Selling out of money options for a living
- Thread starter sjerry4u
- Start date
please explain more 
, At what point it will be hedged for following case--
on 3/10/14, nifty was 7945, 8000 call shorted @100 , suppose on 22/10/14 , nifty trading at 8020 , as per option oracle on 22/10/14 , BEP for my short call is 8035 , Nifty goes beyond 8000 and I want to hedge my SOLD 8000 CALL by buying Nifty but at what level--
1) as soon as nifty crossing 8000 ,
2) as soon as nifty crossing 8035, or
3) as soon as nifty crossing 8100.
, At what point it will be hedged for following case--on 3/10/14, nifty was 7945, 8000 call shorted @100 , suppose on 22/10/14 , nifty trading at 8020 , as per option oracle on 22/10/14 , BEP for my short call is 8035 , Nifty goes beyond 8000 and I want to hedge my SOLD 8000 CALL by buying Nifty but at what level--
1) as soon as nifty crossing 8000 ,
2) as soon as nifty crossing 8035, or
3) as soon as nifty crossing 8100.
please explain more , At what point it will be hedged for following case--
on 3/10/14, nifty was 7945, 8000 call shorted @100 , suppose on 22/10/14 , nifty trading at 8020 , as per option oracle on 22/10/14 , BEP for my short call is 8035 , Nifty goes beyond 8000 and I want to hedge my SOLD 8000 CALL by buying Nifty but at what level--
1) as soon as nifty crossing 8000 ,
2) as soon as nifty crossing 8035, or
3) as soon as nifty crossing 8100.
, At what point it will be hedged for following case--on 3/10/14, nifty was 7945, 8000 call shorted @100 , suppose on 22/10/14 , nifty trading at 8020 , as per option oracle on 22/10/14 , BEP for my short call is 8035 , Nifty goes beyond 8000 and I want to hedge my SOLD 8000 CALL by buying Nifty but at what level--
1) as soon as nifty crossing 8000 ,
2) as soon as nifty crossing 8035, or
3) as soon as nifty crossing 8100.
No Concrete Rule in this regard, It depends on individual psychology and market condition.
1) After selling 8000 call @100, your collected premium is ready to use as buffer money in critical market condition.
2) Close Position immediately at 70% profit.
3) No worry up-to Nifty 8100 Future level, but we should hedge beyond 8000 level (as per individual NF trading strategy, I use PA), because of --
a) Otherwise facing margin call by broker. (You may temporarily implement BEAR CALL STRATEGY in very volatile market condition by buying +200/+300 strike to reduce Margin Call and avoid next day Gap-Up opening, not necessarily).
b) Our main intention is to collect more income by FUTURE Trading.
(If SL hits at NF trading, our buffer money help us.)
4) If one has deep pocket & brave heart, no adjustment required up-to 8100 strike. (Caution :- In this point, we have no buffer money to play NF freely )
5) Near expiry, keep close monitoring on MAXIMUM PAIN point, (Recommendation :- Healthraj's Thread in this regard). I strongly believe that market tend to follow Max Pain Point (at-least nearest point). If Max Pain is <=8100 on 22/10/2014, no adjustment is required, though Nifty (NF/NS) is at 8035, but if Max Pain>=8100, immediately hedge by FUTURE as per your own trading strategy without second thought.
6) There is no any full-proof trading strategy, you have to make it own. After-all, trading is "10% Strategy + 30% Money Management + 60% psychology" -- Success comes from experience only, not from book...!!!
:thumb::thumb::thumb:
I am employing the OTM selling for quite some time now ( more than 2 years)
My take follows:-
1) You need a decent capital to start of with
2) Don't ever think that this is a static strategy, It is an active strategy and you need to monitor the activity closely
3) Need to be ready to take large one off hits which are bound to happen
4) Select typical trading stocks such as GMR, Unitech, IFCI, Ashok Leyland
5) Use Fibonacci on EOD as a road map and and sell otm options on oversold / Overbought levels on oscillators
6) Use effective money management on your capital
7) If the technique is going against you immediately exit the position
8) Buyback your options and never wait till expiry. Surprise volatility will zoom in
9) Keep an eye on some fundamental factors and stay away from writing options before quarterly results
10) Yes you can make some decent money by selling options on stocks but not on index but like any other strategy you need to apply the same principals of stock trading ( Capital Management, Active Decision, Own Analysis) and treat it as a business.
