जानें Options Selling की सही strategy क्या है? #Face2FaceConcepts

TL;DR

Option selling is not limited to short strangles, and it is important to understand risk management and appropriate premium selection when engaging in these strategies.

Transcript

so in option selling generally how people come they try a lot of things and then they come to option selling that's how most of the people used to come they try cash market future option by option selling they come okay so once they come to option selling what they generally do they sell the necro options right okay they sell a call and they sell a... Read More

Key Insights

• 🍗 Many traders turn to option selling after trying other trading methods.
• 🍰 Short strangles are commonly associated with option selling, but other strategies exist.
• 🌸 Risk management is crucial in option selling to avoid unlimited losses.
• 🥳 Ratio trading involves selling options while also buying some, reducing risk but maintaining exposure.
• ❓ Premium selection should consider ROI and written expectations.
• 😘 High implied volatility leads to higher premiums, while lower volatility leads to lower premiums.
• 🆘 Using ROI on margin can help determine appropriate premium selection.

Questions & Answers

Q: What is a short strangle in option selling?

A short strangle involves selling an out-of-the-money call option and an out-of-the-money put option. Traders usually choose strike prices around 500 points away from the spot price in the case of indices like the Nifty. This strategy offers high probability of profit but may result in losses during trending markets.

Q: Why should option sellers avoid naked options?

Naked options, where you sell options without corresponding long options, can lead to unlimited losses. It is not advisable to engage in this risky strategy, especially for retail traders with limited capital.

Q: What is ratio trading in options?

Ratio trading is not a negative strategy. It involves buying one option and selling a greater number of options, still leaving some options naked. It does not eliminate the risk of the naked options and should be approached with caution.

Q: How can premium selection be determined in option selling?

Premium selection should be based on the trader's written expectation and the return on investment on the margin. For example, if you have a margin block of one lakh rupees and desire a 2% ROI, sell options that offer a two percent return within that strike price.

Summary & Key Takeaways

• Option selling is a popular choice for traders after trying various other methods, such as cash market and futures trading.

• Many retail traders focus on short strangles as their go-to option selling strategy, relying on the probability of profit to make consistent profits.

• It is essential to consider risk management and avoid naked options to prevent unlimited losses.

• Ratio trading, where for every option sold, there is a corresponding option bought, is a non-naked selling strategy.

• Premium selection should be based on ROI on margin and the trader's written expectation.