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A THREAD
Topic: HOW TO TRADE IN RISING PREMIUMS SCENARIO
Option sellers specially Straddle sellers feel that rising premiums give them excellent opportunity to make easy money. So what they are seeing is the theta aspect of options & ignoring the delta/gamma/vega forces.
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There will also be very few instances when premiums don't fall till expiry day. So with each delta move the cost of holding a straddle gets accumulated & pressure keeps mounting for the stubborn option sellers.
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Compulsive straddle sellers can keep a close SL & do quick scalping. But such profits don't give you much satisfaction, as speculation element is high in such trades.
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There are many option strategies like Ratios, Ladder, even far OTM naked/spread selling which can give good opportunity to take advantage.
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If one can find a way to forsee how volatility or direction is going to play out, then it's a different ball game altogether.
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Patience is the key & being ready to let go of some premium decay. Don't get caught up in FOMO.
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In this scenario, we could have sold inflated OTM calls, which were not falling.
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When market bounced back calls also fell at first. If market starts rising, we can start neutralizing our position.
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• If IVs are falling then sell otm puts
• If IVs are increasing then buy higher delta calls to make Call ratios
The above example is when we want to trade directional & take advantage of rising premiums.
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More from Sarang Sood
More from Optionslearnings
Collaborated with @niki_poojary
Here's what you'll learn in this thread:
1. Capture Overnight Theta Decay
2. Trading Opening Range Breakouts
3. Reversal Trading Setups
4. Selling strangles and straddles in Bank Nifty
6. NR4 + IB
7. NR 21-Vwap Strategy
Let's dive in ↓
1/ STBT option Selling (Positional Setup):
The setup uses price action to sell options for overnight theta decay.
Check Bank Nifty at 3:15 everyday.
Sell directional credit spreads with capped
A thread about STBT options selling,
— Jig's Patel (@jigspatel1988) July 17, 2021
The purpose is simple to capture overnight theta decay,
Generally, ppl sell ATM straddle with hedge or sell naked options,
But I am using Today\u2019s price action for selling options in STBT,
(1/n)
@jigspatel1988 2/ Selling Strangles in Bank Nifty based on Open Interest Data
Don't trade till 9:45 Am.
Identify the highest OI on puts and calls.
Check combined premium and put a stop on individual
Thread on
— Jig's Patel (@jigspatel1988) July 4, 2021
"Intraday Banknifty Strangle based on OI data"
(System already shared, today just share few examples)
(1/n)
@jigspatel1988 3/ Open Drive (Intraday)
This is an opening range breakout setup with a few conditions.
To be used when the market opens above yesterday's day high
or Below yesterday's day's
#OpenDrive#intradaySetup
— Pathik (@Pathik_Trader) April 16, 2019
Sharing one high probability trending setup for intraday.
Few conditions needs to be met
1. Opening should be above/below previous day high/low for buy/sell setup.
2. Open=low (for buy)
Open=high (for sell)
(1/n)
Collaborated with @niki_poojary
1. Best Sources of knowledge for a beginner in option selling?
Zerodha Varsity from @Nithin0dha's team & the @tastytrade financial network.
Links:
2. Top YouTube Channel for Options Learning?
Power of Stocks - Subhasish Pani
What you'll learn:
1. How to form a trading plan.
2. How to scale an account with risk-reward in option selling.
3. Technical analysis logics you can use daily.
15
15 Learnings from Power of Stocks: \U0001f9f5
— Aditya Todmal (@AdityaTodmal) January 23, 2022
Collaborated with @niki_poojary
3. What are the preconditions to start option Selling:
You should know technical Analysis basics like:
- Support/Resistance
- Chart Patterns
- Candle Patterns
- Dow Theory (HH, LL)
This will help you start taking high probability trades.
4. Risk Management is a must for option selling
If you don't learn to manage your risk, making money in trading is going to be an extremely difficult endeavor
Have some rules:
1. Risk no more than 0.25% per trade as a beginner
2. Risk no more than 2% in a day for the first year
• Psychological mistakes to avoid
• Iron fly strategy
• Calenders strategy
• 3 great books on trading stocks.
• Various risks and how to manage.
• How breakout stocks behave.
• Solutions for peak margin.
Psychological mistakes to
Why few traders are going bankrupt after attaining huge success.
— Mitesh Patel (@Mitesh_Engr) September 4, 2021
Could be the following psychology.
During initial days trader is generating huge ROI with less capital.
Iron fly strategy
There are many strategies in market \U0001f4c9and it's possible to get monthly 4% return consistently if you master \U0001f4aain one strategy .
— Kavita (@Kavitastocks) September 4, 2021
One of those strategies which I like is Iron Fly\u2708\ufe0f
Few important points on Iron fly stategy
Calenders strategy to give you consistent
Here is the detailed information of about strategy,
— itrade(DJ) (@ITRADE191) September 4, 2021
Entry time : 9.30 - 10
Exit : Upto you
Strategy :
Sell weekly ATM CE & PE at almost equal price
For ex : Sell Nifty 17250 CE at 50 and Nifty 17250 PE at 48 so it will become short straddle
Compounding is
If it takes 15 Long Years (180+ months) to Build the First Crore Rupees, the Second will take a Few Years Lesser. The Third will be Effortless & The Fourth Happens Seamlessly.
— Fundamental Investor \u2122 \U0001f1ee\U0001f1f3 (@FI_InvestIndia) September 5, 2021
This is the Power of Patience, Base Effect & Compounding !!!#FI