Module 6   Option StrategiesChapter 1


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1.1 – Setting the context

Before we start this module on Option Strategy, I would like to share with you a Behavioral Finance article I read couple of years ago. The article was titled “Why winning is addictive”.

Here is the article, authored by B.Venkatesh (a regular columnist for HBL) –

To buy and bet on a lottery ticket – a game that you typically avoid because you understand the odds of winning the jackpot is really low. However, if you do win the ticket, you will be most likely tempted to buy a lottery ticket regularly thereafter!

We exhibit similar behavior when it comes to our investments as well. What drives such behavior? As humans, our life is governed by anticipation. So, looking forward to winning a lottery is exciting and so is realizing that expectation.

Research in neuroscience has however shown that anticipating a win is more exciting than actual winning! Nevertheless, once you experience the excitement of winning a lottery you feel the need to indulge. That is, your brain compels you to buy a lottery ticket, even though you are aware of the odds of winning the second one.

This happens because we tend to use more of reflexive brain than reflective brain. The reflective brain performs calculation that helps you analyze and think. The reflexive brain helps you feel and is more intuitive. When you feel an urge to buy a lottery ticket, it is your reflexive brain that is pushing you to do so. Your reflective brain is likely to tell you that the odds of winning the jackpot for the second time are low!

Now consider trading in equity options. You know that buying calls and puts has its risk, as options often expire worthless. Yet we may choose to buy them regularly, especially if we have already experienced large gains from such investments, for it is the reflexive brain in action. With trading options there is another factor at play. We know that options carry the risk of losing capital when our view on the underlying stock or the index turns wrong.

The fact that we can lose money makes our experience of winning against such odds even more exciting! This is not so much true of lottery because a lottery is a game of chance while investments, we believe, require some degree of skill

–End of article–

You maybe be wondering, why I chose to post the above article right at the beginning of this module. Well, this article echoes some of my own thoughts; in fact it goes a step further to put things in the behavioral finance context. From the many interactions that I’ve have had with both experienced and aspiring options traders, one point is quite common – most options traders  treat options trading as a ‘hit or miss” kind of a trade. There is always a sense of amusement when one initiates an option trade, many don’t realize how fatal this naïve amusement can be.

Traders buy options (month after month) with a hope they would double their investment. Trading options with such a mindset is a perfect recipe for a P&L disaster. The bottom line is this – if you aspire to trade options, you need to do it the right way and follow the right approach. Else you can be rest assured the gambling attitude will eventually consume your entire trading capital and you will end up having a short, self destructive option trading career.


I do have to mention this now – the common phrase that goes like this (w.r.t options) “limited risk, unlimited profit potential” is a silent P&L killer. Newbie traders are disillusioned by this ‘theoretically correct’ but practically disastrous fact and thereby end up blowing up their books, slowly and steadily. Hence I do believe that trading options blindly without a strategy is a “dangerous but irresistible pass time”  ☺ (courtesy – Pink Floyd).

I don’t intend to scare you with this note; I’m only trying to set the context here. With the previous module on Options Theory, I’m sure you would have realized that unlike other topics in the markets, the science involved in Options is heavy duty. It can be quite overwhelming, but you will have to trust me here – the only way to understand and master options trading is by structuring your learning path with a good judicious mix of theory and practice.

In this module, I will attempt to give you a good overview of what you really need to know about some of the popular options strategies. Like always, I will try and stick to the practical aspect and ignore the unwanted (and confusing) theory part.

As far as I’m aware, there are close to 475 options strategies out there in the public domain and I’m sure at least another 100 odd strategies are hidden in the proprietary books of brokers, bankers, and traders. Given this should you know all these strategies put up in the public domain?

Answer is a simple no.

1.2 – What should you know?

You only need to know a handful of strategies but you need to know them really well. Once you know these strategies all you need to do is analyze the current state of markets (or the stock) and map it with the right option strategy from your strategy quiver.

Keeping this in perspective we will discuss certain strategies.

Bullish Strategies

  1. Bull Call Spread
  2. Bull Put Spread
  3. Call Ratio Back Spread
  4. Bear Call Ladder
  5. Call Butterfly
  6. Synthetic Call
  7. Straps
Bearish Spreads

  1. Bear Call Spread
  2. Bear Put Spread
  3. Bull Put Ladder
  4. Put Ratio Back spread
  5. Strip
  6. Synthetic Put
Neutral Strategies

  1. Long & Short Straddles
  2. Long & Short Strangles
  3. Long & Short Iron Condor
  4. Long & Short Butterfly
  5. Box

Besides discussing the above strategies I also intend to discuss –

  1. Max Pain for option writing – (some key observations and practical aspects)
  2. Volatility Arbitrage employing Dynamic Delta hedging

The plan is to discuss one option strategy per chapter so that there is ample clarity about the strategy, without any mix up or confusion. This means to say we will have roughly about 20 chapters in this module, although I suppose each chapter would not be too lengthy. For each of the strategy I will discuss the background, implementation, payoff, breakeven, and perhaps the right strikes to use considering the time to expiry. I also intend to share a working excel model which would come handy if you intent to employ the strategy.

Do note, while I will discuss all these strategies keeping the Nifty Index as reference, you can use the same for any stock options.

Now here is the most important thing I want you to be aware of – do not expect a holy grail in this module. None of the strategies that we discuss here in the module is sure shot money making machine; in fact nothing is in the markets. The objective here in this module is to ensure that we discuss few basic but important strategies, if you deploy them right you can make money.

Think about this way – if you have a nice car and drive it properly, you can use it to commute and ensure comfort of yourself and your family. However if you are rash with the car, then it can be dangerous to you and everyone else around you.

Likewise these strategies make money if you use it right; if you don’t then they can create a hole in your P&L. My job here is to help you understand these strategies (help you learn how to drive the car) and I will also attempt to explain the best condition under which you can use these strategies. But making sure it works for you is in your control, this really depends on your discipline and reading of markets. Having said this, I’m reasonably certain your application of strategies will improve as and when you spend more ‘quality’ time in the markets.

So starting from the next chapter we focus on the Bullish strategies with the ‘Bull Call Spread’ making its debut.

Stay tuned.


  1. rajendran says:

    Dear Karthik,
    Looking forward to only two strategies: a) Trend reversal, buy call with credit put spread and b) trend reversal, buy put with credit call spread.
    These are the only strategies i want to specialize on index, please help me.
    Thank you,

    • Karthik Rangappa says:

      Sure, meanwhile do have an open mind for other strategies as well:)

      • Melwyn Vaz says:

        Sorry, I mean pdf file of Module 6.

        • Karthik Rangappa says:

          We are working on it, will be putting it up shortly.

          • Mridula Somashekar says:

            I really like the way you explain.
            I request you to explain nifty and banknifty options trading with some examples.
            I would be very happy to attend a workshop on options trading.

            Thanking you,
            Yours sincerely,
            Mridula Somashekar

          • Karthik Rangappa says:

            Option theory is the same for all assets, be it Nifty, Bank Nifty, Infy options or SBIN.

      • Commodity Trader says:

        How can I download the whole module in a pdf format. The other modules have a direct download link to download the whole module at the end of the list of chapters.

      • samanth ch says:

        Hello sir gud evng ….sir i have one doubt in options….sir yesterday evening i bought bank nifty 19800 ce @104 …160 shares…n bought 18700 pe @ 37 rs…160 shares…on the view of us elections…later ban of 500 1000 rs news added…but today when market opened bank nifty did 18185 low…sir sir sir….my ce value opened by 4 rs…but 18700 pe not opened for 30 mins…later it was showing that premium was 41.80 rs…but 30 mins later market rebounded to 18800 …so according to options law the PE value should open around 300-400 but it was not happend….so finally i knew that market is gambling…it will operate by some rich people….what do u say sir…not only in zerodha pi software …the 18700 pe value not traded in brokers software like sharekhan ventura…etc…finally i booked loss ….so finally my query is if 19800 ce value trading perfectly @ 4 rs …then why 18700 pe was not opened for 30 mins …and later showing bank nifty @18800 ……if people those r trading in stock market…pls dnt enter into this gambling game…it is only for ratan tata birla…fills and diis…not for small investors…

        • Karthik Rangappa says:

          Samanth – this is quite unfortunate. Ideally, you should have had been in a position to square the positions and take the profits. But in this case it is purely because of the lack of liquidity which dint allow you to do so.

          • chanu says:

            but18700 PE option value should have increased? why premium amount does not increased even though market fall?

          • Karthik Rangappa says:

            The premium is not affected just by the delta. The volatility too influences the premium. As the volatility cools off, so does the premium. I guess this is what has happened in this case.

  2. keshav says:

    When can I expect the next chapter sir..?

  3. Shibashis says:

    Thanks Karthik.Eagerly waiting for this. Pls give some idea about how to pick particular Bullish/bearish strategy from 10 to 15 strategy. From my 6 months option trading experience , I made profit when at least one call/put sell is part of my strategy. But as Zerodha span calculator always show high margin for sell option, it is difficult for me to implement some strategy.

    • Sumeet Nagar says:

      Yes. Even i m also facing the same difficulty.. I m making profits consistently on selling rather than buying call/put options. But reward is less due to high margins.

