We know options are very less amount and high return objects in trading. There will be premium like example 50,100 etc between 0-999. No need to keep entire capital if you want to buy like in shares, Just broker will take 15% margin and it varies.
generally options are hedging products which will be used as insurance for your holded stock.
Buying Options - Buying options are very less amount required and there will be greeks like time delay and there is decay in premium daily up to 5-10%. Less risk unlimited profit.
Selling options - Require more than premium and even if option wont move, You will be in profit due to premium erosion of 5-10% daily. Here Premium will be profit at end of expiry and loss unlimited.
Here main reason for this post is to give you great working strategy or can be said as monthly income.
Options Selling Hedging Strategy -
Here you will sell out of the money option where you think stock wont cross in weekly or monthly expiry and you should sell both call and put.
For example, Nifty is at 11800 spot today morning and immediately you can take 12000 call sell and 11600 put sell as nifty on average wont move more than 150-200 points daily. You can take support and resistance of 100 points and you can cut if it crosses that price. Even if price moves, There will be premium erosion of 10-20 points minimum. But for safe side you should cut. Stoploss shoud be total premium on both sides.
If you want to do weekly, As expiry will be thursday, Every friday you can take 700-1000 points out of money options and sell it .
There will be guaranteed profit upto 3750 Rupees/week in nifty, Even if its premium erodes 10 points / day/ lot.
This strategy works highest when there is minor movement or no movement in stock or index.
This is notably called as Short Strangle used at less movement or no movement of stock.
Options Buying Hedging Strategy -
This strategy should be only taken when if you think there is sudden movement of more than 1-2 % at that time or in the day etc.
Here you will buy slightly higher out of the money call and put.
For example nifty spot price is 11800 and you think there some event like interest rate decision or elections etc, Such case there can be more than 2% movement in stock or index, Such case you will get good profits in call or put and if you think there is no movement any more, You can exit both positions at a time.
This is notably called as long strangle and used where there is high movement at that time.