Different type Strategies

There are different type of strategies.

1. Bull Strategies
2. Bear Strategies

In bull and bear there are main strategies they are:

1. Spread
2. ButterFly

In Spread we use this strategies in bull and bear market and same case with butterfly.
There are many strategies available for trading but here i have posted only two.

Spread Strategy:

A spread is constructed by buying a option with a low exercise price, and selling another option with a higher exercise price.

Example: For understanding perpose we take example of NIFTY option.If we think that merket may move down from here so that we set one strategy e.g. we Sell NIFTY 5000 PE and Buy NIFTY 5200 PE, so in this case we are selling 2 lot of 5000 PE and buying 5200 PE 1 lot and we can take postion in same propostion means if we are buying 250 Qty of 5200 PE then have to sell 500 Qty of 5000 PE. and here premium we paid is say buying 1 lot of 5200 PE we pay premium of Rs.50 and while when we sell 2 lot of 5000 PE we receive premium while selling 2 lot is Rs.40,here say 5000 PE price is Rs.20 and while we are selling 2 lot that's why we receive Rs.40.
So, the for whole strategy we have to payRs.10 (50-40) and amount is Rs.10*250 Qty = Rs.2500.
and always we calculate profit and loss with lower Qty. Here maximum profit we get when on expiry NIFTY close at 5000 beacuse when NIFTY close at this level 5000 PE is at-the-money and we have sell that os we no need to buy that and 5200 PE we have bought there we get Rs.200 since it is in-the-money.So profit is 250*200.
For loss if market goes up and don't come dowe then maximum loss is preimum we have paid at time of making strategy.

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