BC OPTIONS
Saved by @rishabhjain06

97% of retailers buy options and lose money.

But, you can buy options:

• At the right time
• For BTST
• When premiums are too low

The difference? Understanding how they work.

Here's how you can buy options if you're a beginner:

Collaborated with @AdityaTodmal

 1/ Basic knowledge of Technicals:

Option buying is about capturing the momentum, hence sound knowledge of technical analysis is required.

Without any knowledge, if one is buying an option purely because he/she feels market will rise/fall is equivalent to buying lottery tickets.
2/ Technical Analysis knowledge:

The analysis could involve usage of pure price action or indicators or a mix of both to capture momentum.

Getting the direction right is very crucial, however along with the direction the timing is equally important.
3/ Basics of CE & PE:

Option holders can buy or sell a security at a predetermined price using contingent financial derivatives called options.

In return for such access, option purchasers charge a small amount referred to as a premium to such sellers.
4/ Why CE & PE options are purchased:

CE is an abbrevation for Call Option and PE for Put option.

The CE buyer benefits every time the price of the underlying goes up.

Polar opposite is the PE option, as a PE option buyer benefits every time the price of the underlying falls.
5/ Knowledge of Greeks:

One can make money in options without knowing in depth about greeks.

However one needs to be aware about an important greek viz. Theta.

Option loses its value as time moves closer to its maturity.
6/ Option is a wasting asset:

An option’s time value decays as expiration approaches, and options buyers don’t want to watch their purchased options decline in value, potentially expiring worthless if the stock/index finishes below the strike price (in case of a CE option).
7/ When to buy CE or PE option: Set -up 1:

After a consolidation, the stock/index usually breaks the consolidation, if it breaks on the upside an option buyer usually buys a CE option and vice versa for PE option.
8/ When to buy a CE option: Set -up 2: BTST

Whenever the market (mainly indices) closes at day high one can opt for buying a CE option.

Conversely whenever the market closes at day low, one can opt for buying a PE option.
9/ When to buy a PE option: Set -up 2: STBT

Conversely whenever the market closes at day low, one can opt for buying a PE option.
10/ Which instrument to choose?

Chose a particular index which usually has strong momentum eg. Banknifty over Nifty.

If you are interested in stocks look for high beta stocks or screen stocks that is soon going to come out of a consolidation, and always opt for liquid counters.
11/ Finer aspects to be taken care of:

Look for option buying near expiration as most of the time value is already eroded, so one can get it at a cheaper price.

Also look for opportunites in lower VIX.
Intraday players can further choose a specific time window e.g. 1 hour post market opening and last hour before closing.

Intraday players can also opt for option buying only on weekly expiries especially when the VIX is low, as any momentum would get maginified.
12/ What should be minimum R/R criteria:

Always work with a minimum target of 1:3 R/R in option buying.
13/ Buying options comes with huge risk:

To make profits in option buying one has to time the momentum.

In case the expected monvement doesn't work out the premium melts and the option buyer ends up in a loss.

Check in case of naked CE option buying the max risk is Rs. 2578
14/ In case of naked PE option buying the max risk is Rs. 3250
15/ Spreads vs. naked option buying:

One can opt for spreads instead of naked buying where the losses are lower.

But with limited risk this comes with limited return.

Spreads are also considered as "defined risk" trades where both the profit & loss are capped.
For times when the expected move is not as pronounced, a spread may be a better fit depending on environment and other factors.
16/ Bull Call Spread:

This strategy consists of one long call with a near strike price and one short call with a farther strike price of the same underlying stock and the same expiration date.

A bull call spread is established for a net debit.
17/ Bear Put Spread:

This strategy consists of buying one put and selling another put at a lower strike.

This is to offset a part of the upfront cost.

This strategy requires a net cash outlay or net debit at the outset.
18/ Defined risk in spreads:

In the above eg. of naked CE buying the max risk was Rs. 2578 the moment we switch to Bull CE spread the max risk reduces by 50% to Rs. 1250.

