There are potentially innumerable ways of trading on the index options market. However we shall look at eight basic modes of trading on the index futures market:
Hedging
H5 Have portfolio, buy puts
Speculation
S3 Bullish index, buy Nifty calls or sell Nifty puts
S4 Bearish index, sell Nifty calls or buy Nifty puts
S5 Anticipate volatility, buy a call and a put at same strike
S6 Bull spreads, Buy a call and sell another
S7 Bear spreads, Sell a call and buy another
Arbitrage
A3 Put-call parity with spot-options arbitrage
A4 Arbitrage beyond option price bounds
Hedging
H5 Have portfolio, buy puts
Speculation
S3 Bullish index, buy Nifty calls or sell Nifty puts
S4 Bearish index, sell Nifty calls or buy Nifty puts
S5 Anticipate volatility, buy a call and a put at same strike
S6 Bull spreads, Buy a call and sell another
S7 Bear spreads, Sell a call and buy another
Arbitrage
A3 Put-call parity with spot-options arbitrage
A4 Arbitrage beyond option price bounds