x658.png 1024w, https:/www.5paisa.com/finschool/wp-content/uploads/2025/01/Calendar-Put-768x493.png 768w, https:/www.5paisa.com/finschool/wp-content/uploads/2025/01/Calendar-Put-50x32.png 50w, https:/www.5paisa.com/finschool/wp-content/uploads/2025/01/Calendar-Put-100x64.png 100w, https:/www.5paisa.com/finschool/wp-content/uploads/2025/01/Calendar-Put-150x96.png 150w\u0022 sizes=\u0022(max-width: 1454px) 100vw, 1454px\u0022 /\u003e\u003c/p\u003e\u003cp\u003eThe payoff diagram above illustrates the following:\u003c/p\u003e\u003cp\u003eNear-Term Put Option Payoff (Orange Dashed Line): This option generates a profit if the stock price falls below ₹840 before its expiration. However, as it expires, its maximum loss is the premium received (-₹10).\u003c/p\u003e\u003cp\u003eLong-Term Put Option Payoff (Blue Dashed Line): This option gains value if the stock price drops significantly below ₹840 over the longer term. Its cost is the premium paid (-₹20).\u003c/p\u003e\u003cp\u003eNet Payoff (Green Line):\u003c/p\u003e\u003cul\u003e\u003cli\u003eRepresents the combined effect of selling the near-term put and buying the longer-term put.\u003c/li\u003e\u003cli\u003eIf the stock price stays above ₹840, the near-term put expires worthless, and the strategy incurs a net cost of ₹10 (the premium difference).\u003c/li\u003e\u003cli\u003eIf the stock price falls significantly, the longer-term put\u0026#8217;s profit outweighs the loss on the near-term put, limiting the downside.\u003c/li\u003e\u003c/ul\u003e\u003cp\u003e\u003cstrong\u003e\u003c/strong\u003e\u003cstrong\u003eExample\u003c/strong\u003e\u003c/p\u003e\u003cp\u003eImagine you believe the price of Reliance Industries, currently at ₹850, will remain stable in the near term but might decline in the longer term:\u003c/p\u003e\u003cul\u003e\u003cli\u003e\u003cstrong\u003eSell a Near-Term Put Option\u003c/strong\u003e: Sell a put option with a strike price of ₹840 and an expiration date one month from now for a premium of ₹10.\u003c/li\u003e\u003cli\u003e\u003cstrong\u003eBuy a Longer-Term Put Option\u003c/strong\u003e: Buy a put option with the same strike price of ₹840 but with an expiration date three months from now for a premium of ₹20.\u003c/li\u003e\u003c/ul\u003e\u003cp\u003e\u003cstrong\u003eProfit and Loss\u003c/strong\u003e\u003c/p\u003e\u003cul\u003e\u003cli\u003e\u003cstrong\u003eMaximum Profit\u003c/strong\u003e: The maximum profit is achieved if the stock price remains at or above the strike price (₹840) at the expiration of the near-term put option. The profit is the net premium received (₹10 – ₹20 = -₹10, which means you initially paid a net premium of ₹10, but as the near-term put expires worthless, you can sell the longer-term put).\u003c/li\u003e\u003cli\u003e\u003cstrong\u003eMaximum Loss\u003c/strong\u003e: The maximum loss occurs if the stock price declines significantly below the strike price before the expiration of the longer-term put option. The loss is limited to the net premium paid (₹20 – ₹10 = ₹10).\u003c/li\u003e\u003c/ul\u003e\u003ch3\u003e\u003cstrong\u003eC. Short Straddle\u003c/strong\u003e\u003c/h3\u003e\u003cp\u003e\u003cimg loading=\u0022lazy\u0022 decoding=\u0022async\u0022 class=\u0022aligncenter wp-image-66188 size-full\u0022 src=\u0022https://www.5paisa.com/hindi/finschool/wp-content/uploads/2025/01/Short-Straddle-Neutral.png\u0022 alt=\u0022Short Straddle\u0022 width=\u00221454\u0022 height=\u0022934\u0022 srcset=\u0022https://www.5paisa.com/hindi/finschool/wp-content/uploads/2025/01/Short-Straddle-Neutral.png 1454w, https:/www.5paisa.com/finschool/wp-content/uploads/2025/01/Short-Straddle-Neutral-300x193.png 300w, https:/www.5paisa.com/finschool/wp-content/uploads/2025/01/Short-Straddle-Neutral-1024x658.png 