Simple Rule based Option selling in

The Ultimate List of Trading Mistakes I have committed.

A long thread. Read on.

Which mistakes have you committed?

1) Strategy Hopping: Changing Strategy as soon as I got a series of losses. Sometimes faster than changing daily clothes. What about you?

2) Trading without knowing the rules of the market:

a few examples

a) Change in lot size
b) Not knowing the margin
c) Not knowing how Options settle

Sounds Familiar?

3) No Backups

One should be prepared for unknown events, like having 2 internet lines, 2 laptops, 2 brokers, etc

4) Not expecting the worse

Remember

PNB Scam
Air Strike
A big leader dying

Anything can happen, that's why keep stop-loss in the system.

A simple way to trade stocks is to score all the factors you consider important. ( example below)

Also, consider multiple time frames.

Trade-in stocks which are in top of table (bullish) or bottom of the table ( bearish)

Comments?

Some Simple Rules for Option Buying Setup!

You can change them as per your comfort.

Which book has changed your trading?

We don't have to be smarter than
the rest. We have to be more disciplined than the rest. - Warren Buffett.

The most valuable hedging strategy you aren't using:

The IRON FLY STRATEGY.

Knowing how to use it will protect you from gaps and intraday spikes and 10x your hedging experience.

Here's the step-by-step guide:

Collaborated with @niki_poojary

Here's what you'll learn in this thread:

1. What is an iron fly
2. Perks and Drawbacks
3. What to do when in profit?
4. How to adjust when in loss?
5. Thread on How to keep shifting an iron fly for max credit?
6. Risk-free trades benefits

Let's dive in ↓

1/ What is an iron fly?

Sell ATM CE and PE (Short straddle)
Buy OTM CE and PE (Hedge it by buying on both sides)

Look at the picture below for an example of an iron fly in current weekly options.

2/ Why do traders like iron fly?

Many traders want to receive maximum theta or max credit.

This is why they sell straddles.

But straddles have unlimited risk in them, and can't handle gaps or intraday spikes.

This is why traders like knowing the maximum loss in their trades.

3/ Perks of Iron Fly

Low capital required—Possible to buy first, sell later

Limit losses—Know your maximum loss upfront

Adjustments—Can reduce losses to zero or almost nothing

Weekly earnings—Possible on a weekly basis

Jackpot—Potential for a jackpot if it expires in middle

https://t.co/5Rdn85mvPJ

If you use it right, Iron Fly is the most solid risk-defined strategy in trading.

But most people don't know how to adjust the strategy when it goes wrong.

Here are 7 adjustments you can do to lower risk and increase profitability: 🧵

Collaborated with @niki_poojary

0/ Who is this for?

This will greatly benefit people who freeze when it comes to managing their trades and keep booking losses.

Some trade with too much fear as well when things go wrong.

Knowing these adjustments will give you the confidence to try to manage your trades.

Most of them are to lower risk on the side the market is going in.

Some adjustments even increase the profit potential and probabilities of the trade being in profit on expiry.

Let's begin by having a look at the adjustments.

Here is the adjustment number 1 below.

1/ Don't do anything till your breakeven arrives

One reason these strategies go wrong far too quickly is due to adjusting them too frequently.

You can escape most adjustments if you simply wait for the market to arrive at your breakeven.

This will work well in monthly options.

2/ Remove Risk from Untested Side

If you've taken an iron fly and the market has gone up you can shift your put buy upwards and lock the downside risk to potentially zero.

This way you've secured one side and just need to manage the bleeding side.