How to make BIG money in Options trading...
๐งต
๐งต
There are many ways you can use options trading to multiply your wealth in quickest way.
In this thread I will be discussing one of the simplest way to do so, but not easiest.
It's through options selling.
Why options selling?
1/n
In this thread I will be discussing one of the simplest way to do so, but not easiest.
It's through options selling.
Why options selling?
1/n
Because, making money through options selling is very Simple.
You don't need to:-
1. Know the direction of market, mostly traders fail here.
2. You don't spend time in unnecessary predictions of what's going to happen.
3. Time is your best friend.
2/n
You don't need to:-
1. Know the direction of market, mostly traders fail here.
2. You don't spend time in unnecessary predictions of what's going to happen.
3. Time is your best friend.
2/n
4. Your position sizing is automatically taken care, atleast to some extent unlike options buying.
Mostly debate in options selling is on which strikes of CE/PE to be sold.
Best premiums are available at ATM Straddle and that's where you gain max.
3/n
Mostly debate in options selling is on which strikes of CE/PE to be sold.
Best premiums are available at ATM Straddle and that's where you gain max.
3/n
So, you got advantages of options selling & best strikes to sell as well.
Now 2nd & most critical part where your action starts is managing RISK.
RISK can b managed wid ease with hedging, SEBI have done phenomenal work in introducing reduced margins for hedged positions.
4/n
Now 2nd & most critical part where your action starts is managing RISK.
RISK can b managed wid ease with hedging, SEBI have done phenomenal work in introducing reduced margins for hedged positions.
4/n
Ways to manage RISK:
Tho thr r many ways to manage RISK in options selling but 4 simplicity, 2 ways which mostly used r:
1. (Best way) Adequate hedging (not for purpose of margin reducing). A hedge which provides RISK Reward (R:R) of 2-1:1, is good.
2. Position sizing.
5/n
Tho thr r many ways to manage RISK in options selling but 4 simplicity, 2 ways which mostly used r:
1. (Best way) Adequate hedging (not for purpose of margin reducing). A hedge which provides RISK Reward (R:R) of 2-1:1, is good.
2. Position sizing.
5/n
Mostly, amateurs commits big blunders in position sizing.
NIFTY's current lot size is approximately 9 L. So, upto 2:1 R:R, 3X leverage is adequate.
Straddle with adequate hedge will form Iron Condor & Margin requirement will reduce to less than 50K per lot IC.
6/n
NIFTY's current lot size is approximately 9 L. So, upto 2:1 R:R, 3X leverage is adequate.
Straddle with adequate hedge will form Iron Condor & Margin requirement will reduce to less than 50K per lot IC.
6/n
So, you get very big breakeven range.
You do nothing until unless the range is tested on either side.
Once the range is tested, you create another IC at ATM strike.
Now, with your both the ICs, total risk won't exceed 15K including all charges despite NIFTY hitting...
7/n
You do nothing until unless the range is tested on either side.
Once the range is tested, you create another IC at ATM strike.
Now, with your both the ICs, total risk won't exceed 15K including all charges despite NIFTY hitting...
7/n
Upper or lower circuit.
Your used margin is only 1/3 of available.
Like this you can create 2 more ICs as the range tests breakeven level resulting in exhausting 2/3 margin.
So, total #RISK involved in 4 IC per 3 Lakh will be 30K including all charges & slippages.
8/n
Your used margin is only 1/3 of available.
Like this you can create 2 more ICs as the range tests breakeven level resulting in exhausting 2/3 margin.
So, total #RISK involved in 4 IC per 3 Lakh will be 30K including all charges & slippages.
8/n
Creating these 4 positions will result in NIFTY scaling 7-8% in a monthly series, which happens 1-2 months in a year.
Now, how to exit?
Whenever you get decay of premium equal to RISK involved in each IC, you can exit or scale out as per positions build up.
9/n
Now, how to exit?
Whenever you get decay of premium equal to RISK involved in each IC, you can exit or scale out as per positions build up.
9/n
What are benefits of above strategy ๐ค.
1. This may not be best yielding strategy BUT will save you big money when you're starting.
2. It contains your risk substantially and giving exposure to understand premium behavior in different VIX cycles.
10/n
1. This may not be best yielding strategy BUT will save you big money when you're starting.
2. It contains your risk substantially and giving exposure to understand premium behavior in different VIX cycles.
10/n
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