A Study on Risk Management with Option Strategies
DOI:
https://doi.org/10.53983/ijmds.v14n4.001Keywords:
Options strategies, straddle, strangle, risk management, derivatives, hedging, speculationAbstract
This research paper aims to examines the role of option strategies in financial risk management, focusing on practical implementation in Vijayawada. Options, as derivative instruments, offer the flexibility to hedge against potential market downturns while allowing investors to capitalize on favourable movements. The study analyses the effectiveness of various strategies such as straddles and strangles using real-time market data from the Indian stock market during January 2025. It highlights the comparative advantages of option selling over buying in low-volatility environments and provides actionable recommendations for retail and institutional investors. The findings suggest that a well-informed and strategic use of options can significantly reduce portfolio risk and improve investment performance.
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