1024w, https:/www.5paisa.com/finschool/wp-content/uploads/2025/01/Short-Straddle-Neutral-768x493.png 768w, https:/www.5paisa.com/finschool/wp-content/uploads/2025/01/Short-Straddle-Neutral-50x32.png 50w, https:/www.5paisa.com/finschool/wp-content/uploads/2025/01/Short-Straddle-Neutral-100x64.png 100w, https:/www.5paisa.com/finschool/wp-content/uploads/2025/01/Short-Straddle-Neutral-150x96.png 150w\u0022 sizes=\u0022(max-width: 1454px) 100vw, 1454px\u0022 /\u003e\u003c/p\u003e\u003cp\u003eThe payoff diagram above illustrates the short straddle strategy:\u003c/p\u003e\u003col\u003e\u003cli\u003eCall Option Payoff (Orange Dashed Line): This represents the payoff for selling the call option. The loss increases as the stock price rises above ₹850, while the maximum profit is limited to the premium received (₹30).\u003c/li\u003e\u003cli\u003ePut Option Payoff (Blue Dashed Line): This represents the payoff for selling the put option. The loss increases as the stock price falls below ₹850, with the maximum profit also limited to the premium received (₹30).\u003c/li\u003e\u003cli\u003eNet Payoff (Green Line):\u003c/li\u003e\u003c/ol\u003e\u003cul\u003e\u003cli\u003eThe combined payoff shows the strategy\u0026#8217;s overall performance.\u003c/li\u003e\u003cli\u003eMaximum Profit: ₹60, achieved when the stock price remains at ₹850 at expiration.\u003c/li\u003e\u003cli\u003eBreakeven Points: ₹790 (lower) and ₹910 (upper). The strategy incurs losses if the stock price moves outside this range.\u003c/li\u003e\u003cli\u003eMaximum Loss: Theoretically unlimited, as the stock price moves significantly away from ₹850 in either direction.\u003c/li\u003e\u003c/ul\u003e\u003cp\u003e\u003cstrong\u003e\u003c/strong\u003e\u003cstrong\u003eExample\u003c/strong\u003e\u003c/p\u003e\u003cp\u003eSuppose you believe the price of Reliance Industries, currently at ₹850, will remain relatively stable:\u003c/p\u003e\u003cul\u003e\u003cli\u003e\u003cstrong\u003eSell a Call Option\u003c/strong\u003e: Strike price ₹850, premium ₹30.\u003c/li\u003e\u003cli\u003e\u003cstrong\u003eSell a Put Option\u003c/strong\u003e: Strike price ₹850, premium ₹30.\u003c/li\u003e\u003c/ul\u003e\u003cp\u003e\u003cstrong\u003eProfit and Loss\u003c/strong\u003e\u003c/p\u003e\u003cul\u003e\u003cli\u003e\u003cstrong\u003eMaximum Profit\u003c/strong\u003e: The maximum profit is achieved if the stock price remains exactly at the strike price (₹850) at expiration. The profit is the total premium received (₹30 + ₹30 = ₹60).\u003c/li\u003e\u003cli\u003e\u003cstrong\u003eMaximum Loss\u003c/strong\u003e: The maximum loss is theoretically unlimited if the stock price moves significantly in either direction. The loss increases as the stock price moves further away from the strike price.\u003c/li\u003e\u003c/ul\u003e\u003cp\u003e\u003cstrong\u003eBreakeven Points\u003c/strong\u003e\u003c/p\u003e\u003cul\u003e\u003cli\u003eThe lower breakeven point is the strike price minus the total premium received (₹850 \u0026#8211; ₹60 = ₹790).\u003c/li\u003e\u003cli\u003eThe upper breakeven point is the strike price plus the total premium received (₹850 + ₹60 = ₹910).\u003c/li\u003e\u003c/ul\u003e\u003ch3\u003e\u003cstrong\u003eD. Short Strangle\u003c/strong\u003e\u003c/h3\u003e\u003cp\u003e\u003cimg loading=\u0022lazy\u0022 decoding=\u0022async\u0022 class=\u0022aligncenter wp-image-66189 size-full\u0022 src=\u0022https://www.5paisa.com/hindi/finschool/wp-content/uploads/2025/01/Short-Strangle-neutral.png\u0022 alt=\u0022Short Strangle\u0022 width=\u00221454\u0022 height=\u0022934\u0022 srcset=\u0022https://www.5paisa.com/hindi/finschool/wp-content/uploads/2025/01/Short-Strangle-neutral.png 1454w, https:/www.5paisa.com/finschool/wp-content/uploads/2025/01/Short-Strangle-neutral-300x193.png 