My alternative take:- Covered calls
1) Buy some blue chip stock shares equivalent to lots which you might be comfortable with on weekly trends preferably oversold levels and sell calls on hourly/ 15 mins charts on counter trends/correction in this way you wont need any margin and simply collect the premium ( provided you maintain the same techniques of stock trade monitoring). Your initial capital grows on a longer term trend and you can also play selling call options on corrections.
Hope this helps
My take follows:-
1) You need a decent capital to start of with
2) Don't ever think that this is a static strategy, It is an active strategy and you need to monitor the activity closely
3) Need to be ready to take large one off hits which are bound to happen
4) Select typical trading stocks such as GMR, Unitech, IFCI, Ashok Leyland
5) Use Fibonacci on EOD as a road map and and sell otm options on oversold / Overbought levels on oscillators
6) Use effective money management on your capital
7) If the technique is going against you immediately exit the position
8) Buyback your options and never wait till expiry. Surprise volatility will zoom in
9) Keep an eye on some fundamental factors and stay away from writing options before quarterly results
10) Yes you can make some decent money by selling options on stocks but not on index but like any other strategy you need to apply the same principals of stock trading ( Capital Management, Active Decision, Own Analysis) and treat it as a business.
My alternative take:- Covered calls
1) Buy some blue chip stock shares equivalent to lots which you might be comfortable with on weekly trends preferably oversold levels and sell calls on hourly/ 15 mins charts on counter trends/correction in this way you wont need any margin and simply collect the premium ( provided you maintain the same techniques of stock trade monitoring). Your initial capital grows on a longer term trend and you can also play selling call options on corrections.
Hope this helps
You can make profits using both long options and short options. For short options -
you will make many small profits
you will have to learn to SL and run before a large move thereby avoiding that one big wave of loss
opposite for long options
you will face lot of small losses
you will recover all losses and make profit in one big swoop, but you need the patience to not book profit early. booking profit early in an unlimited profit scenario can be counter-productive
all the best. i have done 18 years backtesting on long strangle. posted my study here - the study is not accurate, so i know that thing. but pls tell what you think on the concept itself -
http://www.traderji.com/options/86661-15-guaranteed-returns-buy-both-call-put-options-strategy-11.html#post1044567
you will make many small profits
you will have to learn to SL and run before a large move thereby avoiding that one big wave of loss
opposite for long options
you will face lot of small losses
you will recover all losses and make profit in one big swoop, but you need the patience to not book profit early. booking profit early in an unlimited profit scenario can be counter-productive
all the best. i have done 18 years backtesting on long strangle. posted my study here - the study is not accurate, so i know that thing. but pls tell what you think on the concept itself -
http://www.traderji.com/options/86661-15-guaranteed-returns-buy-both-call-put-options-strategy-11.html#post1044567
Selling options works best when the stock or the market is exhibiting a clear trend. For example, if RIL is exhibiting a consistent bullish trend, then traders can make profits by consistently selling put options of higher strikes. By churning your money more often it is possible to improve your yield on selling options when the direction of the stock price movement is fairly clear.
For every option seller it is a trade-off between an in-the-money option and an out-of-the-money option. An ITM option can give you higher premiums but also comes with higher risk. The OTM option, on the other hand, comes with much lower risk but also with much lower premium potential. As an option seller you need to take your strike decision judiciously.
For the option seller time value works in his favour. When I sold my first option I did it with my Angel broking account, premium kept depleting with time giving the seller an opportunity to exit the position at a profit by buying it back at lower levels. Thus the option seller’s relationship with time is exactly in contrast to an option buyer, where the time works against him.
For every option seller it is a trade-off between an in-the-money option and an out-of-the-money option. An ITM option can give you higher premiums but also comes with higher risk. The OTM option, on the other hand, comes with much lower risk but also with much lower premium potential. As an option seller you need to take your strike decision judiciously.
For the option seller time value works in his favour. When I sold my first option I did it with my Angel broking account, premium kept depleting with time giving the seller an opportunity to exit the position at a profit by buying it back at lower levels. Thus the option seller’s relationship with time is exactly in contrast to an option buyer, where the time works against him.
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