current market is a killer for index option buyers.

Dear Members,
From the last 1-2 months, almost every option buyer have faced loss due to lowest volatility. Every day option call & put is loosing their value.
A small trader always think that option writing is very dangerous but now a days only writers are making money.
In my opinion option writing is very much better than buying an option. My focus is specially on selling a call (bcz put selling can be dangerous).
I have watched carefully the market and found that if you are bearish for the next few days then selling a call is far better than the buying a put. If market goes against you and got a jump then you will have to book less loss than a put buying bcz put depreciation is very much faster than call appreciation. Suppose market jumps 50-60 points next day then an atm put will lost almost 25-30 points but an atm call will add mostly 10-15 points and the same thing will happen if market goes in your favor i.e. 50-60 points down then the call will lost 25-30 points and the put will increase only 10-15 points. You can cover your position with more profit.
If market remains sideways then you will also earn 10-20 points due to time decay.
We can also sell a OTM call, if we dont want to trade daily.
But we will have to avoid option writing if any major event is pending i.e. budget etc. Suppose budget is releasing tomorrow then we will buy both put & call at the same atm strike price.

Comments from senior members & newbies are welcome!

Regards
Abhi

Some points have been nicely observed by you - such as - ...depreciation is very much faster....

How about a 100 pt jump? Say monday mkt opens at 5370 and friday you have sold 5300PE@50, then?
Will you have the courage to hold on till expiry .. what if mkt moves to 5400+ before Jan, then?

If you are seriously thinking of selling Options, then sell covered options.
Covered options will be in the direction of market movement/trend. Say mkt is bullish and u expect 5350 to be breached by expiry, then sell 5400 call and buy 5300 call, you make money in both if mkt behaves the way you think it will.
Best part is - if market falls, your loss is pre-defined BUT again if there are gargantuan moves, your profit is also locked unless you risk some by removing the sold call

For bearish trend inverse with puts .. buy near money, sell next strike.

And for ranging markets - sell both ATM call and put which makes it delta neutral (upto a certain points - thats it) but if markets remain rangebound, you can eat all the moolah in premium

Hope this helps ...

I agree with your points but I am saying that selling a call is better than buying puts for these range bound days, as far as huge gapup is concern i think 5350 is still a HUGE BARRIER....

For covered call I think we should sell 5300 call and buy 5400 call (if you are bearish)...

and last YEHI TO "AGAR 5400-5500-5600....7200 PAR CHALA GAYA TO" KI BAAT HAI JO HAMEIN CALL WRITING SE ROKTI HAI...

Nothing ever in the market is a huge resistance or a solid support. All we need is one big trader to tear the support resistance levels.

Hindsight tells us that the markets are range bound. After the mkt has been in a range of 5200-5300 for the past 10 sessions, we know that the market is range bound. We could never have known it in the first week. So how will we decide that the market is range bound and we should sell a straddle or some such similar stuff? Suppose after four days of range bound mkt we sell options and the fifth day onwards the mkt starts trending, we will be caught out.

Mkt always surprises us with its movement. When we expect it to trend it settles into a range, and when we think it it in a range and take action, it breaks out. In January every one and his cousin was expecting a 5-8% move. At least for the first fifteen days of the month it has surprised everyone by being stagnant.

The surprise of January has been the lack of movement. Very easy to trade the left side of the chart, tough to do so consistently on the right side of the chart.

Good analysis. But dont write nifty call for this month. Next week you will know why..

I too experimenting with selling options, and low volatility really helps.

I agree with advantages and disadvantages of selling option. Angel Broking charges Rs.50-00 for one lot of NIFTY.

why ? what is the reason ?