The biggest reason and one of the prime reasons is the theta decay.
Option sellers always have an advantage because the as time passes, the option premium falls even if the underlying instrument doesn't move.
BENEFITS OF OPTION SELLING
Most of the successful traders here are option sellers.
Ever wondered why?
Why we have chosen option selling?
How to decide what strategies to use?
THIS IS THE ONLY THREAD YOU'LL EVER NEED!
Find out below
The biggest reason and one of the prime reasons is the theta decay.
Option sellers always have an advantage because the as time passes, the option premium falls even if the underlying instrument doesn't move.
We as option sellers can be wrong with our market view and still end up making money because of the power of theta decay and adjustments to some extent,
Option selling also enables us to take a directional view. Infact, directional view along with theta decay makes it a solid combination.
Debit spreads and credit spreads works great for a directional view.
We can make money in option selling even if the market doesn't move as the otm options will go to 0 with the help of theta decay. It's the most fascinating thing.
Option selling has extremely low transaction costs as compared to futures and other instruments.
The STT which has to be paid in option selling is drastically low making it an excellent option for many.
Hedging is an excellent tool in option selling. It protects you from losses and also makes you more money than the original trade itself in some cases.
Hedging also makes sure you stay in the trade and prevents you from being thrown out in small spikes.
Usually naked option carries unlimited risk.
But hedging your risk ensures limited risk on your positions.
You can also deploy limited risk strategies which protects you from any big spike and also big gaps.
Option trading is all about trading volatility. Option selling can be used to take advantage of rising and falling volatility.
Best strategy for falling volatility : Strangles, straddles, iron condor, ironfly, butterfly.
Adjustments is the heart of option selling.
The ability to adjust your trades and coming out in profit even when your view goes wrong is one of the prime reason why option selling is amazing.
Adjustments can be done in "n" number of ways as per one's style.
Option selling requires very low margin as compared to futures because of hedging. You can also make your option selling position behave like futures by going with itm options, although I personally don't recommend it to newbies.
In option selling,you can play ALL directions
If you're bullish you can play long, If you're bearish you can play short and if you think the market will be rangebound, you can deploy neutral strategies
The flexibility it offers is unmatched!
Close to 80% of the options expire worthless. So the probability is always on your side.
You don't have to be intelligent to make money. Only trade the most high probable setups and you're good to go.
Option selling is an amazing tool for making consistent returns and compounding your money at a decent pace with least drawdown.
You just have to make 2% a month.
Often buying options, futures, etc has a problem of scalability.
But selling options can be done at a scale! It can be done with huge capital and there's seriously no limit as to how much capital one can scale!
Option selling is not only used for trading but also for hedging your long term investment portfolio.
Covered calls is an excellent way to collect premiums from option selling as long as your stock is flat/going down and bring down the average price.
Cash secured puts is an amazing way to buy stocks at your desired price provided you have enough cash to take the delivery of the stock.
Option selling requires patience by default since it doesn't give you money instantly like other instruments.
It cultivates the habit of patience and also makes you less prone to take unnecessary risks.
For more learnings/analysis during live markets join our telegram channel : https://t.co/uNIrqq5aDP
More from Aditya Trivedi
Workshop worth 5 LAKHS absolutely for FREE.
I've posted some amazing stuff about trading which in itself is a workshop.
Posting some of my best threads here.
1: Benefits of Option selling.
Why are most of the successful traders option sellers?
Writing down my reasons for choosing
2: How to use Technical Analysis to form a weekly view as an option
3: How to adjust a short
4: Top Trading books that make you a better
I've posted some amazing stuff about trading which in itself is a workshop.
Posting some of my best threads here.
1: Benefits of Option selling.
Why are most of the successful traders option sellers?
Writing down my reasons for choosing
BENEFITS OF OPTION SELLING
— Aditya Trivedi (@itsAdityaT) May 28, 2022
Most of the successful traders here are option sellers.
Ever wondered why?
Why we have chosen option selling?
How to decide what strategies to use?
THIS IS THE ONLY THREAD YOU'LL EVER NEED!
