6
Multi-Leg Strategies
Combine two or more options to create strategies for different market views.
Why Combine Options?
Buying a single option is simple, but it has downsides: high premium cost and time decay working against you.
By combining options, you can:
- Reduce cost — sell one option to fund buying another
- Limit risk — cap your maximum loss at a known amount
- Profit from range — make money even when the market doesn't move
- Bet on volatility — profit from big moves without picking direction
Bull Call Spread2 legs
Buy a lower strike call + Sell a higher strike call. Reduces cost but caps profit.
When to use: You think the market will go up moderately (not a huge rally)
Max Profit: Difference between strikes minus net premium
Max Loss: Net premium paid
Net Premium: Pay ₹200
Strategy Legs:
BUY24000 CE
₹350SELL24500 CE
₹150Future Nifty Price24,200
23,00024,200 (Current)25,500
Strategy P&L at 24,200
+₹0
P&L Across Prices
23,00024,20025,500
Key Takeaways
- ✓Spreads (Bull Call, Bear Put) reduce cost but cap profit
- ✓Straddles profit from big moves — great before events
- ✓Iron Condors profit from sideways markets — most popular for sellers
- ✓Always know your max loss before entering any strategy