Options Theory for Professional Trading
Options Trading is a segment of the derivatives segment. Options contracts grant the buyer the right to buy/sell the underlying without a compulsory obligation. This module discusses options contracts, pricing, and their profit and loss payoffs.
25 chapters
Introduction to Options
What are options? Understanding calls, puts, and the concept of right without obligation.
Call Option Basics
Buying and selling call options. Strike price, premium, and expiry explained.
Put Option Basics
Buying and selling put options. Understanding the right to sell.
Buying Options
When to buy options. Limited risk, unlimited reward, and the probability angle.
Selling Options
Writing options for premium. Understanding unlimited risk and margin requirements.
Moneyness of Options
ITM, ATM, and OTM options. How moneyness affects premium and trading decisions.
Intrinsic and Extrinsic Value
Breaking down option premium. Time value, intrinsic value, and what drives them.
Option Pricing Models
Black-Scholes model explained. Factors affecting option prices.
Delta
The first Greek. Delta as rate of change and probability proxy.
Gamma
Rate of change of delta. Gamma risk and gamma scalping basics.
Theta
Time decay in options. How theta affects buyers vs sellers.
Vega
Volatility sensitivity. Trading volatility through options.
Implied Volatility
Understanding IV. IV rank, IV percentile, and volatility smile.
Historical Volatility
Calculating and using historical volatility. HV vs IV comparison.
Reading the Option Chain
Analyzing option chain data. OI, volume, bid-ask, and Greeks in practice.
Payoff Diagrams
Visualizing profit and loss. Building payoff graphs for different positions.
Long Call Strategy
Bullish strategy with calls. Entry, exit, and risk management.
Long Put Strategy
Bearish strategy with puts. When to buy puts and managing the trade.
Covered Call
Generating income from stock holdings. The most conservative options strategy.
Protective Put
Insurance for your portfolio. Hedging long positions with puts.
Option Exercise and Settlement
Exercise styles, assignment, and settlement process in Indian markets.
Weekly vs Monthly Options
Differences in trading weekly and monthly expiries. Theta decay patterns.
Expiry Day Trading
Trading on expiry day. Gamma explosion and expiry day strategies.
Common Mistakes in Options
Pitfalls to avoid. Over-leveraging, ignoring Greeks, and emotional trading.
Building an Options Trading Plan
Creating your options trading framework. Capital allocation and continuous learning.