300w, https:/www.5paisa.com/finschool/wp-content/uploads/2025/01/Short-Strangle-neutral-1024x658.png 1024w, https:/www.5paisa.com/finschool/wp-content/uploads/2025/01/Short-Strangle-neutral-768x493.png 768w, https:/www.5paisa.com/finschool/wp-content/uploads/2025/01/Short-Strangle-neutral-50x32.png 50w, https:/www.5paisa.com/finschool/wp-content/uploads/2025/01/Short-Strangle-neutral-100x64.png 100w, https:/www.5paisa.com/finschool/wp-content/uploads/2025/01/Short-Strangle-neutral-150x96.png 150w\u0022 sizes=\u0022(max-width: 1454px) 100vw, 1454px\u0022 /\u003e\u003c/p\u003e\u003cp\u003eThe payoff diagram above illustrates the short strangle strategy:\u003c/p\u003e\u003col\u003e\u003cli\u003ePut Option Payoff (Blue Dashed Line): This represents the payoff for selling the put option with a strike price of ₹820. The loss increases if the stock price falls below ₹820, while the maximum profit is capped at the premium received (₹20).\u003c/li\u003e\u003c/ol\u003e\u003col start=\u00222\u0022\u003e\u003cli\u003eCall Option Payoff (Orange Dashed Line): This represents the payoff for selling the call option with a strike price of ₹880. The loss increases if the stock price rises above ₹880, with the maximum profit capped at the premium received (₹20).\u003c/li\u003e\u003c/ol\u003e\u003col start=\u00223\u0022\u003e\u003cli\u003eNet Payoff (Green Line): The combined payoff shows the overall performance of the strategy.\u003c/li\u003e\u003c/ol\u003e\u003cul\u003e\u003cli\u003e\u003cstrong\u003eMaximum Profit:\u003c/strong\u003e ₹40, achieved if the stock price remains between ₹820 and ₹880 at expiration.\u003c/li\u003e\u003cli\u003e\u003cstrong\u003eBreakeven Points:\u003c/strong\u003e ₹780 (lower) and ₹920 (upper). Losses occur if the stock price moves outside this range.\u003c/li\u003e\u003cli\u003e\u003cstrong\u003eMaximum Loss:\u003c/strong\u003e Theoretically unlimited, as the stock price moves significantly away from ₹820 or ₹880.\u003c/li\u003e\u003c/ul\u003e\u003cp\u003e\u003cstrong\u003e\u003c/strong\u003e\u003cstrong\u003eExample\u003c/strong\u003e\u003c/p\u003e\u003cp\u003eSuppose you believe the price of Reliance Industries, currently at ₹850, will remain relatively stable:\u003c/p\u003e\u003cul\u003e\u003cli\u003e\u003cstrong\u003eSell an Out-of-the-Money Call Option\u003c/strong\u003e: Strike price ₹880, premium ₹20.\u003c/li\u003e\u003cli\u003e\u003cstrong\u003eSell an Out-of-the-Money Put Option\u003c/strong\u003e: Strike price ₹820, premium ₹20.\u003c/li\u003e\u003c/ul\u003e\u003cp\u003e\u003cstrong\u003eProfit and Loss\u003c/strong\u003e\u003c/p\u003e\u003cul\u003e\u003cli\u003e\u003cstrong\u003eMaximum Profit\u003c/strong\u003e: The maximum profit is achieved if the stock price remains between the strike prices (₹820 and ₹880) at expiration. The profit is the total premium received (₹20 + ₹20 = ₹40).\u003c/li\u003e\u003cli\u003e\u003cstrong\u003eMaximum Loss\u003c/strong\u003e: The maximum loss is theoretically unlimited if the stock price moves significantly in either direction beyond the strike prices. The loss increases as the stock price moves further away from the strike prices.\u003c/li\u003e\u003c/ul\u003e\u003cp\u003e\u003cstrong\u003eBreakeven Points \u003c/strong\u003e\u003c/p\u003e\u003cul\u003e\u003cli\u003eThe lower breakeven point is the put strike price minus the total premium received (₹820 \u0026#8211; ₹40 = ₹780).