If you are new to F&O, you can start with Vertical Spreads (Debit and Credit spreads) instead of buying options in Stocks and Indices.
Here are some ways how you can do it, when you can do it and the right position sizing for doing it... 🧵 (1/25)
1. Bull call spread (Debit spread)
2. Bull put spread (Credit spread)
3. Bear call spread (Credit spread)
4. Bear put spread (Debit spread)
Read about these strategies in the below articles. (4/25)
While going through these strategies, you must have thought you have to wait till expiry for profits/loss. (5/25)
Let's understand how, when and what strategy to use with a few examples:
(you should have knowledge of price action for this) (7/25)
A recent example - since Oct 21 markets started falling, initially we assumed that it could be a pullback but many stocks started falling with good volumes, started making tops and giving false breakouts. (8/25)
In options, you got to be mindful of choosing stocks with good liquidity in options.(9/25)
When stocks/Index started rejecting from their major resistance areas.. mark that level. In reversal trades, you can trade via Credit Spread.
Sell ATM call and buy OTM call. (10/25)
When any stock/Index breaks support and give a breakout, we can trade via Debit Spread as the move is fast in breakouts.
Buy ATM/ITM put and Sell OTM put
In TechM, we could buy 1650 put and sell 1550 put. (13/25)
Check the chart for reference. (14/25)
When you should initiate a trade?
First, you need to find out the major trend of instrument you are trading either Index or stocks.
At present, we know it's a bearish trend or sell on rise market.. (16/25)
Every week you need to check the large cap stocks (if you are trading in stocks) and Index charts if you are trading Nifty/Banknifty. (17/25)
2. Check if it's near any resistance area
3. If it gave a rejection candle near imp. resistance (mark the level)
4. Or if it's breaking any imp. support
For entry, check the daily chart next day. (18/25)
Check the chart for your reference: (19/25)
If stock/Index is near major support, don't sell call, as chances of reversal will be more from there. Even if it closes below resistance strike at expiry, in reversal, premiums will spike. You will see immediate loss which is tough to handle. (20/25)
Let's check the charts of Nifty/Banknifty for trading weekly expiries(directional trading) via spreads: (21/25)
Vertical spreads are risk defined strategies. Keep sizing such that you don't lose over 3-4% in max loss or use 2L for 1 lot.
I think one should have at least 15L-20L for F&O.
In naked selling or in futures, the sizing should be fixed on notional exposure.(22/25)
Initially, you must not take more than 2x exposure.
Suppose the Notional value is 6L, you can take 1 lot using 3L or in simple language if you carry a naked selling option or futures, use 3-4L for one lot initially.. (23/25)
https://t.co/TVesQ0xnDe (24/25)
More from Sheetal Rijhwani
It's practically impossible to check all charts. However, you can use multiple scanners as per your setups to make things easy.
In trending market, even junk stocks give a good move. But in sideways and falling markets, you have to be very selective. (2/21)
One imp. filter for me is trading in strong fundamental stocks. Every quarter, I check results of companies and filter the list. I keep checking the charts and set an alert on the levels. Many good handles on Twitter post good results lists, you can save that as well. (3/21)
This time, I did the same on my telegram channel.
https://t.co/C3eS9PSncG
Second filter for me is Current Performing Sectors/Themes. Keep your eyes and ears open. Being a good observer helps you big time. Make good use of news in your analysis. (4/21)
For Eg: Textiles are performing well for a while now. It has strong consumer interest due to many global retailers, diversifying their outsourcing and reducing their dependence on China. Order booking from India has increased rapidly. (5/21)
Nobody will give you this kind of knowledge in any paid webinar like they gave this in a thread! One more brilliant thread by @ITRADE191 @AdityaTodmal @niki_poojary
In this thread, I'll walk you through my set up, absorb it as much as you can.
— itrade(DJ) (@ITRADE191) June 27, 2021
The instrument that I trade in are Nifty (NF) options
Thanks to @AdityaTodmal @niki_poojary for contributing in making this pic.twitter.com/BrMrGydb1v
More from Optionslearnings
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
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
Some knowledgeable tweets/threads by me...
I will keep adding to this thread over time
Starting with:
1. Option Synthetics Explained
2. Best free Data website - Icici Direct
3. Per order vs Per lot brokerage
4. Best youtube channel - Power of Stocks
A thread on Option Synthetics
1. Increase your returns
2. Margin requirements/costs are less
3. Save on STT/other charges
4. Develop a better understanding of
A THREAD ON OPTIONS SYNTHETICS, LONG READ:
— Aditya Todmal (@AdityaTodmal) August 16, 2020
With synthetics you can increase your returns as the margin requirements/costs are less. Everyone wanting to become a top trader needs to know this and get their concepts cleared because many people don't know what they're doing
(1/11)
Best free website to get Data from - ICICI DIRECT
Advantages:
1. Quantitative Analysis in one place
2. Easy to find stocks where action taking place
3. Find the exact price levels at which OI is being
Best FREE website for FNO Heatmap - ICICI DIRECThttps://t.co/honvUA9lmx
— Aditya Todmal (@AdityaTodmal) January 24, 2021
Advantages:
1. Quantitative Analysis in one place
2. Easy to find stocks where action taking place
3. Find the exact price levels at which OI is being added.
(1/5) pic.twitter.com/Pvk8i8EfIT
PER ORDER Vs PER LOT brokerage
Which one is better?
Read the thread to know why one is clearly better than the
PER ORDER Vs PER LOT brokerage
— Aditya Todmal (@AdityaTodmal) May 23, 2021
Which one is better?
Read the thread to know why one is clearly better than the other.
A THREAD ...
Finally, Check out Subhasish Pani Channel - Power of Stocks
My favorite Youtuber from the trading community without a doubt.
Spend your weekend learning from his channel.
The best YouTuber I have ever seen from the trading industry.
— Aditya Todmal (@AdityaTodmal) January 23, 2021
Power of Stocks - Subhasish Pani
Guys do go over his daily analysis videos to become better.
1. Superb logics
2. Great Risk Reward
3. Consistency
4. Prepared for all scenarioshttps://t.co/I5wGmwIYUq