In the current scenario, option sellers who are deploying strangles are unable to make money
Undisputed champion 🏆 in option selling and undoubtedly India's best trader @Mitesh_Engr Sir
Lessons on how to trade in such difficult times from the Indian Options Conclave 3.0 by Jainam Broking Ltd
Time for a🧵
Collaborated with @AdityaTodmal
In the current scenario, option sellers who are deploying strangles are unable to make money
So overall, the strangle seller is at a loss
Strangles & Straddles are easy to manage in low vix
During high vix, find reversals
Trailing is the answer during high VIX, as the momentum is faster on both sides
Check past few days charts on 3min TF for more clarity
Whenever market breaks a support, check the volumes in the downfall
If you intend to catch a trend, then volume is the best indicator for trading, rest all indicators like RSI, MA's etc. are lagging indicators as they indicate post the movement in price
Whenever volumes are declining when prices are making fresh lows, it indicates that the participants are not interested in fresh/further selling for the current period (in intra)
However all the pre-conditions needs to be met, Lets recap all the conditions to capture reversal from the bottom:
2⃣ However, the volumes were shrinking whenever prices were making a fresh low, indicating no more interest by the sellers to push the prices to fresh low
3⃣ LL2 was not breached for the day
5⃣The moment you get a significant volume, on the upside, play for reversal
6⃣In this case, all you need to do is, if you sold CE’s just exit them
Post gap down, he had sold 35800 which was a PDH and also acted as a high for the past two days, the moment he spotted a reversal from the bottom, he exited from CE’s at 12.35 hours
Post selling a CE for the 2nd time, lets assume if the prices again start to move up, then you will have a surety of atleast 80% that market is taking support of that level so in this case, the 2nd time after selling a CE, you can sell a PE to adjust it
🖊️Ongoing trend: upwards
🖊️After a small consolidation there is a BO
🖊️The very next candle rejected the entire upmove
🖊️Action: CE sell
🖍️Ongoing trend: downwards
🖍️After a small consolidation there is a BD
🖍️The very next candle rejected the entire down move
🖍️Action: PE sell
The key in finding rejections is to spot large sized candles
Spot the big candles, you need to act basis the break of the High or Low of that huge candle
Example 1: Here SL got hit
However for this you need to sell high premium options only then it will work
Better to play with reversal set ups on these days, with small SL
Overall profit/loss ratio would triumph the lower win ratio
Trade set up: He uses one indicator i.e. VWAP, if prices trade > VWAP indicates buyers are strong & vice-versa
Thereafter, he relies only on big volume candles
In times of normal market conditions when there are no gap ups & gap downs, then you just need to spot weekly S/R
Scenario 1: if the prices are between both, one has to simply sell 1% above & below the resistance & support respectively to make consistent returns via options selling
Scenario 3: If price is hovering near resistance, only Sell PE’s
Greedy traders think that they can eat prem on both sides while keeping their margin low as strangle attracts lower margin than directional
Lets take the example of current weekly S/R i.e 34k & 36800, assuming VIX is normal & there are no news. In that case, as a positional trader one is supposed to sell only CE’s
However remember you don’t have to exit the CE’s unless the resistance of 36800 is taken out
However these are intermediary spikes, the moment prices hit the resistance and stays there, time decay will come into play
If the market is trying to move up from lows, then buyers would wipe out all the sellers, in such case they need to absorb all the selling i.e. volumes will⬆️
In such scenario, exit CE’s and short only PE's
However if the price upmove is not backed by the surge in volume then stay in CE sell position
Big money/operators 👣 can be tracked from volumes
The last adjustment is to convert the strangle into straddle.
Another scenario, even if one end up making a loss in the current week, the upcoming week one can sell a PE of higher prem as a strong base and support is made in the previous week
In case the market moves up strongly after taking a support of 34k (in normal market conditions) Mitesh Sir would sell 34k PE’s
If the prices keep going up then he’ll keep moving up his PE's
He would maintain a distance of 1.5% at all times as that will give him the time/cushion for adjustments in case of any reversal
Feb 25th buyers rejected the heavy selling made on Feb 24th
On the third day (Feb 28th), if the buyers were really strong they would have further taken up BNF, however notice that on the third day BNF fails to cross event he 2nd day high that itself is a confirmation
However for a safe trader, he can still wait for a confirmation i.e. when BNF reaches the low made on Feb 24, at that time he can sell the CE
Example 1: On huge candles and trade logic
One can practice these 5 examples in single lot to gain confidence
E.g.: Sell OTM strike X at Rs. 90
Buy far OTM strike X+500 points at Rs. 45
If the index goes down then:
Strike X = Rs. 70
Strike X + 500 = Rs. 35
Net reward: Rs. 10 only
Despite capturing the move, making only Rs. 10 ☹
Strike X = Rs. 10
Strike X+500 = Rs. 2
Now if you still holding this and in case there is a reversal
Strike X = 90
Strike X +500 = 0
Mitesh Sir, sells only those strikes which has 90% probability of going to 0
Leverage is a double edged sword, it will have a multiplier effect when you make money & similarly when you lose
So each individual needs to check the risk capacity and accordingly stick to their position sizing
One can make consistent 3% monthly return and if compounded works out to 38-40% p.a. which very few other business can generate
If your capital is low ~Rs. 10lacs & you are making 3-4lacs p.a. instead of being☹️by the absolute amt, be disciplined to make it consistently as compounding magic will play out in the longer term
anything>1% is bonus
SL is always based on the levels and not on points or %
Needless to say @Mitesh_Engr Sir has shared everything in detail & it is nothing less than a workshop in itself
• Link: https://t.co/hxw235CMQP
• If you❤️this, why not share?