So for people who are in the learning phase, its better to opt for spreads as the risk involved is lower.
19/ Position Sizing:

Sizing is the key, never go all in, define your risk in terms of percentage of your total capital or in absolute terms and stick to the same.
20/ Final Thoughts:

Before taking the plunge, always backtest your strategy for atleast 3months and forward test it with small quantity, to learn the nuances of the set up.

Scaling up should be done only when you are consistenly profitable.
We are finally on Youtube!!

We have a free Youtube Channel where we cover our analysis of the markets.

Checkout using this link:
https://t.co/5AyQC6MuyC
If you enjoyed this thread here's another one:
https://t.co/Bt6ejYc3GP
We also have a free telegram channel.

Link to join: https://t.co/GpDL0dXbzS
That's a wrap!

If you enjoyed this thread:

1. Follow us

@Adityatodmal

&

@niki_poojary

for more threads on Price action, Option Selling & Trading growth.

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I appreciate it!

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Please take Efforts to watch this
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Short Strangle

Net credit with a sideways stance

A thread 🧵

#options #trading


1/ Short Strangles

As the name suggests, you need to sell options in this strategy

It involves 2 legs:

Short OTM CE

Short OTM PE

2/ Stance

You expect the market to trade within a narrow range. A narrow range means low volatility and hence lowering option premium due to theta decay

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Short 16100PE @132

Total premium received = 92 + 132 = 224


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In the Ex, expiry at or between 16100 or 16300, means options go worthless due to theta decay and you receive 224 points per lot
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(1/12)


Step 1: Stock Selection

1. For this strategy you're going to have to choose some stocks that you think will be doing well in the future/long term.

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4. List of stocks attached

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Adam “Sliver” 🏀...
@AdamSliverTrade
🏆 TRADE EXECUTION 🏆

You do NOT have to know what's going to happen next in order to make money. We MUST identify our edge, and act on the edge with proper sizing and risk management.

In this thread I will go through multiple different trade situations and how to process them.

First and foremost, my RULES (tailor to your liking):

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(I like to sell in 1/3's most of the time)

1. 15-20% scale 1/3

2. Scale next 1/3 into momentum on next leg (35-40%) or if it starts to reverse I will sell remaining position +10% or have breakeven stop

3. Next leg scale into momo. or stop out +20%

Stopping out:

KEEP LOSSES SMALL. If your max loss is -10% and average gain is 20%, then you can lose more trades than you win and STILL be profitable.

You must think of each trade as "playing an edge." The trade either works or it doesn't. Accept it.

My goal is to get an entry as close as possible to my trigger. That way if it goes against me, my loss is minimal. I am not looking for any sort of confirmation to take losses.

Suppose I enter just past my call trigger, but the very next minute, it drops back below. I'm OUT.
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How to sell option?
Here let me explain through simple math.
Say BN at 30000
30000 straddle trading at combine premium 800 ( based on current volatility)
Put at 400
Call at 400
You don’t know direction. Sold both.

If move will not come than both will decrease gradually.

At day end it will come down to 720-740 if move will not come. Difference is your profit.

Now case 2:
Move started.
At one points combine premium will start increasing.
Say 810.
Exit immediately. No need to do adjustment.
Let market settle.

Sell again straddle once market settle.
Now repeat same thing.

Straddle selling webinar over.
Good luck.

One can keep SL 550 for both strike to escape from sudden movement.
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The Straddle is my favorite trade these days. But more often than not, one needs to adjust to make a good return from it. There are many ways to do this depending on your view, psychology and imagination. Will discuss a few that I use

The Straddle is a delta neutral strategy and it is important to keep deltas in check during the course of the Trade and not let them run away from you. Of course Volatility is the elephant in the room- but not going there as that will require a separate discussion

The first and most common method is to go 'inverted.' That is to say to shift the untested side to generate additional Premium and increase the runway to Breakeven. So if you start with a Straddle at 700 and price goes to 740, you can move the PE up to say 720.

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