    • Karthik Rangappa says:

      Picking the right strategy for the given market condition depends upon your reading of the market. This will improve as and when you gain more experience in the market.

      Also, selling options requires a margin amount.

  4. Sandeep says:

    Super say bhi Upaar .Picture abhi baaki hai as always Starring Karthik ji .

  5. Ravi Padmanaban V P says:

    Hi Karthik,
    The market turns bullish and bearish overnight. Hence learning bullish strategy and bearish strategy simultaneously will help us to apply the strategy in the market. Hence please explore possibility to publish one chapter for one bullish strategy the next for one bearish strategy ; one bullish strategy; one bearish strategy and so on. Is it possible?.

  6. Ankit Bhatt says:

    Hurray….. New Module is finally available…..

    as every time no word for appreciate simply wonderfull……. Eagarly waiting for new chapter ….

    thanks varsity team

  7. Khyati verdhan says:

    Hi kartik
    I feel sad after reading article of Mr. Nitin kamath on automated trading that you not provide it at zerodha for retail users in reasonable cost.
    Can there is any technique with you that the price on which I want to buy get executes, I am asking this because suppose when I place limit order to buy idea at 150 and current stock is at 147 it get executed and not at 150. My calculations predict that when price reaches 150 it definitely goes to 155. But this occurs only when price reaches 150. And at150 price moves sharply to156 and which I fails to book order manually. Please give suggestions to me.

  8. Madhujeet says:

    Hi Khyati… Two words from me if it might help you.. Even i was facing the same problem .. If stock is at 147 and and you want to buy it at 150 just put directly a stop loss buy order and trigger price as 150… And your purpose will be served.

  9. R P HANS says:

    Very Soon I will be joining ZERODHA specially for option strategy trading.
    I would like to know the technique where sitting in front of the computer/trading software continuously is not required.
    Thanks for starting this module. Sir, Relative value Arbitrage (Pair Trading) and Volatility Arbitrage will also be covered in this module as have mentioned in earlier? It is not clear to me from the topics listed above.
    R P HANS

    • Karthik Rangappa says:

      For that you need to setup expiry based options strategy. I would be discussing volatility arb options strategy.

  10. Sandeep says:

    Kab aaogey ,kab aaogey ,sir ji waiting eagerly for the next chapter,this wait is killing me

  11. Sandeep says:

    Today is my Happy Bday ,New chapter to banta hai gift main ;=)

  12. Sandeep says:

    Today is my Happy Bday ,New chapter to banta hai gift main ;=)
    Luv Zerodha

  13. Vipul says:

    Hi karthik sir.. Nice chapters in lineup. Sir what i wud like to suggest is that apart from above proven strategies, if u cud also suggest best and failsafe moves like selling otm / far otm but with some premium val options at 2:55 pm on expiry day or like Max pain indicator in option from expiry POV. Waiting eagerly for such stuffs as well. Thanks 🙂

    • Karthik Rangappa says:

      Max Pain is something we would discussing. Btw we have discussed options writing in the previous module..suggest you go through it once.

  14. Sandeep says:

    Lalit ji .Thank you very much for your wishes !!!

  15. Khyati verdhan says:

    Hi Kartika
    When I search for option contacts like it shows nifty 19 Dec 8000 CE and nifty 15 Dec 8000 CE. Here, what is the sense of 19 and 15 in above contracts???

  16. Pawan kumar singh says:

    I am new trader in Zerodha I think we should create a Whatsapp group on which we can share our calls and strategies. I am creating group if interested give ur no at 9198206781

  17. Milan says:

    Hello Mr. Karthink
    Thanks again for this great information about Option trading strategies.
    But i’m getting confused more and more after reading all strategies one-by-one.
    i don’t know which to follow and how to follow.
    you said around 475 option strategies are available in the market.
    can you say that which strategy has best past performance record. by broker/individuals/firms etc.
    if i’m bullish then which strategies i should go for,
    and i’m bearish then which strategies i should go for it.

    Sorry for grammatically mistakes.

    • Karthik Rangappa says:

      Milan – as mentioned in the chapter you need not know all the strategies. Just learn a few…I will discuss few practical strategies in this module which you can implement. These are spread across bullish, bearish, and neutral option strategies.

  18. aehsan4004 says:

    sir , in the last module you discussed a case where your friend got a 1300% return by going LONG CE on OTM calls …. can in this module we have a reconstruction of same scenario & try to assume what the outcome would be if your friend would have exercised these strategies instead of simply buying CE ?
    for example :-
    in case of LONG CE , if he would have done a bull call spread , or straddle or strangle etc …….what would have been the outcome for each strategy ?

  19. DS7574 says:

    Dear Karthik,
    Does chart work on options in PI.Thanks.

  20. rajdhoom says:

    Kindly add the other Chapters under option-strategies with Ebook.
    Lastly plzz update :
    1.Trading Psychology and Risk Management
    2.Commodities, Currency and Interest Rate FuturesCommodities, Currency and Interest Rate Futures
    3.Trading Strategies and System

    Thank You
    Merry Christmas
    Happy New Year

    • Karthik Rangappa says:

      Zerodha Varsity is an ongoing project – We have completed Modules 1 to 5 and the 7th. Work is in progress for the 6th module. It takes time to build the content, and we intend to go module by module. So this will take some time and I hope you stay tuned for more.

      Wishing you Merry Christmas & a Happy New Year!

  21. Sunil HC says:

    How can we be always in the profit zone….. Which strategy will support to lower our losses when the market get u turn from our calculation.

    • Karthik Rangappa says:

      Strategies such as a call ratio back spread and bear call ladder gives you a modest profit if the market goes down…but a big gain if the markets go up.

  22. Milan says:

    Hello Sir,
    today i read about binary trading is very popular in USA,UK.
    i don’t know what is binary option trading and is it illegal in india ?
    does indian broker provides features like it ?

    • Karthik Rangappa says:

      Don’t bother about this, binary options are not available in India and I don’t think it will be made available till a long time to come.

  23. aehsan4004 says:

    when we use a stop-loss on futures we get some reduced-margin benefit .
    is not the case same with option writing ? can we somehow reduce the excessive margin by putting a stoploss ?

  24. Arpan says:

    I read somewhere that selling options requires a margin amount but do they require margin in hedged positions (spreads)?
    i.e In a contract like “Buying an At the Money Option and Selling Out of Money Option”

  25. Sai Sreedhar says:

    Hi Karthik
    Can you please post the PDF download for this module?

  26. hp9202 says:

    Lots of congratulations from me….u guys are brilliantly committed towards traders’s education….i am one of the proud clients of zerodha and using ‘SHORT STRANGLE’ since last 3 months…it’s working very well….and hats off for this educational initiative….keep it up guys….!!!!!

  27. Tanmay says:

    Karthik Rangappa thanks for the amazing stuff you people have put together. These modules are very lucid and have helped me get grasp of market. Varsity has all the content from top to bottom regarding stock market.
    Next I want to make a request. Kindly make the option Strategies Chapter 6 in a downloadable pdf format. Your help in this regard would be highly appreciated.

  28. sandeep ullal says:

    very good work Karthik master.
    thank you.

  29. rupesh says:

    your explianation is very nice and eazy to understand and making confidence to trade

  30. Rajesh says:

    Hi karthik, requesting you to pls make available the PDF of option strategies.

  31. Nisarg says:

    Couple of question:
    1) Can you elaborate more on quality time with market?
    2) Which newspaper you recommend for daily reading and knowledge enhancement?

    • Karthik Rangappa says:

      Quality Time = Active trading and learning from both your winning and losing trades. Post trade analysis is the key.

      News paper – HBL, ET, and Mint

  32. can u please add download button to this to read it offline.

  33. RAJAN says:

    Kindly Publish Module 6 Option Strategies as PDF File .

  34. I suppose still working on the PDF. This is a very good work why not release it as one single book.

  35. ADARSH says:

    Sir, waiting of pdf eagerly. : )

  36. Deepak says:

    Why isn’t a pdf download available for this chapter?
    is it because this is still a work in progress or in draft mode?

  37. vishal wadekar says:

    plz make availible module 6 & 8 for pdf download

  38. Denis says:

    Hello KARTHIK …

    Do you organise seminars / class for this course “OPTION STRATEGIES”

  39. Chirag says:

    Sir, can you make ibook available for this module 6

  40. Jayanna says:

    Why did not discussed on Long & Short Iron Condor, Long & Short Butterfly and Box stratergies ? or I missed it 🙂

  41. Arun says:

    In the end of day data, we are shown FII buying or selling in Options(Index). What does the following indicate :
    1.) If data shows buying of 1000 crore rupees in index options.
    2.) If data shows selling of 1000 crore rupees in index options.

    • Karthik Rangappa says:

      In both the cases it simply means that they (all FIIs put together) have bought or sold options worth x amount of money. However, it may not be a wise thing to build a trading strategy based on this information. You will never know why the FIIs have bought or sold these.


    Does F&O and equity moves side by side?

    • Karthik Rangappa says:

      Yes, the price movements are similar. Spot (EQ) prices influences the price of F&O prices.

