Intraday Option Trading Setup: Best Strategies, Indicators & Risk Control | CapitalKeeper
By CapitalKeeper | Beginner’s Guide | Indian Equities | Market Moves That Matter
Intraday Options Trading Setup: A Step-by-Step Guide for High-Probability Trades
Intraday options trading requires precision, discipline, and a well-defined strategy. Below is a complete intraday options trading setup, covering selection, entry, exit, risk management, and real-time examples.
Best Timeframes for Intraday Options
- Use 5-min & 15-min charts for entry signals.
- Check higher timeframe (1-hour) trend for confirmation.
Indicators to Use
- RSI (Relative Strength Index): Identify overbought (>70) or oversold (<30) zones for reversals.
- MACD (Moving Average Convergence Divergence): Spot momentum shifts and confirm breakouts.
- Volume Analysis: High volume on breakout candles = stronger confirmation.
Identifying Breakouts & Reversals
- Look for support/resistance breakouts with volume confirmation.
- Watch for false breakouts by combining RSI & price action.
Strike Selection
- Choose ATM (At-the-Money) or 1-step OTM (Out-of-the-Money) strikes for better liquidity.
- Avoid deep OTM options for intraday unless high momentum is present.
Risk Management
- Never risk more than 1-2% of total capital per trade.
- Use stop-loss based on underlying price, not just premium.
Exit Strategy
- Partial profit booking: Exit 50% at 1:1 reward-risk ratio.
- Trail stop-loss to lock in profits if price moves favorably.
Step 1: Selecting the Right Options for Intraday
1. Choose High Liquidity Options
- Nifty / Bank Nifty options (most liquid in India).
- Stocks like Reliance, HDFC Bank, ICICI Bank, TCS (high OI & volume).
- Avoid illiquid strikes (wide bid-ask spreads).
2. Opt for ATM or Slightly OTM Options
- ATM (At-The-Money) options have the highest Gamma & Theta impact.
- OTM (Out-of-The-Money) options are cheaper but need strong momentum.
3. Check Implied Volatility (IV) Rank
- IV Rank > 70% → Favor selling strategies (Credit Spreads).
- IV Rank < 30% → Favor buying strategies (Straddles, Directional Calls/Puts).
Step 2: Intraday Entry Strategy
1. Breakout Strategy (Best for Trending Markets)
- Entry: Price breaks key resistance/support with volume.
- Example:
- Nifty breaks 25,200 (previous high) → Buy 25,200 Call.
- Stop Loss: Below 25,150 (if reversal confirmed).
2. Pullback Strategy (Re-Entry in Trend)
- Entry: Wait for a retest of support/resistance before entering.
- Example:
- Bank Nifty rallies to 56,500, pulls back to 56,200 → Buy Call.
3. Opening Range Breakout (ORB) – First 15-30 Mins
- Entry: Break of high/low of the first 30 mins.
- Example:
- Nifty opening range: 24,900-24,950 → Break above 24,950 → Buy Call.
4. News-Based Momentum (Earnings, RBI Policy, Global Cues)
- Entry: Trade the initial volatility spike.
- Example:
- RBI hikes rates → Bank Nifty falls → Buy Puts.
Step 3: Exit Rules (Maximize Profit, Cut Losses Early)
1. Target-Based Exit
- 1:2 Risk-Reward: If SL is 20 points, book partial profits at 40 points.
- Trailing SL: Move stop loss to breakeven after 1.5x profit.
2. Time-Based Exit
- Avoid holding options beyond 2:30 PM (Theta decay accelerates).
- Exit before major news events (FOMC, GDP data).
3. Price Action Exit
- If momentum fades (lower highs/lower lows), exit.
- If option Delta drops significantly, exit.
Step 4: Risk Management (Must-Follow Rules)
1. Position Sizing
- Risk only 1-2% of capital per trade.
- Example: If capital = ₹1,00,000 → Max loss per trade = ₹1,000-2,000.
2. Stop Loss (Non-Negotiable)
- Fixed SL: 10-15% of option premium.
- Technical SL: Below key support/resistance.
3. Avoid Overtrading
- Stick to 2-3 high-conviction trades per day.
- No revenge trading after a loss.
Step 5: Intraday Option Trading Example (Nifty)
Trade Setup (06 June 2025)
- Spot Nifty: 25,000
- Trend: Bullish (Higher highs, Higher lows)
- Entry: Break above 25,100 → Buy 25,100 Call @ ₹80
- Stop Loss: Below 25,050 (SL triggered if Nifty reverses)
- Target 1: ₹100 (25% profit) → Book partial
- Target 2: ₹120 (50% profit) → Trail SL
- Exit Time: Before 3:00 PM
Outcome:
- Nifty hits 25,180 → Option price reaches ₹120 → Book full profit.
Best Intraday Option Strategies
| Strategy | When to Use | Risk | Reward |
|---|---|---|---|
| ATM Call/Put Buying | Strong trend | Limited to premium | Unlimited |
| Bull Call Spread | Moderately bullish | Limited | Limited |
| Bear Put Spread | Moderately bearish | Limited | Limited |
| Straddle/Strangle | High volatility (News events) | Limited | High |
Pro Tips for Intraday Options Success
✅ Trade in the direction of the trend (Check 5-min & 15-min charts).
✅ Avoid holding till expiry (Theta kills option buyers).
✅ Use bracket orders (SL + Target) for disciplined exits.
✅ Track FII/DII activity (Big moves often follow institutional flows).
- Always track global cues (Dow futures, SGX Nifty) before intraday option trading.
- Avoid trading during major news events (RBI policy, Fed meetings).
Final Thoughts
Intraday options trading is highly profitable but requires strict discipline, quick decision-making, and risk control. Start with small positions, refine your strategy, and scale up gradually.
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