\u003c/li\u003e\u003cli\u003eThe upper breakeven point is the call strike price plus the total premium received (₹880 + ₹40 = ₹\u003c/li\u003e\u003c/ul\u003e\u003c/div\u003e\u003c/div\u003e\u003c/div\u003e\u003cscript type=\u0027text/javascript\u0027\u003ejQuery(document).ready(function()  {jQuery(\u0027#text_slider\u0027).owlCarousel({items  :  1,smartSpeed  :  400,autoplay  :  false,autoplayHoverPause  :  false,smartSpeed  :  400,fluidSpeed  :  400,autoplaySpeed  :  400,navSpeed  :  400,dotsSpeed  :  400,dotsEach  :  1,loop  :  false,nav  :  true,navText  :  [\u0027Previous\u0027,\u0027Next\u0027],dots  :  true,responsiveRefreshRate  :  200,slideBy  :  1,mergeFit  :  true,autoHeight  :  true,mouseDrag  :  false,touchDrag  :  true});jQuery(\u0027#text_slider\u0027).css(\u0027visibility\u0027, \u0027visible\u0027);var  owl_goto  =  jQuery(\u0027#text_slider\u0027);jQuery(\u0027.text_slider_goto1\u0027).click(function(event){owl_goto.trigger(\u0027to.owl.carousel\u0027,  0);});jQuery(\u0027.text_slider_goto2\u0027).click(function(event){owl_goto.trigger(\u0027to.owl.carousel\u0027,  1);});jQuery(\u0027.text_slider_goto3\u0027).click(function(event){owl_goto.trigger(\u0027to.owl.carousel\u0027,  2);});var  resize_66173  =  jQuery(\u0027.owl-carousel\u0027);resize_66173.on(\u0027initialized.owl.carousel\u0027,  function(e)  {if  (typeof(Event)  === \u0027function\u0027)  {window.dispatchEvent(new  Event(\u0027resize\u0027));}  else  {var  evt  =  window.document.createEvent(\u0027UIEvents\u0027);evt.initUIEvent(\u0027resize\u0027,  true,  false,  window,  0);window.dispatchEvent(evt);}});});\u003c/script\u003e\u003c/p\u003e\u003c/div\u003e\u003cdiv id=\u0022videos-tab\u0022 class=\u0022clearfix eael-tab-content-item \u0022 data-title-link=\u0022videos-tab\u0022\u003e\u003cdiv class=\u0022yt_iframe\u0022\u003e\u003ciframe title=\u0022YouTube video player\u0022 src=\u0022https://www.youtube.com/embed/-qyxvx9gfbs?rel=0\u0022 width=\u0022560\u0022 height=\u0022315\u0022 allowfullscreen=\u0022allowfullscreen\u0022\u003e\u003c/iframe\u003e\u003c/div\u003e\u003c/div\u003e\u003c/div\u003e\u003c/div\u003e\u003c/div\u003e\u003c/div\u003e\u003c/div\u003e\u003c/div\u003e\u003c/div\u003e\u003c/section\u003e\u003c/div\u003e\u003c/div\u003e\u003c/div\u003e\u003c/section\u003e\u003c/div\u003e","protected":false},"excerpt":{"rendered":"\u003cp\u003e5paisa\u0026#8217;s FnO 360 is an advanced derivatives trading platform designed for traders to facilitate Futures and Options (F\u0026#038;O) trading\u003c/p\u003e","protected":false},"author":1,"featured_media":11245,"parent":66063,"menu_order":0,"comment_status":"closed","ping_status":"closed","template":"","format":"standard","meta":{"_acf_changed":false,"footnotes":""},"categories":[],"class_list":["post-66368","markets","type-markets","status-publish","format-standard","has-post-thumbnail","hentry"],"acf":[],"_links":{"self":[{"href":"https://www.5paisa.com/finschool/wp-json/wp/v2/markets/66368","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https://www.5paisa.com/finschool/wp-json/wp/v2/markets"}],"about":[{"href":"https://www.5paisa.com/finschool/wp-json/wp/v2/types/markets"}],"author":[{"embeddable":true,"href":"https://www.5paisa.com/finschool/wp-json/wp/v2/users/1"}],"replies":[{"embeddable":true,"href":"https://www.5paisa.com/finschool/wp-json/wp/v2/comments?post=66368"}],"version-history":[{"count":16,"href":"https://www.5paisa.com/finschool/wp-json/wp/v2/markets/66368/revisions"}],"predecessor-version":[{"id":66384,"href":"https://www.5paisa.com/finschool/wp-json/wp/v2/markets/66368/revisions/66384"}],"up":[{"embeddable":true,"href":"https://www.5paisa.com/finschool/wp-json/wp/v2/markets/66063"}],"wp:featuredmedia":[{"embeddable":true,"href":"https://www.5paisa.com/finschool/wp-json/wp/v2/media/11245"}],"wp:attachment":[{"href":"https://www.5paisa.com/finschool/wp-json/wp/v2/media?parent=66368"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https://www.5paisa.com/finschool/wp-json/wp/v2/categories?post=66368"}],"curies":[{"name":"wp","href":"https://api.w.org/{rel}","templated":true}]}}