  43. sagar says:

    options stratrges hindi me nahi hai kya

  44. Ajay says:

    In Banknifty,please let me know a strategy which option to buy ?
    suppose if you take today it is trading at 22002,so at this point if you want to take options which option would you buy and why?

    • Karthik Rangappa says:

      If I knew, I would not tell 🙂

      Please do read up the module on Options, you will certainly get to know which strikes to trade.

  45. danish hakim says:

    Hi, Karthik

    First of all I would like to thank you for creating such a beautiful course on option trading with simplified explanation.

    I have a query. On friday I short sell Nifty 8700 PE @1.90, by monday and tuesday it made a low of 0.55 but still the price didn’t came down instead it made a high of 1.25 yesterday, I am bit confused that for consecutive 2 days market was up by 80-90 points but the value of option is not coming although tomorrow is expiry

    Can you please elaborate why this incident happened ?

    • Karthik Rangappa says:

      Danish, option premium is also a function of the volatility. With increase in volatility, premium also increase. However, with expiry close by, your options seems to be safe…unless something drastic happens in the markets. Good luck.

  46. Manoj O J says:

    Is market order allowed for Options in Zerodha?

  47. Karan Asnani says:

    Respected Sir,
    Can you please provide the pdf format of modules as it was provided earlier.
    Waiting for your reply

  48. CUTEDRAGON says:

    How can I download pdf file of module 9.

  49. Ashok says:

    What does it mean writing option have unlimited loss? Lets say if i am trading nifty option 1 lot and the margin is Rs.30,000. That means i only loose Rs.30,000 right?

    • Karthik Rangappa says:

      No, when you write options, there is a possibility to lose the margin and more.

      • Akram says:

        Hi Karthik..
        Let’s assume there is just enough or say little more than margin required for writing an option in the trading account.
        Will the trade be squared off by the RMS when the market goes in the opposite direction more than his capital in the trading account.
        For example last month when public sector banks made such a huge jump, what would have happened if someone had sold only a call option just the previous day. What would be his/her losses.

  50. Biswajyoti Kashyap says:

    Sir, I have been reading your modules and its very helpful. I request you to give the download pdf option back since its very difficult to read these material online. Hope you take some take some action

  51. tarun maheshwaari says:

    how can i download the stuff in pdf format.

  52. Waqaar says:

    Hello Karthik,

    Your trading’s content are very good quality and now I am more interested in options and want to study further on it and want to increase knowledge on it, so can you please suggest some really good books on option strategies .


  53. Ashok says:

    Let’s say I buy 1 lot of nifty option and pay premium. I am sure that the market is bullish. But suddenly market turned against me and it started moving down. I don’t have any stop loss. Still I believe market will move up.

    My question is… Do my position will automatically get exit OR can I hold my position and wait for the market turn in my direction (since maximum loss is premium paid)?

    • Karthik Rangappa says:

      If you have bought the option under NRML, then you can continue to hold the position till you wish. All MIS orders are squared off intraday.

  54. Ashok says:

    I lost 1.5 lakhs doing day trading and decided to concentrate only on swing trading using daily chart. Currently i have Rs.5000 in my trading account and i am not going to increase my capital any further. With this money i can buy OTM call/put option (only buying not selling).

    My question is, is it wise decision to do swing trading using options? I mean when i am sure that market moves in certain direction (using technical and fundamental analysis), can i buy OMT call or put option and hold it for some days ? I know about time decay, i won’t be buying during expiry week. What are the disadvantages of buying options for swing trading?

    Thank you

    • Karthik Rangappa says:

      Yes, it does make sense – as long as you are certain about the direction. Otherwise, it is very easy to lose 5K in 1 single options trade. Also, do keep an eye on the expiry of the option.

      • chanu says:

        1. Please, can you tell more about premium, trades, strategies to be used on the last day on which option expires & couple days before it? I’ve seen some videos on youtube for better understanding that trades on options expiry day after 2:50 pm / 2:55 pm chances of making a profit by shorting nifty & bank nifty are 100%. Please give some brief information on this.

        2. Why shorting on require nifty & bank nifty require huge amount? also seen in a video(youtube) says zerodha allows short trade on expiry. while checking some other information on margin calculator of zerodha it was mention that ‘Only buying is enabled only for nifty’ i did not understand what this means?

        3. is there any difference in margin on the option expiry day and normal days? like very low/ high for short and

    • ratnam says:

      even swing trading is also dangerous………it need followup… it does n’t mean that we r safe if the option has time

  55. ratnam says:

    why any one sell an option @ .05p or .10 at the expiry .. what he will get by selling .05p
    he may not be the buyer bcos no one sell at this price which is negligible

    • Karthik Rangappa says:

      Nothing really.

      • ratnam says:

        i did not understand. my doubt is… it should be a reason for doing any thing
        retail traders like me used to buy options @ .05p ..r.. 0.10p assuming jackpot(ex:10000 x .05p=500) risk is small amount. if it works …..but why some one sell it at that rate he has no profit chance @ .05p …@.10p only .05P
        to sell a option one needs around 40,000/- per lot (as per margin calculator) for this gets only 500…i think no one do this stupidity.
        as per my knowledge options will be sold at high premium
        then why he is selling?
        it will be very helpful to me if u clear…thk u

  56. Nishant says:

    Hi Karthik,

    Its a great article and you explained the things in a very lucid way. Just one thing can you also explain Covered Call Strategy.

  57. Ravi Kumar BA says:


    Below Option strategy looks to good to be true. Please correct me if I am wrong and where.

    TCS spot : 2583
    Short strangle:
    Cost/Margin : 1.7L
    Max Profit: 16K when spot is b/w 2500 to 2640 (140 points range).

    Question is:
    If I enter this trade on day T1. And on T1 + 1 day can I close the trade for a profit of 16K since TCS spot cannot move 140 points in a single day (or atleast I assume so)?

    • Karthik Rangappa says:

      16K profit is if you hold the position to expiry. If you intend to close it the next day, then you may profit a much smaller amount.

      • Ravi Kumar BA says:

        Thanks karthik.

        One thing I have come to understand is , though option strategies are helpful in cutting ur losses, they require huge margins (1L to 2L) especially when it involves a Sell leg. Is there any way you can reduce the margin ?

        • Karthik Rangappa says:

          If you plan to trade intraday then you can always use an MIS order to reduce the margins. However, you need to pay full margins for overnight positions.

  58. Ravi Kumar BA says:


    Just to double check. If I do a short strangle (or a naked option Sell) I can square off on the same day or when ever I want, Right. I don’t necessarily have to wait till expiry, correct?

  59. AHAMMAD says:



  60. YADNESH says:

    HI SIR,

    • Karthik Rangappa says:

      Options strategies are not really great for scalping. I’d suggest you stick to futures if at all you want to scalp.

  61. Mahesh says:

    Option strategies in which max loss is limited and defined, so there should be less margin requirement according to maximum loss like iron condor, butterfly, Bull put spread, Bear call spread etc

  62. Ankit Agrawal says:

    Previously there was an iBook option for download. Please provide the iBook option back or mail all iBooks to me at [email protected]

  63. Sadha says:

    Hi Karthick,

    If you see 19.06.2018 today’s BANK NIFTY Option Prices (21 June Expiry), The BANK Nifty is at 26309. The call option 26500 is priced 49 and PE 26100 is priced 89, I see there is a large difference in the call and put premiums as both these options have around 200 points from the spot. I understood this is because more demand for the put options but the still open interest responds differently.Today and all open interest. So I don’t understand this, If there is more demand PE open interest should be more than CE open intereset right? atleast for today.
    Also do you aware of any OPtion strategies where we can benefit from this CE,PE premium differences. I believe there there should be some strategies for anticipating this differences?


    • Karthik Rangappa says:

      Sadha, the pricing is not just a function of demand and supply. Remember, there is an angle of implied volatility as well. Perhaps, traders are bearish, which can drive the IV and therefore the option premium.

  64. Mani says:

    how to find whether a option contracts for a underlying is liquid?

    • Karthik Rangappa says:

      See the difference between the bid and ask of the premium. If the difference is large, then its not liquid, if its small then its liquid.

      • Mani says:

        Is 15 praise difference considered large sir, what happened is that sir, last month I bought put ratio back spread for PNB, even though position turned profitable I was unable exit one leg at desired price point sir.

        • Karthik Rangappa says:

          15 paise is not really large, but I guess there just no counterparty for your trade. This is a common situation with stock options.

          • Mani says:

            Actually what happened is that I was unable to exit an ITM leg because there was no counterparty. I waited two days to exit the position with very low profit. Is it possible to avoid those situations sir?

          • Karthik Rangappa says:

            Yeah, this is the problem with stock options, not all contracts are liquid.

  65. Mani says:

    If volatility of SBIN AUG CE is 20% and if I predict its volatility will increase to 30% by 15th aug is it advisable to initiate long strangle/straddle or should I be looking at some other strategies sir?

    • Karthik Rangappa says:

      If you think the volatility will increase, then it will lead to an increase in premium, hence the best way to exploit this by buying (or going long) on options. So yeah, long straddle/strangles works. Even a naked option would.

