Strategies: spreads, straddles and condors

Why combine options at all?

A single option is a blunt tool: cheap ones usually expire worthless, expensive ones need a big move to pay off. Combining two or more lets you shape the bet - cap the loss, cut the cost, or bet on how much NABIL moves instead of which way. Each strategy below is just the four basic payoffs from lesson 6 added together.

Bull call spread - a cheaper bet on a rise

Buy the 550 call (Rs 13.5) and sell the 580 call (Rs 3.5). Net cost: Rs 10 a share, Rs 5,000 a lot.

You give up everything above 580 in exchange for a trade that costs a quarter less than the call alone and needs a smaller move to break even. It suits a view like "NABIL will rise a little after results" - which is the view most people actually have.

Bear put spread - the same idea for a fall

Buy the 550 put (Rs 11.6), sell the 520 put (Rs 2.4). Net cost Rs 9.2 (Rs 4,600 a lot); most you can make Rs 10,400 if NABIL ends at 520 or below; break-even Rs 540.8.

Straddle - "something big is coming, I don't know which way"

Buy both the 550 call (Rs 13.5) and the 550 put (Rs 11.6): Rs 25.1 a share, Rs 12,550 a lot. You profit if NABIL moves more than Rs 25 either way by expiry.

Strangle - a cheaper, wider straddle

Buy the 580 call (Rs 3.5) and the 520 put (Rs 2.4): only Rs 5.9 a share (Rs 2,950), but NABIL must move below 514 or above 586 to profit. Cheaper to buy, harder to win.

Iron condor - "it will stay in a range"

The opposite bet: sell the 540 put and the 560 call to collect premium, and buy the 520 put and 580 call further out as protection. Net premium received: 7.4 − 2.4 + 9.0 − 3.5 = Rs 10.5 a share (Rs 5,250 a lot).

Condors win often and lose rarely - but the loss is close to the size of the win, so you need to win most of the time just to break even after costs. It's a strategy for quiet markets, managed carefully, never "set and forget".

Choosing a strategy

Notice that every strategy here has a known maximum loss. That's the most useful habit to bring from this lesson: if you can't say what the worst case is before you trade, don't trade it.

Prices: Black-Scholes on NABIL Rs 549.20 (31 Oct 2026), 30 days, 20% volatility, 6% interest. Real trades also pay brokerage, taxes and the bid-ask spread on every leg - four legs means four sets of costs.