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Master the craft of options trading

The concepts every derivatives trader should own — from the Greeks to the strategies and the risk discipline that keeps you in the game. Plain-English, no fluff.

Options 101

The building blocks

Get the vocabulary right and the rest of trading gets a lot clearer.

Calls & Puts

A call is the right to buy, a put the right to sell, at a fixed strike before expiry. Buyers pay premium for leverage; sellers collect it.

Strike & Premium

The strike is the contract’s reference price. The premium is its market price — driven by distance from spot, time left and volatility.

Expiry

Indian index options expire weekly and monthly. Time decay accelerates near expiry — the engine behind most option-selling strategies.

Moneyness (ITM / ATM / OTM)

In-, at-, or out-of-the-money describes the strike versus spot. ATM options carry the most time value and the sharpest gamma.

Open Interest (OI)

The number of open contracts at a strike. Build-up and unwinding hint at where positioning — and support/resistance — sits.

Lots & Margin

Derivatives trade in fixed lots. Selling needs margin; hedged structures reduce it through margin benefit.

The Greeks

What actually moves an option’s price

Delta, gamma, theta, vega and IV — read them live across the chain inside the terminal.

Delta

Change in option price per ₹1 move in spot — also a proxy for directional exposure and the odds of finishing in-the-money.

Gamma

How fast delta itself changes. Highest near ATM and expiry — the source of violent P&L swings for sellers.

Theta

Daily time decay. Option sellers are net-positive theta; it is the tailwind that pays them to wait.

Vega

Sensitivity to implied volatility. Rising IV helps buyers; an IV crush rewards sellers.

Implied Volatility (IV)

The market’s expected future movement priced into options. Comparing IV across strikes and expiries is where edge is found.

Strategy guides

The core options structures

Every one of these is a one-click template in Gravity Algo — with a live payoff before you commit.

Long Straddle

What: Buy an ATM call and put.
When: You expect a big move but not the direction — events, results, budgets.
Risk: Bleeds to time decay if the market stays flat.

Short Straddle

What: Sell an ATM call and put.
When: You expect range-bound, low-volatility drift.
Risk: Open-ended on a sharp move — always hedge or use a stop.

Strangle

What: OTM call and put together.
When: A cheaper, direction-agnostic play with wider break-evens.
Risk: Same tail risk as a straddle when sold.

Iron Condor

What: Sell an OTM call spread and put spread.
When: Range-bound markets where you want defined risk.
Risk: Loss is capped; you profit if price stays between the short strikes.

Iron Fly

What: A short straddle with protective wings.
When: Neutral view with higher credit and defined risk.
Risk: Capped loss, but a narrower profit zone.

Delta Hedging

What: Offset directional exposure with futures or options.
When: Keep a book delta-neutral as spot moves.
Risk: Needs constant rebalancing — ideal to automate with rules.

Risk management

The habits that keep you trading

Edge means nothing without survival. These are the non-negotiables.

Size by risk, not capital

Decide the rupees you can lose on a trade first, then derive the position — never the other way around.

Define max loss up front

Set an MTM stop-loss before entry so a bad day can’t become a bad month.

Hedge the tail

Naked selling earns steadily and loses violently. Buy cheap wings to cap the disaster.

Respect liquidity

Trade strikes with tight spreads and real OI — slippage quietly eats edge.

Automate discipline

Rules execute your plan without fear or greed. The hardest part of trading is doing what you already decided.

Glossary

Terms you’ll see in the terminal

LTP: Last traded price of an instrument.
ATM / OTM / ITM: At / out of / in the money relative to spot.
IV: Implied volatility — expected movement priced into options.
OI: Open interest — total outstanding contracts.
MTM: Mark-to-market — live profit or loss on open positions.
Square-off: Closing an open position to realise P&L.
Rolling: Moving a position to a new strike or expiry.
Synthetic future: A futures-equivalent built from a call and a put.
Lot size: The fixed quantity one derivatives contract represents.
Premium: The price paid or received for an option.

Educational content only — not investment advice. Derivatives carry substantial risk.

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