Part4 Institutional Trading

Straddle
When to Use: Expect big move but unsure direction.

How It Works: Buy call and put at same strike & expiry.

Risk: High premium cost.

Reward: Big if price moves sharply up or down.

Example: Stock at ₹100, buy call ₹100 (₹4) and put ₹100 (₹4). Cost ₹8. Needs a big move to profit.

Strangle
When to Use: Expect big move but want cheaper entry than straddle.

How It Works: Buy OTM call and put.

Risk: Cheaper than straddle but needs larger move.

Example: Stock at ₹100, buy call ₹105 (₹3) and put ₹95 (₹3). Cost ₹6.

Iron Condor
When to Use: Expect low volatility.

How It Works: Sell an OTM call spread + sell an OTM put spread.

Risk: Limited by spread width.

Reward: Limited to premium collected.

Example: Stock at ₹100, sell call ₹110, buy call ₹115; sell put ₹90, buy put ₹85.