      • Mani says:

        But if I buy an naked option then there is a directional risk sir, so to eliminate it I am thinking of implementing long straddle/strangle. Is this the right way to trade increase in volatility sir?

        • Karthik Rangappa says:

          Yes, I agree there is a directional risk involved here. You can consider hedged strategies if you want to eliminate the directional risk.

          • Mani says:

            Hedged strategies meaning sir, Can you elaborate on that or suggest a reading material or two sir?

          • Karthik Rangappa says:

            You hedge your risk when you eliminate the directional risk involved in a trade. For example, there is no directional risk when you buy a call and put, this is a hedged strategy.

          • Mani says:

            Thank You sir

  66. Mani says:

    do you know any international markets with extended derivatives trading hours?

  67. Roopa says:

    Do you’ll conduct any workshop or training for options trading?
    The reason for this question is that understanding the options strategy in theory is easy but its application or execution is very confusing. Therefore, a workshop or training for execution of strategies would be really helpful.

  68. Vaibhav says:

    Can I get similar kind of link for module 6 & 9. 5th & 8th I manged to get and 10 looks not completed yet.
    As from where I want to print the download link is inaccessible due to network permission.

  69. Mani says:

    I came across the below line in a forum sir.

    “IV, have no meaning in illiquid options and can show wrong values. Nifty, Bank Nifty, and top 10 stocks are reliably liquid, and the next 40 are somewhat liquid. Liquidity and reliability drop after this point”
    Also found some what same line in sensibull disclaimer sir.

    what are those 10 liquid and remaining 40 stocks that are referred here sir?

    • Mani says:

      I am good at python programming sir, Also is there a way to filter options that are illiquid through programming?

      • Karthik Rangappa says:

        Yes, of course, you can, Mani. Firstly, I’d suggest you take a look at the Kite Connect APIs, here –

        1) Look up for the bid and offer price of a contract
        2) Calculate the spread between the bid – offer
        3) Divide the spread by the average of the spread
        4) If the % is more than 0.2%, then it is illiquid, less than that is alright
        5) Nifty 50 is the most liquid, run this exercise on Nifty 50 to set a benchmark for liquidity.

        • Mani says:

          thank you, I am using kite api for trading sir.
          I am finding it tough to execute option spread strategies at desired premium.
          Sometimes a leg or two remains pending in orderbook, in that case I manually intervene and place the order, driving the strategy cost higher.

          I am using same python algorithm framework to do day trading and pair trading strategies sir, which does not have above slippage problem sir.

          • Karthik Rangappa says:

            Sure, Mani. Let me know if you need any inputs.

          • Mani says:

            Thats really nice of you sir.

          • Mani says:

            Sir, How to decide upon SL and target for volatility based option strategies, is there any quantitative approach possible.

            Regarding position sizing, I was quite profitable with my option trading for last five months not huge money but consistent month on month sir, is it advisable to increase by trading size by a lot sir, what are the things I keep in mind before increase the position size sir?

            Below are the Thumb Rules I follow sir,
            1) Never buy naked option
            2) Never trade more than 50% of the money allocated for option trading

            Is there anything I can add here sir?

          • Karthik Rangappa says:

            Mani, you can always use volatility levels to identify SL. You can increase the position size over time when you have accumulated capital.

        • Mani says:

          Sir, continuing the above discussion, I am trying to write far OTM(5 to 7 strikes away from ATM strike) contracts based on SD and support resistance. I am unable to define liquidity or correct premium price of these far OTM contracts sir.

          • Karthik Rangappa says:

            You can define liquidity in your own terms. If you are trying to write say 5 lots, see if there are at least 25 lots bids at any given point. This should be good enough. Don’t forget to place limit orders.

          • Mani says:

            I have written a piece of code to calculate IV or premium of strike using black scholes model sir, last month my algo predicted 365CE strike of adaniports as resistance point, at that time spot was 330, LTP of 365CE is higher than 360CE, also spread of 365CE is highly mispriced sir. In this scenario I used ATM IV to calculate premium of 365CE sir, is this the correct way or is there a way to mathematical find approx premium for current spot sir, so that my algo places order once that approx value appears in bid price.

            I find it really challenging to automate option trading sir. It is making me think.

          • Karthik Rangappa says:

            Mani, yes..the single stock option strikes are quite illiquid, hence the spreads are bad. You can use the IV of the ATM strike as a proxy, no problem with this.

    • Karthik Rangappa says:

      Guess this is in the context of Nifty 50 stocks, Mani. You can find the list of these stocks here –

  70. Vaibhav says:

    Can I get similar URL for downloading PDF file for module6 and 9

  71. Vaibhav says:

    Hi Karthik,
    URL I am looking is kind of “”
    Actually the download pdf dropbox is blocked in my network…
    So I just need for module 6 and 9. Thanks!

  72. Prabhav Prashant says:

    Hi Kartik,

    Those theories about the brain reminded me of a book by Dan Kahneman- Thinking fast & Slow. Do give it a read at your perusal!

  73. alt says:

    Sir, is it possible to hedge option writing strategies like short straddle/strangle for a black swan event

    • Karthik Rangappa says:

      Yup, these are standard directional hedged strategies. You can use this for any event, including an anticipated black swan event.

  74. Mani says:

    Sir while downloading historical data from NSE website I found that Close price is different from LTP, why sir?

  75. prakhar says:

    if i sell a option should i be confident that my loss would not be more then margin blocked in my account because i think the rms will cut my position very early

  76. Mohan says:

    Hi Sir,

    Where can I find how to setup a Iron condor option trade in Zerodha?

    Best Regards,

  77. Chandan Singh Mabkotia says:

    Two points from my side
    1. I got 10 (R) 10 accounts opened for zerodha . I gave referals but in my dashboard it shows none of them.
    3 contacts were such who were willing to open demat account i gave their contact numbers n names they were not called up by any customer care executive . 2 more contacts were such who tried opening zerodha demat account before being in contact with me.
    they hv not filled any form but they had given their contact numbers . so when i refer their numbers it doesnt accepts.
    If u think once about me i become fool everytime convincing people to open demat from zerodha and finally it ends up with nothing for me moreover in some cases i become a down image character.
    Now what about my those 10 reffered accounts and others.
    Still i have 3 contacts who r willing to open demat account . But i am putting them on hold because first i want to confirm if i am working hard for getting rewards or for getting fooled..??

    2.I cant trade options from my account id ZH8263 . I dont know if it is not activated for my account or what.? Please let me trade options from tomorrow . or tell me what should i do to trade options. If any activation amount required u can deduct from my accont.
    This much lengthy letter i had to type because your customer executives are always busy talking to i dont know whom?

    Please try to understand the pain in the mudda.
    Atleast solve my 2nd complaint/request/point
    on priority for tomorrow. Thank you very much if u hv read till here .

    • Karthik Rangappa says:

      Chandan, I’ll forward your query to the partner’s team. You will hear from them soon.

      About options, is your derivative segmented activated? You can call the support desk to figure this or log in to kite and click on your profile. Scroll down and you should be able to check the segments you are activated in. You should have NFO enabled here. If not, please call the support desk and they will help you with it.

  78. Praveen Ch says:


    i am having a demat and trading account (Client ZI2021) with Zerodha.

    My query is—
    I would like to purchase one lot of nifty stock (for eg. 1750 shares of yesbank @ 190, 800 shares of Kotak Mahindra Bank @ 1170, 1800 shares of [email protected] 325) thorugh delivery and i would like to sell a Call option at higher levels. let’s say Yes Bank 230 CE option for december series. In this case, whether i will get any margin benefit as i am already holding entire quantity in my demat account.

    If i have to maintain margin amount, how much would be the margin amount (for Yes Bank)

    I have already raised a ticket through Zerodha Support portal and didn’t got the reply relevant to my query.

    Kindly clarify the query.

  79. Ramamohanarao M says:

    Hi Sir,
    My quettion regarding OPTIONS order placing:
    Recently too BankNIfty at 80/- under NRML 1 lot and its gone to 200/- and came to 180/- then again took another lot under MIS and sold MIS order at 200/-
    but NRML order average became 180/- instead of 80/- how it will happening when both NRML and MIS are different.

    Please help me on it for save future references.
    Many thanks in advance..!

    • Karthik Rangappa says:

      Like you said, these are two different product types, can you please check with support once? Thanks.

      • Ramamohanarao M says:

        Hi Kartik,

        I had call to support team but they are saying both are same in that case what would be use of MIS and NRML 🙁

        • Nakul Kulkarni says:

          MIS and NRML are only product types provided by Zerodha for you to avail intraday leverage. However, the exchange does not differentiate product types. Now in the above example, both your NRML and MIS trades are two simple buy trades in the exchange. If you square off 1 position, the position taken first will be squared off as per FIFO principle (First In First Out).

  80. Akshay says:


    Is it safe to assume that all these option strategies work when one plans to hold them till expiry?

    For betting on change in option premium, like in intraday trading, is it better to trade naked options with a stop loss placed on option price?


    • Karthik Rangappa says:

      Yes sir, to a large extent it does. However, in an event driven situation such as the corporate earnings, you may want to use an option strategy as opposed to naked ones.

