Selling options for income query

Romeo1998

Well-Known Member
#11
I am looking to trade in shorting options looking at the theta decay angle.For example the stock CMP is 2000 and i feel it will not go above 2300 so i would like to short this call while going long a 2500 call for protection(Credit spread).But I have seen that one gap up or wrong trade takes away all the gains plus more.Is there any way else to hedge or prevent this loss?How do experienced traders deal in this type of trade as even many times the stop loss will also not get triggered at any favorable rate.
read chapter 6 on Spreads, from page 317 to 352, in this book "The Option Trader Handbook - Jabbour " :) u will be able to find it with simple google search or libgen :)
what to do when in profit, how to lock in profit, what to do when in loss, how to limit loss or raise breakeven point with no additional cost :)
all these r important things which i was not able to find in other option strategy books :)
the book is of only 400 pages, once u understand most of the things clearly in this book n all your concepts r very clear, u will be able to create several unique option strategies according to your trading style :) good luck :)
https://www.amazon.co.uk/Option-Trader-Handbook-Strategies-Adjustments/dp/0470481617
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#14
Yes. It is actually useless. Kind of like risking 99 to earn 1. 10%+ far otm options don't have a reasonable intrinsic value to bet on. And yes , it's easier said than done about the strike adjustment part. I usually do that in index. Not possible in stocks , as they could be illiquid strikes and I could get trapped for auctions. That's why I said hypothetically.
Ok leave aside stocks is this worth doing on Bank nifty weekly options?
 
#16
Screenshot_20230228-082229_1.png


This is current example for you. We take two major market swings in the past, and we assume banknifty going to expire below those swings.

Screenshot_20230228-082345_1_1.png


In that case we can prepare our Cspread like this . If market shoots up , then we can buy back 41400 ce and sell 41300 pe ( or current ITM strike at the time )
Banknifty you need constant attention in Cspread.
 

Verde

Well-Known Member
#18
what do you suggest then?
In the real world, the people who make the big bucks are the ones with the most merit. It is no different here. You make as much money as your skill dictates. :greedy:

Everyone comes to trading for a free lunch, but it doesn't exist.

View attachment 48922

In that case we can prepare our Cspread like this . If market shoots up , then we can buy back 41400 ce and sell 41300 pe ( or current ITM strike at the time )
Banknifty you need constant attention in Cspread.
So you want to put down 25,000 margin to get a max profit of (5 x 25)125 - brokerage + taxes. At 20 per leg, max profit is about 25 or so :meh:

A vegetable vendor sitting on the pavement makes that much in 1 sale.
 
#19
In the real world, the people who make the big bucks are the ones with the most merit. It is no different here. You make as much money as your skill dictates. :greedy:

Everyone comes to trading for a free lunch, but it doesn't exist.


So you want to put down 25,000 margin to get a max profit of (5 x 25)125 - brokerage + taxes. At 20 per leg, max profit is about 25 or so :meh:

A vegetable vendor sitting on the pavement makes that much in 1 sale.
Already said ,it's not a viable option. Just giving subjective setups.
 
#20
In the real world, the people who make the big bucks are the ones with the most merit. It is no different here. You make as much money as your skill dictates. :greedy:

Everyone comes to trading for a free lunch, but it doesn't exist.


So you want to put down 25,000 margin to get a max profit of (5 x 25)125 - brokerage + taxes. At 20 per leg, max profit is about 25 or so :meh:

A vegetable vendor sitting on the pavement makes that much in 1 sale.
Yup we are just discussing some subjective ways not the exact trade.
Not looking for big bucks just some consistent income..Hope you could suggest some ways for the same.
 

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