Alpha Edge Pro Academy
AlphaEdge Pro Academy · Options Day 10

Understand the
option setup.

Read the option chain, compare call and put positions, and see how a straddle behaves at expiry.

Option chain & OIITM · ATM · OTMLong & short straddles
same strikecallput

Call and put value · conceptual diagram

Option chain basics

Read both sides of a strike

An option chain lists available strikes for an underlying and expiry, with calls (CE) and puts (PE). The PDF introduces open interest (OI) through an exchange option-chain example.

Call and put

A call gives its holder the right to buy under the contract terms; a put gives its holder the right to sell. The same strike can have a call and a put for one expiry.

Open interest

OI counts outstanding contracts that have not been closed or expired. It describes positioning, but a large OI number alone does not identify who will win or where price must move.

When comparing contracts, first confirm the underlying, expiry, strike, option type, premium, and contract size. A chain can change throughout the session.
Relationship to spot price

ITM, ATM, and OTM

Moneyness changes with the underlying price, and call and put labels move in opposite directions. In this illustration the underlying is 19,700; these are teaching numbers, not a live quote.

StrikeCall (CE)Put (PE)Reason
19,600ITMOTMStrike is below the underlying
19,700ATMATMStrike is at the underlying
19,800OTMITMStrike is above the underlying

ITM = in the money · ATM = at the money · OTM = out of the money. Exchange strikes are discrete, so “ATM” often means the nearest available strike.

Two legs, same terms

What is a straddle?

A straddle pairs one call and one put on the same underlying, strike, and expiry. The long and short versions have very different risk.

Long straddle

Buy the call and buy the put. You pay both premiums. A sufficiently large price move in either direction may produce a gain at expiry.

Short straddle High risk

Sell the call and sell the put. You receive premiums, but large moves can cause substantial losses; upside loss is unbounded.

Illustrative pair from the supplied PDF

If an index is near 19,710, the 19,700 call and 19,700 put of the same expiry form a straddle. The example is historical and gives no current premium or entry signal.

strike KprofitlossExpiry profit / loss (conceptual)

Expiry payoff shape · illustrative, not to scale

Buying both legs

Long straddle

At expiry, the total premium paid is the maximum loss per unit if the underlying finishes at the strike. The price must move enough to recover that premium before the position earns a net gain.

Breakevens at expiry: K − total premium and K + total premium
  • Maximum loss: total premium paid, plus costs.
  • Potential gain: unbounded on the upside; substantial but bounded if the underlying falls toward zero.
  • Before expiry: time decay and implied volatility also affect both option prices.
strike KprofitlossExpiry profit / loss (conceptual)

Expiry payoff shape · illustrative, not to scale

Selling both legs

Short straddle High risk

At expiry, maximum gain occurs if the underlying finishes at the strike and equals the total premium received before costs. A large move in either direction can overwhelm that income.

Breakevens at expiry: K − total premium and K + total premium
  • Maximum gain: total premium received, before costs.
  • Potential loss: unlimited on the upside; substantial on the downside.
  • Practical concern: margin requirements and volatility can change rapidly. Understand the full exposure before considering a position.

In formulas, K is the shared strike and total premium is the sum of call and put premiums per unit. Payoff sketches exclude fees, tax, slippage, and contract multiplier.

Final part of the PDF

Supertrend + 5 period EMA

The PDF shows an intraday example using a trend following Supertrend indicator with a 5 period exponential moving average (EMA) on 5 or 15 minute charts.

Bullish reading

A candle closing above the 5 period EMA while Supertrend indicates an uptrend is described as bullish momentum in the PDF.

Bearish reading

A candle closing below the 5 period EMA while Supertrend indicates a downtrend is described as bearish momentum.

These are indicator conditions, not guaranteed signals. Supertrend settings depend on the chart implementation. Review the underlying trend, option premium, liquidity, and your exit plan before interpreting a reading.
Review the earlier lessons

Candle and chart-pattern context can help you interpret price action around option levels.

Open Day 1 →

Sources and educational note

This original web lesson follows the supplied Day 10 PDF, which credits Vidya Phad. The wording, table, and diagrams were created for AlphaEdge Pro Academy.

For contract listings, see the NSE option chain. For strategy risks and expiry payoff details, see the Options Industry Council’s long straddle and short straddle guides.

All figures are illustrative and this lesson is for education, not a trading recommendation.