  81. Akshay says:


    Volatility Arbitrage with Dynamic Delta Hedging – it looks like – if not sure shot – atleast the best money making strategy in markets. What could possibly affect such a trade negatively?

    – Delta is hedged
    – Theta works in our favour if we have sold the spread
    – Volatility can’t possibly shoot up if we have already sold at historically high volatility levels
    – We need to factor in trading costs and need to ensure enough balance in account to maintain zero delta

    What can go wrong in such a setup?


  82. Akshay says:


    My below analysis is purely intuitive, I have not verified it against real data:

    – For Commodity and Currency F&O, we can’t trade spot on the exchanges. It is very likely that the price discovered through F&O trading impacts the spot prices

    – For Stocks and Index F&O, underlying is also traded on exchanges, real price discovery happens in trading of underlying and F&O price movement should lag the movement in price of underlying by a few microseconds.

    Can we exploit this timelag using an algo to identify buy and sell opportunities in Stocks and Index F&O?

    Similarly, for Commodity F&O, say for Oil, the price movement in NSE might lag the movement in Oil F&O price in an international exchange (I don’t know which one), where Oil is more widely tracked. Can we exploit this timelag?


    • Karthik Rangappa says:

      1) In both these cases, I think the spot is a bigger market (both domestic and international)
      2) Theoretically yes, but algos work at sub microseconds making it feel seamless
      3) Yes, you can, but before you do so, you’d have to run a cost-benefit analysis. Lots of things involved, colocation of servers, bandwidth, hardware etc.
      4) Tough, cause you need access to the international commodities market.

  83. Santhosh says:

    Mr. Karthik, please and please write a module on calendar spread / diagonal spread. I think it is very very important and effective strategy to be missed out.

  84. Govind Srinivasan says:

    Hi, in your introduction to this module, you have mentioned about sharing a working excel model that would help us employ the strategy. However, I am unable to find it here. Could you please let me know whether it is available? Thanks.

    • Karthik Rangappa says:

      Govind, the excel sheet is available at the end of each chapter. Scroll to the end of the chapter and download the excel.

  85. Mani says:

    Sir does increase in margin affect the premium of option contracts?

  86. Mani says:

    what would happen if I let a index ATM short option position expire? and equity ATM short option position expire?

  87. krishna says:

    Hi Karthik,

    One query, just wanted to confirm on this.

    As on 16th Mar, NIFTY 11400 CE(20th March expiry) is at 92.9. So if Nifty remains closes below 11400 on 20th march, so this call will become 0. is my understanding correct ?

    So if i sell this call now and nifty remains below 11400, i will get this much premium : 92×75 =6900. Is that correct?

    • Karthik Rangappa says:

      Yes, the 11400CE is profitable only if Nifty crosses 11400. Below that the option turn worthless and you get to retain the premium.

  88. Mani says:

    Hello sir, how to write covered call,
    1) can I use SD to find the strikes?
    2) Should I maintain delta neutrality, while creating position?
    3) what adjustments can I do if spot reaches strike?
    4) what adjustments can I do if the spot price go down, below desired level?

    • Karthik Rangappa says:

      The covered call is all about buying in the spot and selling the OTM option. For example, buy 250 shares of HDFC Bank in the spot, and sell OTM option (1 lot). The idea is to earn a passive income on the underlying shares in your DEMAT. If the OTM becomes ITM, then you sell the same spot and make good the loss.

  89. Ron Kalra says:

    Dear Karthink,
    Is it possible to trade options with 1 hour chart or do I have to follow the daily chart. Basically what I want to know is that if I’m using options strategies like bull call spread, condor, straddle etc, do I have to wait for the expiry date or can I make money within few hours using hourly chart.
    For example if I’m doing a bull call spread on sbin and sbin is trading at 300. My first leg is buy CE 300 and Sell CE 320. If the price goes to 310 in 2 days, will I make money or my position will be no profit. B’coz CE300 will make me money but CE320 I’ll be loosing money. Assume we still have 20 days to expiry. Please advise
    Thank you

    • Karthik Rangappa says:

      Ron, you can use the 1-hour chart, no problem with it. However, personally, I like to trade options with EOD charts.

    • S SENTHIL KUMAR says:

      please use sensibull. it will give your P/L position for for every possible situations.

  90. Ron Kalra says:

    To add to my question above, can I day trade options ( using different strategies ). Infact I’ll really appreciate if you can give me some examples of Options strategies that can be used for day trading as well as for 3-5 days tradings period.

    Once again thank you very much for all you do for us.



    • Karthik Rangappa says:

      As I mentioned in my earlier comment, I’m not a big fan of trading option for intraday. You are better off trading futures. That said, you can pretty much use any single/two leg strategy for intraday as well.

  91. Ron Kalra says:

    Dear Karthik,
    really sorry to bother you again. just want to ask you if the strategy that I’m thinking will work or not. Also, I’ll appreciate if you can let me know what are the disadvantages of the my strategy. Also, advantages ( if any ) haha
    let’s say I think SBI will go up by 5 rupees before expiry and we have 20 days remaining for expiry. Now, what if I buy OTM call option with delta 35. What I’ll do here is that I’ll by 3 OTM call to make delta 1.
    After 5 days SBI moves up by 3 rupees ? will my entire position of 3 OTM call move by 3 Rupees ?? Pls see we still have 15 days remaining to expiry ?
    Does this kind of strategies useful and should I use it or not ?

    Thank you very much in advance


  92. Suvajit says:

    Hi Karthik,

    A quick query please, Let’s assume I BUY Call PE Deep OTM and by the time of expiry it becomes further DEEP (ha ha ha) and their are no Buyers for that Option Anymore. Then what will happen after the Expiry Day or How do I SELL that position?

    Just little curious. 🙂


  93. Kiran says:

    Hi Karthik, Do not see chapters for straps, strip and butterfly? Where can I find??

  94. Mani says:

    Hello sir, is there a way to place conditional orders in zerodha like buy/sell a particular strike call when price reaches desired level.

  95. Ron kalra says:

    Hi, I have been wondering for a long time how can I use options strategies which I don’t want to hold until expire.
    Let’s say I’m trading 5 mins chart and have my entry and exit plans on 5 mins chart, can I use options strategies. ( I want to use all possible strategies on shorter time frame, rather than having a naked open position )
    Can u pls let me know which all stategies could be used for smaller time frame.
    Is it necessary for me to hold the options to expire?

    • Karthik Rangappa says:

      Technically you can use option strategies, Ron…but from my experience, its best to take directional calls with naked options for intraday.

  96. Ron says:

    Hi Karthik,
    adding to my question above.
    I want to know is there any limitations when it comes to using the options strategies. I want to know can I use all the strategies like bull call spread, iron condor and all the other available strategies on shorter timeframes like 5 mins, 1 hour or all these strategies are based on expiry.
    Please help me clear the concept and let me know which all strategies could be used on shorter timeframes.
    Many thanks

    • Karthik Rangappa says:

      Request you to check my previous comment. But yeah, if you are using this for intraday, then you can use it the same way as you’d for end of day. There is no change there, in terms of execution.

  97. Ron says:

    Thank you Karthik

  98. Aditya says:

    Hi Karthik,

    In the article, you have mentioned to talk about “Volatility Arbitrage employing Dynamic Delta hedging” in detail. Has it got published? If yes, can you please give the link.


    • Karthik Rangappa says:

      Ah, no Aditya. Towards the end of the module, I got a sense that the topic could be an overkill. So decided to drop it.

  99. Guhan says:

    Hello Sir, I came across something called directional option writing, what is it? what are the strategies that can be used to implement it

  100. Premakumar K S says:

    Respected Sir,

    Some of the chapters are missing eg. Iron condor etc?

  101. Abudhar al Hassan says:

    Dear Karthik,
    Belated happy new year!!! Hope you are doing well. Bombarding you with questions again…sorry…
    1. If I buy 750 units of NiftyBEES, will it be equivalent to buying 1 lot of Nifty?
    2. If yes, then can I implement a collar strategy using 750 units of niftybees as underlying along with Call & Put NIFTY options?

    Thanks & Regards,
    ~ Abudhar al Hassan.

  102. Abudhar al Hassan says:

    Thank you very much Karthik. Just two more queries…
    1. Supposing I own 750 units of NiftyBees and I try to sell a NIFTY call option as a covered call let’s say..will i get margin benefit as I would with Nifty Futures?
    2. Also..since NiftyBees is 1/10th the value of NIFTY shouldn’t the current price of NiftyBees be 1218.7 when Nifty is at 12187? Why is it trading at 121.87 instead? Am I missing something?

    ~ Abudhar al Hassan.

    • Karthik Rangappa says:

      1) Not sure if this possible. However you can pledge the Niftybees for margin benefit.
      2) Hmm, this is because of the tracking error. This is common with index tracking ETFs.

  103. Kishore Ranjan Das says:

    The first lesson of economics is scarcity: there is never enough of anything to fully satisfy all those who want it.

  104. Munish Bahl says:

    1.What level of Vega will erode Theta completely.
    2. Is there any rate of change of VIx that can show up market trend
    3. Can VIX be related to weekly expiry option getting worthless.

    Any study available on these points.

