We periodically share ourstrategies, which are high-probability scenarios with defined risk and reward possibilities. One can even customize them as per own risk profile. At the same time, we do not advise any buy or sell on any security or instrument.
Unlike traditional market-related investment products, here the returns and risks are very indicative.
It's important to note that derivatives trading involves inherent risks and may not be suitable for all investors. Traders and investors should thoroughly understand the characteristics and risks of each strategy and consult us before any adjustment or omission of derivative positions.
The most widely used strategies in derivatives are straddles, strangles, synthetics, and spreads. A few of them the listed below,
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Speculation:
- Long Call or Put Options: Investors can take directional bets on the price movements of the underlying asset. A long call benefits from a rising asset price, while a long put benefits from a falling price.
- Bull Call Spread: Combining a long call option with a short call option at a higher strike price to create a limited-risk, limited-reward strategy bullish on the underlying asset.
- Bear Put Spread: Combining a long put option with a short put option at a lower strike price to create a limited-risk, limited-reward strategy bearish on the underlying asset.
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Income Generation:
- Covered Call Writing: Investors who own the underlying asset sell call options to generate additional income. This strategy works well in stable or slightly rising markets.
- Cash-Covered Put Writing: Selling put options with cash set aside to purchase the underlying asset if the option is exercised. This can be a way to generate income while potentially acquiring the asset at a lower price.
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Arbitrage:
- Risk Arbitrage: Taking advantage of price discrepancies in securities due to pending mergers, acquisitions, or other corporate events. The goal is to profit from the eventual convergence of prices.
- Statistical Arbitrage: Using mathematical models to identify and exploit short-term pricing inefficiencies between related securities.
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Delta Hedging:
- Delta-Neutral Strategies: Adjusting the position in the underlying asset to maintain a delta-neutral portfolio, where the overall delta is close to zero. This strategy helps mitigate directional risk.
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Straddle and Strangle:
- Long Straddle: Simultaneously buying a call and a put option with the same strike price and expiration date, anticipating a significant price movement in either direction.
- Long Strangle: Similar to a straddle, but with different strike prices for the call and put options. This strategy benefits from a significant price movement but allows for a wider range.