Top 5 Options Trading Strategies for Beginners Using a Trading Terminal

Options trading has seen growing interest from retail investors in recent years. It offers a range of strategies to manage risk, generate income, or protect existing positions. While the concept of derivatives may seem complex at first, many basic options strategies are accessible to beginners—especially when executed through a trading terminal.

This article explores five beginner-friendly options trading strategies that can be implemented using a standard trading platform. Each strategy is explained with clarity to help new traders get started with confidence.

How to trade options: Top strategies

Here are the five strategies that will answer your query:

1. Covered call

In a covered call, you own a stock and then sell a call option on the identical stock. In this strategy, you are limiting your upside but earning steady income in return. It is ideal if you believe the stock won’t rise sharply in the short term. However, you must be willing to sell your shares if the price goes beyond the strike price.

Here is how it works:

Let’s say you own 100 shares of ABC, currently trading at ₹1,500 per share. You sell one call option (since one option represents 100 shares) with a strike price of ₹1,600 and a premium of ₹30. This ₹30 is the income you collect upfront, no matter what happens next.

Now, there are two possible outcomes by the expiry date:

• If ABC stays below ₹1,600, the call buyer won’t exercise the option because it is not profitable for them. You keep the ₹30 premium as profit, and your shares remain with you.

• If ABC goes above ₹1,600, the buyer will exercise the option. You must sell your 100 shares at ₹1,600, even if the market price is higher. You still profit from ₹100 per share (₹1,600 – ₹1,500), plus the ₹30 premium, but you miss out on any gains above ₹1,600.

2. Protective put

In this strategy, you buy a put option for a stock that you already hold. A put option provides you with the authority to sell the stock at a predefined price (called the strike price) before a predefined date (called the expiration date). If the stock price goes below the strike price, the worth of the put option rises, helping you reduce or recover losses from the stock.

Let us understand it with an example:

Suppose you own 100 shares of a company trading at ₹500 per share. You are worried the price might fall soon, so you buy a put option with a strike price of ₹480, paying a premium of ₹10 per share. The total cost of the put option is ₹1,000 (₹10 × 100 shares).

Now, if the stock falls to ₹450, your shares lose ₹5,000 in value (₹50 × 100). However, your put option allows you to sell at ₹480, so you recover ₹3,000 (₹30 gain × 100), minus the ₹1,000 premium. Your net loss is only ₹2,000 instead of ₹5,000.

If the stock rises, you benefit from the price increase but lose the ₹1,000 premium. So, a protective put helps you limit downside risk while keeping the upside potential.

3. Synthetic put

A synthetic put is one of the options trading strategies where you combine a short position in a stock with a long call option on the same stock. It mimics the payoff of a real put option. You use it when you want downside protection but prefer to use a call option rather than directly buying a put.

Let us say you short 100 shares of ABC stock at ₹500 each, expecting the price to fall. To limit your losses in case the stock rises, you buy a call option with a ₹520 strike price for ₹10. If the stock falls to ₹450, you gain ₹50 per share on the short, and the call expires worthless. If the stock rises to ₹550, your short loses ₹50 per share, but your call gains ₹30 per share, reducing the loss.

4. Strip strategy

The strip option strategy is used when you expect the market to be volatile, with a higher chance of a downward movement. In this strategy, you buy one at-the-money call option and two at-the-money put options with the same strike price and expiry. This setup lets you profit more if the price falls, while still earning if it rises.

Suppose a stock is trading at ₹500. You buy:

• 1 call option of ₹500 strike (premium ₹10)
• 2 put options of ₹500 strike (premium ₹15 each)

Your total premium paid is ₹40 (₹10 + ₹15 + ₹15).

If the stock drops to ₹450 at expiry, the put options become valuable. The puts are ₹50 in the money, giving you ₹100 from the two puts, minus ₹40 premium. Your net profit is ₹60. If the stock rises to ₹550, your call is ₹50 in the money, and the puts expire worthless. You get ₹50 from the call minus a ₹40 premium. Your net profit is ₹10.

5. Long straddles & short straddles

A long straddle is an options strategy where you purchase both a call and a put option for the identical stock, with the same strike price and expiry date. You use this strategy when you anticipate a major price fluctuation but are unsure of the direction. For example, if a stock is trading at ₹500, you buy a ₹500 call and a ₹500 put. If the stock rises to ₹550 or falls to ₹450, one leg gains significantly while the loss on the other is limited to the premium paid.

A short straddle is the opposite. You sell both a call and a put option with the same strike and expiry. This works when you expect the stock to remain stable. Using the same ₹500 example, if the price remains close to ₹500, both options expire worthless, and you keep the premiums. However, if the price moves sharply in either direction, your losses can be unlimited.

Conclusion

Options trading strategies do not have to be complicated when you start with basic techniques like covered calls, protective puts, or straddles. These five beginner-friendly methods help you manage risk while understanding how options work. By using a trading terminal, you can easily execute and monitor these strategies. As always, start small, learn through practice, and avoid rushing into complex trades until you are confident with the basics.