• 🔃 the first tweet and help others find this🧵
See past 🧵 here:
@AdityaTodmal
&
@niki_poojary
More from Nikita Poojary
More from Optionslearnings
A THREAD ON @SarangSood
Decoded his way of analysis/logics for everyone to easily understand.
Have covered:
1. Analysis of volatility, how to foresee/signs.
2. Workbook
3. When to sell options
4. Diff category of days
5. How movement of option prices tell us what will happen
1. Keeps following volatility super closely.
Makes 7-8 different strategies to give him a sense of what's going on.
Whichever gives highest profit he trades in.
2. Theta falls when market moves.
Falls where market is headed towards not on our original position.
3. If you're an options seller then sell only when volatility is dropping, there is a high probability of you making the right trade and getting profit as a result
He believes in a market operator, if market mover sells volatility Sarang Sir joins him.
4. Theta decay vs Fall in vega
Sell when Vega is falling rather than for theta decay. You won't be trapped and higher probability of making profit.
Decoded his way of analysis/logics for everyone to easily understand.
Have covered:
1. Analysis of volatility, how to foresee/signs.
2. Workbook
3. When to sell options
4. Diff category of days
5. How movement of option prices tell us what will happen
1. Keeps following volatility super closely.
Makes 7-8 different strategies to give him a sense of what's going on.
Whichever gives highest profit he trades in.
I am quite different from your style. I follow the market's volatility very closely. I have mock positions in 7-8 different strategies which allows me to stay connected. Whichever gives best profit is usually the one i trade in.
— Sarang Sood (@SarangSood) August 13, 2019
2. Theta falls when market moves.
Falls where market is headed towards not on our original position.
Anilji most of the time these days Theta only falls when market moves. So the Theta actually falls where market has moved to, not where our position was in the first place. By shifting we can come close to capturing the Theta fall but not always.
— Sarang Sood (@SarangSood) June 24, 2019
3. If you're an options seller then sell only when volatility is dropping, there is a high probability of you making the right trade and getting profit as a result
He believes in a market operator, if market mover sells volatility Sarang Sir joins him.
This week has been great so far. The main aim is to be in the right side of the volatility, rest the market will reward.
— Sarang Sood (@SarangSood) July 3, 2019
4. Theta decay vs Fall in vega
Sell when Vega is falling rather than for theta decay. You won't be trapped and higher probability of making profit.
There is a difference between theta decay & fall in vega. Decay is certain but there is no guaranteed profit as delta moves can increase cost. Fall in vega on the other hand is backed by a powerful force that sells options and gives handsome returns. Our job is to identify them.
— Sarang Sood (@SarangSood) February 12, 2020
There are many strategies in market 📉and it's possible to get monthly 4% return consistently if you master 💪in one strategy .
One of those strategies which I like is Iron Fly✈️
Few important points on Iron fly stategy
This is fixed loss🔴 defined stategy ,so you are aware of your losses . You know your risk ⚠️and breakeven points to exit the positions.
Risk is defined , so at psychological🧠 level you are at peace🙋♀️
How to implement
1. Should be done on Tuesday or Wednesday for next week expiry after 1-2 pm
2. Take view of the market ,looking at daily chart
3. Then do weekly iron fly.
4. No need to hold this till expiry day .
5.Exit it one day before expiry or when you see more than 2% within the week.
5. High vix is preferred for iron fly
6. Can be executed with less capital of 3-5 lakhs .
https://t.co/MYDgWkjYo8 have R:2R so over all it should be good.
8. If you are able to get 6% return monthly ,it means close to 100% return on your capital per annum.
One of those strategies which I like is Iron Fly✈️
Few important points on Iron fly stategy
This is fixed loss🔴 defined stategy ,so you are aware of your losses . You know your risk ⚠️and breakeven points to exit the positions.
Risk is defined , so at psychological🧠 level you are at peace🙋♀️
How to implement
1. Should be done on Tuesday or Wednesday for next week expiry after 1-2 pm
2. Take view of the market ,looking at daily chart
3. Then do weekly iron fly.
4. No need to hold this till expiry day .
5.Exit it one day before expiry or when you see more than 2% within the week.
5. High vix is preferred for iron fly
6. Can be executed with less capital of 3-5 lakhs .
https://t.co/MYDgWkjYo8 have R:2R so over all it should be good.
8. If you are able to get 6% return monthly ,it means close to 100% return on your capital per annum.
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