    • Karthik Rangappa says:

      1) If there is more time to expiry, Vega has a higher influence. Lower the time to expiry (like a day or 2), the effect of Theta is higher
      2) Nope
      3) Yup

      I cant seem to find a good source, will let you know if I do.

  105. Vaishnavi Sanjay says:

    In this chapter you promised to explain us nearly 20 strategies but you concluded with just around 5to6 strategies.. Any particular reason?.

  106. Vaishnavi Sanjay says:

    Sir , Tell us about Iron Condor

  107. Vaishnavi Sanjay says:

    Sir .,

    I have a Long Position of Idea CE 5 Expiring April 30 Which is Slightly OTM at this Moment Purchased @ 0.65 . Idea has Rallied today 24% Currently 4.10. I hope the rally will continue for a day or two then it will drastically crash this is happening for the past many days . Strike 5 PE , Strike 6 PE ,Strike 7 PE , are trading at 1.20, 2.75, 3.70 and Volatility 202.50% , 220% and 230% Respectively . What should be the Strategy if you were to execute such a position . I know you would not touch beyond SBI, Reliance , NIFTY , INFY & TCS . I got Trapped into Idea in the Month of March by being reckless after reading Options , i was overwhelmed by reading it . then i started reading strategies and got scared ( what really scared me was Max Pain , ) . I had thought Options are a cake walk . as i progressed reading your articles it was getting clear and clearer how reckless i was .

    I should have Initiated a stop loss earlier itself but i thought i have ample time so kept quite . Theta eroded my value as well at some point it was down to 5 paise . At this point i want to know what happens if it becomes 0 in between and then after some time it gets back to the value , will the option dies once it touches 0 or it will again gain value after fully eroded by 0 . I don’t know if what i am asking is Considered Ethical or not , if this is okay , Please guide me .

    You have been a wonderful Teacher , But by asking this assistance if i am breaking my limits Pardon me Sir .

    • Karthik Rangappa says:

      Here is a thumb rule – high volatility suggests that you should not be a buyer of options, rather a seller. So keeping this point in mind would have made you avoid buying the option. Anyway, as the expiry approaches the option premium decreases to zero (assuming there is no further rally in the stock). At 0, the option will expire worthlessly and will have no value.

      So always look for volatility and take trades keeping that in perspective.

  108. Ron says:

    Hi Sir,
    What are good strategies if I’m planning a trade which I intend to hold for few days ( 3-5 days ). I mean all the informations when we read about options strategies talk about holding it till expire but no-one talks about how the strategies will behave when we intend to buy and hold it for 3-5 days or maybe 10-15 days.
    what I basically want to ask is
    1. If we are not holding the contracts till the expire then we don’t have to bother about Break even points of our strategies. Suppose I choose to trade Bull call spread so the moment market moves in my direction I should be making money right away. Am I correct.
    2. can I plan my trades using deltas. Like Long 80 delta and short 30 delta

    • Karthik Rangappa says:

      You can hold these all these strategies for a few days as well, Ron. No need to wait till expiry.

      1) What matters would be the change in premium
      2) Yes, you certainly can.

  109. Ron says:

    Thank you karthik, appreciated.
    By the way in one of your study material you asked us a question about how to hedge straddle with future contracts ( I guess it was for delta neutral ). If I’m not wrong I guess it was a question of “How to maintain Delta neutral”.
    I know you said it’s a big topic and will next a separate chapter to explain it. But I’ll appreciate if you can provide with brief explanation so I can dig deeper into it to understand.
    Many thanks

  110. Arvind Verma says:

    Hi Karthik,
    First of all thank you very much for explaining the options in such a nice way, I was very confused but now most of my doubts are cleared. After reading your module and to check my understanding I tried to buy an option call April 10000 CE at a premium of Rs 3.8 (I choose this as just want to check my understanding and here the loss would be just Rs 285 (3.8*75)) but the order at zerodha got rejected, below are the details
    11:47:39 BUY NIFTY APR 10000 CE NFO NRML 0 / 75 0.00 REJECTED

    Strike price is outside the allowed range. Check the margin calculator for allowed strikes, or try a strike closer to the spot price.

    As per my understanding to buy an option (whether call or put) we just need to pay the premium and there is no need to maintain the margin money and if one incur a loss it would be the premium paid, why did my order get rejected and what does the above statement mean? If I want to buy a Call of 10000, 11000 or more how can I buy? If we sell an option then margin money concept is understandable as there is no limit of loss but for buying it is not. Please help.
    I could not reach zerodha’s customer care to lockdown. Thanks in advance

  111. sagar says:

    i am looking for banknifty..,but how i wil do where i have to go to buy…?


    Hi Karthik, Please correct me, but i think most of the strategies will fail if we let ITM call option expire, since STT is calculated on the notional value rather than the premium value of the underlying at the expiry of contract.

  113. Loki says:

    Iron condor is not published.

  114. jayesh Jain says:

    Sir, at start you mentioned which strategies you are going to discussed in option strategy module, but missing long and short iron condor, long and short butterfly and iron butterfly strategies. Requesting to kindly include these strategies in the module along with excel. Thanks

    • Karthik Rangappa says:

      Iron condor will be up today, Jayesh. I had not done that because of high margin requirement, but it is no longer the case.

  115. Jayesh says:

    Thank you sir.

  116. Jayesh says:

    Sir do you provide trade recommendations? or publish your trades so as to follow your trades

  117. udhay says:

    That car example at the end!

  118. rajat pahuja says:

    hello sir
    sir i read something about binary option on internet. Is binary option is the same what we have learned in previous module ?

    • Karthik Rangappa says:

      No, binary options are different. They have a 0 or 1 outcome. They are not available (for good reasons) in India.

  119. rajat pahuja says:

    sir one more thing , is there any chapter on cryptocurrency on varsity ?
    Is zerodha going to provide a platform for global market ?

  120. Deep Patel says:

    can you guys please make these comment discussions visible in the mobile app too

  121. Rajesh says:

    Karthik you are a very good teacher. Awesome

  122. Rushikesh Gawde says:

    Hello karthik and Nithin sir,
    I have account in zerodha but i am really upset with this account now. i have shifted from geojit to zerodha for best performance Portal. But from some days i am getting too much problems regaarding Lagging while trading, Market order nt executed on time and gave me lot of losses in this pandemic. Me & my dad getting problems while option trading cause of this i got 8 k of losses.

    a)Sometimes your portal gets hanged or lags too much while trading in options so market order executes lately and in scalping it gives too much loss in seconds.
    b) sometimes it shows margin problem even if we have eenough marging in the account.
    c) in basket orders when we try to pur but and sell strategy at that time only sell order executes and buy order rejects.
    d) from opening of my account date till today i have tried bracket orrders everywhere but it’s always blocked by your side.then what is the benefit of that option o your platform????
    i have tried to call customer care they told us will call you back after crosscheck. but in 7 days i never get a ssingle call.
    Please revert me with your mail id’s as soon as possible. so i can mail you problems in your portal in detail. Nithin sir please help me with this and give me some contact person or email id where i can get solutions on problems i am facing.

  123. Balaji says:

    With the options required to settled with physical delivery , would it void the strategies discusses here to hold till expiry unless it an INDEX option?

    • Karthik Rangappa says:

      NOt really, you can hold them up until expiry. Also, for hedged positions, the margins are actually lower.

  124. Karan says:

    Hi Ravi, I was finding below Option Strategies in varsity but unable to find, please help regarding the same & if they are not posted in Varsity then please posted the same so that we learn these also.

    Bullish Strategies

    Bull Call Ladder
    Call Butterfly
    Synthetic Call

    Bearish Spreads

    Bull Put Ladder
    Bear Put Ladder
    Synthetic Put

    Neutral Strategies

    Long & Short Iron Condor
    Long & Short Butterfly

  125. Karan says:

    Hi Karthik Rangappa,

    After checking these are which are not on Varsity

    Only Following are on Varsity
    Bull Call Spread
    Bull Put Spread
    Call Ratio Back Spread
    Bear Call Ladder
    Synthetic Long & Arbitrage
    Bear Put Spread
    Bear Call Spread
    Put Ratio Back spread
    The Long Straddle
    The Short Straddle
    The Long & Short Strangle
    Max Pain & PCR Ratio
    Iron Condor

    Please share link or provide these on varsity for better understanding of Bullish, Bearish, Neutral Strategies

  126. Mani says:

    I have a basic question sir, I read both futures and option chapters sir, I understand that option premiums are derived from black-scholes formula. but I am still confused whether futures or spot determine option prices? Because there are contrasting theories and balck_scholes formula supporting those, some articles say options follow spot others say futures. Which one is correct sir? Can I look at nifty futures chart and take trades in options?

    • Karthik Rangappa says:

      Both are correct, but depends upon which futures you are seeing. For example, commodities option tracks commodity futures. Stock options, on the other hand, looks at the spot price.

  127. Mani says:

    Indices sir, does NF and BNF option premium move with indices or based on futures?

  128. Mani says:

    ok sir, thank you. Why I asked this question is I am planning to switch from naked futures to credit spreads for directional trading. Is ATM-OTM combination better or OTM-OTM combo better sir(weeklies). I am not going to hold this spread till expiry, I will exit when my future SL is triggered. I chose weekly to avoid IV spike and use theta decay to my advantage, also I will rollover the spread one day before the expiry.

