1. A Thread🧵on option selling strategy for top 1% podcast by Nitish (@nitishnarang)- Founder of Stockmock.in with Mr. Sourabh Sisodiya (@sourabhsiso19)-Co Founder & Head of investment strategy at Quantify Capital
2. Mr. Sourabh Sisodiya is a 30 yrs young guy manages capital of 25-30 Cr, featured in ET now and CNBC awaaz. He shared his wisdom with many academic institutions like IIT and IIM too.
3. He is an option seller and trades in Bank Nifty (although volatility is high) because of
a.Attractive premiums and trending moves.
b. Nifty premiums and strikes are not attractive
enough to trade and adjust.
a.Attractive premiums and trending moves.
b. Nifty premiums and strikes are not attractive
enough to trade and adjust.
c. Easy to concentrate on 3-4 heavy weights and track one index on daily basis
d. Tracking geopolitical events and technical patterns are easy to increase the probability of winning, if we concentrate on minimal instruments
d. Tracking geopolitical events and technical patterns are easy to increase the probability of winning, if we concentrate on minimal instruments
4. He says it is not easy to make 500 points in option selling, but it is easy to lose 500 points in option selling and to recover it, it takes around 3-4 months. If 3-4 such losing trades happens, we will be in net loss at the end of the year considering brokerages and charges
It also damages our psychology. Hence the holy grail is capping the loss, so that, money can be made in long run (Avg profit on win days >Avg loss on losing days)
5. THOUGHT PROCESS BEHIND THE CONCEPT OF DECAY -Basically, options are having time value which will become zero
5. THOUGHT PROCESS BEHIND THE CONCEPT OF DECAY -Basically, options are having time value which will become zero
- when they approach near expiry. With this let’s understand, how can we make money?
6. WHY NON DIRECTIONAL TRADING-
a. 80% off the time BN are in the range of +5% to -5% in a week
6. WHY NON DIRECTIONAL TRADING-
a. 80% off the time BN are in the range of +5% to -5% in a week
b. Probability of price going higher than 4% from open is about 0.75%
c. Violin Plot of BN opening between PDH and PDL- Data shows chances are more that it will be sideways
7. STRATEGY-
a. @ 925 AM, If PDH and PDL is not broken, short ATM straddle based on open price- SL’s can be based on following types
i. 10% of Combined premium and TSL at 10% profit.
Ex-If the sold premium is 500, initial SL is 550, if premium decays to 450,sl revised to 495
a. @ 925 AM, If PDH and PDL is not broken, short ATM straddle based on open price- SL’s can be based on following types
i. 10% of Combined premium and TSL at 10% profit.
Ex-If the sold premium is 500, initial SL is 550, if premium decays to 450,sl revised to 495
ii. Place SL buy order for OTM option on breakeven legs of Straddle at 20-25% above from closing price @ 925 AM.
If one leg takes entry, enter another leg also. (this will be helpful, if market reverses and closes at the opening price especially during expiry days because,
If one leg takes entry, enter another leg also. (this will be helpful, if market reverses and closes at the opening price especially during expiry days because,
we are capping the risk by buying OTM legs)- If buy legs are making low, we have to trial entry also (for eg- if we kept entry at 120 when the price was at 100, if the price is making new lows, we have to trial entry from the lows)
b. After capping the risk, if BN breaks PDH, we can add Puts and vice versa up to 1:4 (to avoid gamma risk during reversal)- Exit at 1% loss of deployed capital
8. RISK-
a.Large movements
b. VIX
c.Gamma on expiry (if we added more)
d. Freak trades
If we don’t manage risk, there are days, premiums gone from 2 RS to 950 Rs as well. So this one day is enough to lose huge capital.
a.Large movements
b. VIX
c.Gamma on expiry (if we added more)
d. Freak trades
If we don’t manage risk, there are days, premiums gone from 2 RS to 950 Rs as well. So this one day is enough to lose huge capital.
9. POSITION SIZING -2.5 Lakhs per lot- 100 points loss- 1% Loss
10. DIVERSIFICATION- He diversifies his capital in to 3 parts with risk in equal parts- Non directional, directional and stocks (1/3rd of risk in each type)
10. DIVERSIFICATION- He diversifies his capital in to 3 parts with risk in equal parts- Non directional, directional and stocks (1/3rd of risk in each type)
11. GAPS- usually there is no follow through during the gaps, hence he trades based on first 15 min candle high and low
12. His daily screentime is 15-20 mins, uses 20 and 200 MA’s to find the trend, which means he wants to convey that, simple things have an additional edge
12. His daily screentime is 15-20 mins, uses 20 and 200 MA’s to find the trend, which means he wants to convey that, simple things have an additional edge
13. TAKE HOME MESSAGE FOR NEW TRADERS-
a. Trading is difficult to master, but not it is
impossible
b. To have an alternative source of income, as
trading will not guarantee consistent income for
daily expenses
c. Always cap overnight risk
a. Trading is difficult to master, but not it is
impossible
b. To have an alternative source of income, as
trading will not guarantee consistent income for
daily expenses
c. Always cap overnight risk
ENDED PODCAST WITH THE QUOTE-
To be successful in any field, you should have clarity on the goal- Nitin Kamath
To be successful in any field, you should have clarity on the goal- Nitin Kamath
That's it thank you for reading the thread, If found useful kindly retweet. For complete video, kindly watch here
youtu.be
youtu.be
Loading suggestions...