Stock, Commodity, Forex Trading Ideas & Analysis

In this article, we’ll explore the top 7 option-selling strategies on the NSE (National Stock Exchange) that could help traders target up to 10% monthly returns on their capital. Option selling is an advanced strategy that can generate consistent income, but it’s important to balance high rewards with the right risk management. Whether you are new to options or an experienced trader, this guide will provide an overview of each strategy, rated based on its risk, reward, and suitability for achieving your financial goals.

• 1. 1. Define what option selling is
     • If you want to understand the fundamentals of option selling, check out our detailed guide on Option Selling on NSE where we explain what it is and how it works.

     2. Explain its advantages, such as earning a premium and managing risk with spreads

     • For a full breakdown of the advantages of option selling, including earning premiums and managing risk using spreads, you can refer to the same guide here.

     3. Discuss why option selling is a popular strategy on the NSE

     • To see why option selling is so popular on the NSE, check out our insights in this article.

Top 7 NSE Option Selling Strategies in Table:

Each Strategy Breakdown:

1. Iron Condor Strategy

• • • Description: The Iron Condor strategy involves selling out-of-the-money call and put options and buying further out-of-the-money options for protection.

  
  

  • • Risk Level: Low, because the risk is capped by the protective options.

  
  

  • • Profit Potential: Moderate. You collect premiums from both sides, but profits are capped.

  
  

  • • Ideal Market Conditions: Best for range-bound or low volatility markets.

  
  

  • Rating: ⭐⭐⭐⭐⭐⭐⭐ (7/10)

2. Bull Put Spread Strategy

• • • Description: In this strategy, you sell a higher strike put and buy a lower strike put to limit your risk. It works best in a bullish market.

  
  

  • • Risk Level: Low, with limited downside risk due to the protective lower strike put.

  
  

  • • Profit Potential: High, especially in a bullish market.

  
  

  • • Ideal Market Conditions: Works best when the market is showing bullish signs.

  
  

  • Rating: ⭐⭐⭐⭐⭐⭐⭐⭐ (8/10)

3. Bear Call Spread Strategy

• • • Description: This strategy involves selling a call at a lower strike price and buying a higher strike call to limit risk. Best suited for bearish markets.

  
  

  • • Risk Level: Low, as risk is defined.

  
  

  • • Profit Potential: High in bearish or neutral markets.

  
  

  • • Ideal Market Conditions: Bearish or neutral market conditions.

  
  

  • Rating: ⭐⭐⭐⭐⭐⭐⭐ (7/10)

4. Short Strangle Strategy

• • • Description: The Short Strangle involves selling an out-of-the-money call and put simultaneously. It’s best for capturing premiums in a quiet market.

  
  

  • • Risk Level: High, as the market can move sharply in either direction.

  
  

  • • Profit Potential: Very high, since you collect premium from both sides.

  
  

  • • Ideal Market Conditions: Low volatility or range-bound markets.

  
  

  • Rating: ⭐⭐⭐⭐⭐⭐⭐⭐⭐ (9/10)

5. Short Straddle Strategy

• • • Description: In a Short Straddle, you sell a call and a put at the same strike price. It can generate substantial premium, but with higher risk.

  
  

  • • Risk Level: High, due to the potential for significant market movement.

  
  

  • • Profit Potential: High, but with significant risk exposure.

  
  

  • • Ideal Market Conditions: Neutral markets with little movement.

  
  

  • Rating: ⭐⭐⭐⭐⭐⭐⭐⭐ (8/10)

6. Covered Call Strategy

• • • Description: A conservative strategy where you sell calls against stocks you own, earning a premium. Works best in bullish markets.

  
  

  • • Risk Level: Low, as long as you hold the stock.

  
  

  • • Profit Potential: Low to moderate, suitable for income generation but less aggressive than other strategies.

  
  

  • • Ideal Market Conditions: Bullish or sideways market.

  
  

  • Rating: ⭐⭐⭐⭐⭐⭐ (6/10)

7. Naked Call/Put Strategy

• • • Description: Selling naked options involves selling calls or puts without holding the underlying asset. It offers the highest profit but carries the most risk.

  
  

  • • Risk Level: High, as losses can be unlimited in the case of naked calls.

  
  

  • • Profit Potential: Very high, but with significant risk.

  
  

  • • Ideal Market Conditions: High volatility markets.

  
  

  • Rating: ⭐⭐⭐⭐⭐⭐⭐⭐⭐ (9/10)

Conclusion

In conclusion, option selling strategies can be highly profitable, but they come with different levels of risk. If your goal is to earn 10% monthly returns, strategies like Short Strangle and Naked Call/Put have the highest profit potential but require solid risk management. On the other hand, conservative strategies like Iron Condor and Bull Put Spread provide more stable returns with limited downside risk, making them suitable for traders seeking steady income.

Choosing the right strategy depends on your risk tolerance, market outlook, and capital management.