  129. Mani says:

    why ATM-OTM combo sir? is it because of more premiums or any other reason sir.

  130. Mani says:

    I am still not getting it sir.
    Is it because of gamma effect you are suggesting ATM-OTM combo sir, so even if NF opens against my view I will lose less than OTM-OTM combo?
    but in OTM-OTM combo theta decay will be more, isn’t it sir? also POP of OTM-OTM combo is higher.

    • Karthik Rangappa says:

      Not gamma effect, Mani. Imagine, you take a call thinking target will hit un 5 days, just in case that goes wrong and extends up to 10 days, then under such a circumstance, you are better off with ATM-OTM option.

  131. Mani says:

    oh ok sir, I get it, you are implying that RR of ATM-OTM combo is better than OTM-OTM option.

  132. Anil says:

    Hi Sir,
    Have you discussed Calendar Spreads, anywhere?


  133. Deepak Patil says:

    Dear Karthik Sir,
    You have made options journey simple for us. I have doubt regarding market volatility with respect to options selling.Pls guide.
    1)How to decide option selling strategies like iron condor , short strangle ,short stradle based on volatility ?
    2) Which website is to be refer for volatility (IV number) of stocks ?
    3) What is range for volatility ?…means what are numbers for low and high volatility for nifty/bank nifty/stocks ?
    4) Which is the best option selling strategy for working professional ?
    5) How to use Delta, Vega ,theta in practical for option selling ?

    • Karthik Rangappa says:

      1) Higher the vol, higher is the option premium. If the premium is expected to go lower owing to volatility cooling off, then sell options. Else, you don’t.
      2) Do check Sensibull’s website
      3) Depends on the instrument, no standard figures
      4) Nothing like that exists, it really depends on the market condition
      5) Have explained that in the module.

  134. Atul says:

    Hi Karthik,
    You have produced excellent articles on Zerodha varsity forum.
    I was wondering if you could help with a simpler option to calculated Delta for Option strategies. Because in some case negative sign was addded and it is confusing to newbies who are just starting to learn. Is there a combined strategy Delta calculator clearly highlighting if the overall strategy is profitable or not?
    Please throw some light in to this if you find this question worthwhile.


    • Karthik Rangappa says:

      The easiest way is to keep the delta table in mind, we have discussed this in the chapter. This will give you a rough estimate, which is ok for most of the trading decisions.

  135. Deepak Dhillan says:

    Sir, how can we plot straddle strange charts on Excell with live data feed.
    Is it possible at all?

  136. Mahesh says:

    Karthik sir, please include butterfly strategy too. It’s not included in the current module. Please include it too


    sir your explaining power is excellent i have learn so much from varsity
    i have a question i want to buy some option at a price higher than CMP and also want to place stop loss order at the same time my SL>CMP and SL<buying target/trigger price is it possible by GTT oco order in zerodha if possible plz clear with example

  138. Pradeep maheshwari says:

    thanks for prompt reply sir
    This means before execution of buy order i can’t place SL order.
    if i am having intention of placing buy order as well as SL order in a single click is it not possible
    subject to the condition : BUY price > SL> CMP
    for example CMP is 40
    i want to buy when it reaches 50
    and want to place SL at 48
    what is the way to do it if it is possible

  139. trader says:

    A few days ago I was trying to execute the protective call strategy using Banknifty futures and long calls. I initially bought ATM calls and a few seconds later shorted one lot of banknifty futures. I got the margin benefit and so I was able to execute the trade by having just Rs.50k in my account as free cash. I placed a stop loss about 100 points away from my entry in the banknifty futures and the system readily allowed me to place it without any difficulty. However when I tried to place a target level of about 180-200 points below my entry price for banknifty futures contract I got a rejection message saying that to do that I require Rs. 199000 in my account. Why did this happen when I tried to place a target in my banknifty futures leg? Is it because some margin was already blocked since I had placed a stoploss before? After I saw the rejection message I immediately cancelled my stoploss order and place an exit order at market price for the futures contract…but I would like to know if it is possible to place a stoploss and target using MIS code for such a trade without bringing in large margins (eg. Rs199000 in my case). Or is it that only one order can be placed (either stoploss or target) if I already hold a banknifty futures contract which is also hedge by long options?

    • Karthik Rangappa says:

      Thats right, the margin was utilized and your target sell was considered a new position. Why don’t you try cover order instead?

  140. trader says:

    Hello Sir,

    My two questions are:
    • What if I bought a banknifty option of a particular strike which was allowed by zerodha during the day but when it tried to sell it the strike had moved beyond the allowed range? Will I still be allowed to square off my position by selling it?
    • Sometimes I have noticed that the strikes allowed for trading are far away from the prevailing market price of banknifty. Eg. If banknifty is trading at 34000 then as per zerodha margin calculator page the allowed strikes for trading are in range of 34800-35200. This usually happens when there is a strong movement in banknifty. In such a case I am not able to buy any atm option. What to do in this regard?

  141. Siddhant Patra says:

    Aah, the pink floyd reference :’)

  142. Haresh says:

    Hi Sir,

    What is the point of straps and strips?

    These are not delta neutral and require the market to move either way?

    Also why have you not spoken about synthetic call, synthetic put, strip/straps and box strategy?

  143. Chandan says:

    Hello Sir,

    Do why people long/short butterfly put and call and long/short condor call and put?

    They both get satisfied by long/short Iron Butterly and long/short iron condor.

  144. Namran says:

    Dear Sir,

    Lets say I am holding 1700 shares of tata steel in my demat acc.
    I am long towards Tata steel but there is these recent covid disruptions causing the price to temporarily drop.

    If I buy 1 lot of ATM PE option of tata steel (1700 shares). Will I be protected adequately protected by any downside movement?
    Or do I need to sell a future for that?

  145. Chandan says:

    I was asking why do people deploy
    put butterfly and call butterfly as well as put condor and call condor??

    They could use an iron butterfly and iron condor correct?

  146. Tinti says:


    I want to implement a covered call strategy.

    I am holding roughly 400 shares of HDFC bank ltd.
    If I short an OTM call option will my margins reduce since I am holding the stock or will they be the same as a naked short option?

  147. Hasan says:

    Hello Sir,

    When reading option chains. Why are the Open interest shown in total value like 10.5 L etc.
    Nifty having an open interest of 10.5 L means 14000 contracts open.
    While a company like power grid having an open interest of 10.5 L means it has roughly 263 contracts open.

    This is often confusing the reader in measuring liquidity.
    Shouldn’t open interest rather show total contracts available??

    I am using Sensibull’s option chain and NSE option chain.

  148. Hasan says:

    Hello Karthik,

    Sensibull does the same thing.

    They show total number of shares available based on open interest, not total contracts open.

  149. Tital says:

    Hello Sir,

    When placing multiple-leg option strategies such as the Iron condor, can I place all orders on one click and exit all orders in one click?

  150. Ruchie Srivastava says:

    Kartik R.
    I love the way you write, though i may never trade options and stick to stocks. I would like to like to take this moment to congratulate you on the phenomenal work you do…and that too on a free platform.

  151. Saptarshi Panda says:

    Sir , I am not getting the butterfly, box strip , &strap strategies in the next module . pls help

  152. Harmesh says:

    Hello Sir,

    I decided to initiate a bull call spread in Cadila HC at 650 CE and 660 CE while the stock was at 640 CE.
    There was decent liquidity at 650 Ce and 660 ce.

    Scenario 1
    Now Cadilla CMP reduced to 625-635 levels, all of a sudden the bid to ask spread in 650 Ce and 660 CE had a big difference and now I am unable to exit my position as my current loss is roughly 900-1000 but if I exit my positions at the current of 3-5 rs I would lose substantially from impact cost.

    Scenario 2
    Similarly If Cadilla CMP moved to 670-680 levels. Both my Strikes become ITM and again the liquidity has reduced substantially. My position is profitable but I would only receive Rs 2500 instead of Rs. 13000 I would receive at expiry.
    What should I do, exit my position and lose out on impact cost or just wait?

    It is very hard to predict what nifty and bank nifty will do, easier to predict a stock. But stock options don’t have much liquidity so what can one do?
    Futures are extremely risky and worst case I can covert a future to synthetic call/put to give me some protection. But using futures i cannot create the strategies that I could create in options?

    • Karthik Rangappa says:

      Harmesh, I agree its a tricky situation. Hence you need to implement these strategies in stocks like Cadila (or any stock which has liquidity issues) under the following circumstances –

      1) You are bullish on the next few days outcome
      2) You dont mind waiting till expiry
      3) You dont mind taking or giving delivery

      Without these conditions, its tough to trade these stock options.

  153. Harmesh says:

    Hello Sir,

    Thank you for your response.

    If I have a Bull call spread why would I need to give delivery or take delivery. This is not a naked position hence it is completely squared off at expiry correct?

    • Karthik Rangappa says:

      It depends on the moneyness of your options. If both the options are ITM, the positions will offset. If one is ITM and other other is OTM, then it wont be offset.