Find out below
2: How to use Technical Analysis to form a weekly view as an option
HOW TO USE TECHNICAL ANALYSIS TO FORM A WEEKLY VIEW
— Aditya Trivedi (@itsAdityaT) September 24, 2022
A thread\U0001f9f5
Got many DMs about how I form my weekly view in Banknifty and how do I analyze it.
In this thread I'll show you how I do it so that anyone can analyze Banknifty and other instruments the right way.
3: How to adjust a short
HOW TO ADJUST A SHORT STRANGLE?
— Aditya Trivedi (@itsAdityaT) August 13, 2022
Gone are those days where a short strangle used to expire worthless without any adjustments.
Adjustments are a must when your initial view goes wrong which it will.
Listing down all the ways to adjust a short strangle WITH EXAMPLES below. pic.twitter.com/k0iuvvqqQu
4: Top Trading books that make you a better
TOP 10 TRADING BOOKS THAT MAKE YOU A BETTER TRADER
— Aditya Trivedi (@itsAdityaT) July 16, 2022
I've read a number of books on trading and these are top 10 of them which I found the most useful.
More from Optionslearnings
MASTER THREAD on Short Strangles.
Curated the best tweets from the best traders who are exceptional at managing strangles.
• Positional Strangles
• Intraday Strangles
• Position Sizing
• How to do Adjustments
• Plenty of Examples
• When to avoid
• Exit Criteria
How to sell Strangles in weekly expiry as explained by boss himself. @Mitesh_Engr
• When to sell
• How to do Adjustments
• Exit
Beautiful explanation on positional option selling by @Mitesh_Engr
Sir on how to sell low premium strangles yourself without paying anyone. This is a free mini course in
1st Live example of managing a strangle by Mitesh Sir. @Mitesh_Engr
• Sold Strangles 20% cap used
• Added 20% cap more when in profit
• Booked profitable leg and rolled up
• Kept rolling up profitable leg
• Booked loss in calls
• Sold only
2nd example by @Mitesh_Engr Sir on converting a directional trade into strangles. Option Sellers can use this for consistent profit.
• Identified a reversal and sold puts
• Puts decayed a lot
• When achieved 2% profit through puts then sold
Curated the best tweets from the best traders who are exceptional at managing strangles.
• Positional Strangles
• Intraday Strangles
• Position Sizing
• How to do Adjustments
• Plenty of Examples
• When to avoid
• Exit Criteria
How to sell Strangles in weekly expiry as explained by boss himself. @Mitesh_Engr
• When to sell
• How to do Adjustments
• Exit
1. Let's start option selling learning.
— Mitesh Patel (@Mitesh_Engr) February 10, 2019
Strangle selling. ( I am doing mostly in weekly Bank Nifty)
When to sell? When VIX is below 15
Assume spot is at 27500
Sell 27100 PE & 27900 CE
say premium for both 50-50
If bank nifty will move in narrow range u will get profit from both.
Beautiful explanation on positional option selling by @Mitesh_Engr
Sir on how to sell low premium strangles yourself without paying anyone. This is a free mini course in
Few are selling 20-25 Rs positional option selling course.
— Mitesh Patel (@Mitesh_Engr) November 3, 2019
Nothing big deal in that.
For selling weekly option just identify last week low and high.
Now from that low and high keep 1-1.5% distance from strike.
And sell option on both side.
1/n
1st Live example of managing a strangle by Mitesh Sir. @Mitesh_Engr
• Sold Strangles 20% cap used
• Added 20% cap more when in profit
• Booked profitable leg and rolled up
• Kept rolling up profitable leg
• Booked loss in calls
• Sold only
Sold 29200 put and 30500 call
— Mitesh Patel (@Mitesh_Engr) April 12, 2019
Used 20% capital@44 each
2nd example by @Mitesh_Engr Sir on converting a directional trade into strangles. Option Sellers can use this for consistent profit.
• Identified a reversal and sold puts
• Puts decayed a lot
• When achieved 2% profit through puts then sold
Already giving more than 2% return in a week. Now I will prefer to sell 32500 call at 74 to make it strangle in equal ratio.
— Mitesh Patel (@Mitesh_Engr) February 7, 2020
To all. This is free learning for you. How to play option to make consistent return.
Stay tuned and learn it here free of cost. https://t.co/7J7LC86oW0
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