  154. Sathya says:

    Sir,I bought Jindal Steel July 29 430 CE 1 LOT(2500) @ 4.95
    Rps and sold @ 5.5 what will be my profit and will I lose all my 12375 as Jindal Steel is 394.55 now as the stock has not hit the strike price

  155. Ketan says:

    Hi Sir,

    What is the difference between Put Horizontal spread (sell weekly atm put and buy monthly atm put) and Call Horizontal spread (sell weekly atm call and buy monthly atm call)?

    The pay off graph and everything is practically the same.

  156. trader says:

    how many quantities of banknifty or nifty options (ATM strikes) can I trade as an option buyer for smooth execution of the trade using market order/limit order (such that my whole order gets filled easily)? i am an intraday trader and was contemplating on trading with a maximum of Rs. 15 lacs per strike price as an option buyer but I have doubt whether my order will not get filled quickly/smoothly because the amount size is large…could you please tell me how much quantities i should trade in total after using basket order?

  157. Mahadevan says:

    Hello Kathik,

    Thank you so much for putting up all this material. I found this study material of immense help in satiating my new found interest in options.

    I’m a long term investor (active since 2004) and recently found about about LEAPS. Can you please lead me to more study material about LEAPS, especially in the Indian context? Are they traded in India? My broker (ISEC) does not allow me to buy these. If Zerodha has this facility, I will be interested in opening an account.

    Thanks again.

    • Karthik Rangappa says:

      Happy learning, Madadeven. From what I know, LEAPS are not liquid enough in India. Let me do some research around this and see if things have changed.

  158. Mahadevan says:


    Thank you for your prompt response Karthik.
    1. I checked the NSE Options Chain and do not see a lot of long term options traded. There is some decent volume in the Dec 2021 series. There is some trading on Dec 2022 series, albeit minuscule. I have not checked if they are overpriced or not. I do not intend to actively trade in these. It is just about buying them during a market crash and holding on to them for the long term. All I intend to do is to maximize the leverage that options offer while doing away with time decay. Would be nice to know your views on this.
    2. Are there any other long term options strategies you are aware of?
    3. My main quest at this time is an online broker who will allow me to buy these calls. Will be grateful for any support on this.

    Thank you again for your efforts in putting this study material together.

    • Karthik Rangappa says:

      I understand, let me try and gather some info around this. Its just that I’ve never traded these and hence never tried to figure how they operate.

  159. Mahadevan says:

    Thank you Karthik. Appreciate your efforts.

  160. Srijan says:

    Hi Karthik,
    These modules are very informative. I wonder how much time and effort you must have put in to explain concepts in such a simple manner.
    Keep up the good work!

    Role of option Greeks, Strategy payoff, breakeven points, max loss or profits all these points are very clear.
    Can you share some insights on the following: If an option seller wants to risk 1% per trade and would be happy with 3-5% return per month
    1) What should be a decent R Multiple one should look for before entering the trade?
    2) Let’s assume we enter a 1.25 R setup but we might realize only 0.4R or 0.6R. Basically the outcome of a trade depends on the ways market situations unfold and a trade might not realize the max profit. So, what should be a good average R multiple?
    3) For Delta neutral strategies what is a good time to enter 30/45/60 days to expiry? How should one select the expiry series for such trades?
    4) Any recommendations (blogs, books or YouTube videos) to learn how to adjust the trade if it goes against us so that the loss can be minimized?


    • Karthik Rangappa says:

      1) There is no fixed ratio here, but generally speaking, anything better than 1:1.5 is good
      2) Like I said, there is no fixed ratio. But if you are halfway through, and you think the market situation is likely to change, then don’t hesitate to book profits
      3) 30 is good
      4) Not sure, need to check this myself 🙂

  161. Ketan says:

    Hello Sir,

    Did you check regarding the put horizontal spread and call horizontal spread?

    What is the difference between Put Horizontal spread (sell weekly atm put and buy monthly atm put) and Call Horizontal spread (sell weekly atm call and buy monthly atm call)?

    I had asked you this question a little earlier and you said you would check it out on the weekend?

    • Karthik Rangappa says:

      Ketan, the difference in expiries will lead to varied theta decays, the raid decrease in weekly premium (theta bit), is supported by the monthly options. But why would you want to do this with ATM? why not OTM?

  162. Saurabh Sahane says:

    Absolute heartfelt thank you to your team for providing this knowledge in an academic module kind of way. Varsity has helped me build a strong foundation. Thank you.

  163. Ganapathyappan T says:

    Dear Karthick Sir,

    Good eveng, Please share some inputs on option adjustments.

  164. L.KAMALAKSH RAO says:

    The SBI spot price is 432rs.I have a lot (1500)in demat.If I short one lot at sep ce Rs 10,
    I get a credit of 15K.
    What happens if SBI closes at 448rs at expiry since market watch will show a premium of say 18 or 19 Rs.Will I have to buy at 18 or 19 rs?or will premium be zero for me .where it will be visible?
    Also if SBI closes at 452 at expiry will my loss be minimum .
    Please advise

    • Karthik Rangappa says:

      If SBI closes at 450 or any price lower, then the option is worthless and you will retain the premium. At 452 also, the option maybe considered as close to money and the different is netted off in cash.

  165. L.KAMALAKSH RAO says:

    Thank you .Your explanations are very crisp and clear.
    I find there was no need for me to take outside help and spend money when a war veteran like you was available to answer all queries however silly they may be.
    Only thing one should have patience to go thru diligently the material you have produced

  166. Pavan says:

    Hello sir,
    I had buy put options of bpcl on 15 sep 2021 premium @ 6 because bpcl dividend ex date 16 sep, I thought that on exdate every sell their shares so the price will come down below 470 then I short but it reversus and I lost 10000.
    premium @6
    spot price 490
    strike price 470(put buy)
    On exdate as I assumed its undelying trading 435(almost 10%) but its premium trading at @2.
    Here I have doubt that its underlying asset moving my favor only(below 470), but premiums decresed(@2) instead of increase.
    Can u please clarify my doubt sir.

    • Karthik Rangappa says:

      Pavan, as I have stated in the module, the change in premium price is not just on direction changes. There are other factors such as volatility and time which affects it.

  167. Pavan says:

    I don’t think time affects because it overnight trade.
    In such scenarious what is the best trade to make profits sir?

  168. Pavan says:

    I don’t think time affects because its overnight trade.
    In such scenarious what is the best trade to make profits sir?

  169. Pavan says:

    If I keep my trade till expiry will I get profit(470-440-10=20). here i assumed bpcl share price on exipiry 440.
    On expiry day, for getting profits do i pay all amount(bpcl lot=1800*440) to physical settlement?

  170. Sankar C says:

    Context well set to fly into strategies Thanks

  171. Manoj Yepuri says:

    Hi, can you include Calendar Spread and its adjustments.

  172. Arjun says:

    Hy sir
    are u also going to upload this module’s videos?
    when any specific date or anything
    thank u

  173. Anupam says:

    How Can we determine Premium of a strike price of a stock is high or low ? i.e. How can we identify thaat at a particular strike price of a stock the premium is at right price and we can execute trade. If there are strategies kindly proovide them and explain few.

    • Karthik Rangappa says:

      You can use a black and scholes calculator to figure what is the ideal price and then compare the market price.

  174. Suresh Babu says:

    Hello Sir,

    According to Chapter 1.2, you have listed out Strategies and discussed, but the follow strategies are missed in this module, can I know why these are not included..?
    1. Call Butterfly
    2. Straps
    3. Bull Put Ladder
    4. Strip
    5. Synthetic Put
    6. Long & Short Iron Condor
    7. Long & Short Butterfly
    8. BOX

    Thank You

  175. P. N.BHATIA says:


  176. Sachin says:

    Does this section have a Video also ? Can you send me the link please.

  177. Anupam says:

    Dear Sir,
    Can you please suggest a good book for price action with 1 Indian Author and 1 foreign author?

  178. Anupam says:

    Thank you Karthik Sir,
    Video was helpful,
    In the video @ 3:00- 3:15 you said, try to understand what ,candles formed, are saying or suggesting i.e. psychology of the market based on the price action. That is what I want to understand at deeper level. Candlestick patterns comes far later. So, if you can suggest me 1 or 2 books (preferable) or any course available on the Internet so that I can understand psychology of the market, That would be very helpful.

    • Karthik Rangappa says:

      Not sure of that, Anupam. Let me review my list and see if there are any good books. But What I mean to say is that eventually, it all boils down to price action, so may as well start from there.

  179. Anupam says:

    Thank you for your response sir.
    I will get on with price action. First I will go through varsity again. In meanwhile if you could suggest any source which talks about price action deeply, will be very helpful.
    And, if you find any book/source which talks about psychology behing candlesticks in different market(bullish, bearish or sideways), please do let know. I want to understand this fully and completely.

  180. Anupam says:

    Dear Karthik Sir
    Also, I want to learn about different Leading, Lagging or Neutral Indicators in depth. If you could help me to suggest some good Offline and Online source, that would be very helpful.

  181. shashi says:

    what indicates rising in delivery percentage with decreasing price in stock which is not in F&O? strength or weakness.

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