Best option trading strategy india
Keep an eye on VIX. If IV is high, then the risk of ending in a loss even though you predict the direction well is higher. Since time and volatility are against you. A simple strategy that would earn you decent returns would be to sell far out of money calls and puts and hold it to expiry. If you are working on large capital, a good capital preserving strategy would be to sell the options and use the option premium credits to buy directional bets. This way, your capital will never erode although there is a capital erosion owing to inflation and if your bets do work out, you are better off.
Important is to be able to choose the option strikes wisely. Buy one Nifty Future and buy 2 ATM puts wait for couple of days if it moves either side of the market it gives the profit, close the trade and do it again. Minimum loss maximum gain. With introduction of bank nifty weekly options, any options trader can write far of Out of the Money call or puts during the expiry days to take less risk and high probability trades As sellers of the options are always at the advantage because time value decay usually work in their favor.
Technical charts can be utilized to see the major resistance and support levels within last days of the expiry as the options writing above or below these anchor levels can be used to take small profits but those which have higher probability of success.
Also, writing works in favor during the last two hours of the expiry day. With experience, we can start trading big lot size to make big profits from this. Options are used for hedging purpose. Options buyers will only loose. Knowing trend or direction you can protect your money. Trader can take the help of the information to know technical trend and trade technically. Probably you should trade Options based on open interest.
It is believed as a Confirming Indicator by numerous traders across the globe. It generally confirms the market trend whether its rising, falling or sideways when used in conjunction with other parameters like volume and price.
It also measures the flow of money in the market. Check out the below article for a comprehensive guide on OI analysis with a supporting excel sheet:.
Thanks for the wonderful explaination. Its good to know that the shared information is benefiting the trading community. I suggest a open strategy https: What is the best strategy that one can follow always in options index trading General.
I believe there cannot be straight forward answer for this. Short term - 2 weeks, Medium term - 4 weeks 1month. Long term - 8 weeks 2 months. I look at it as a normal income and use it to supplement my financial goals. There is no system that can guarantee you return, in the last 1.
It is important to understand this and hence manage your risk accordingly. Trading is like a profession, people take it lightly especially because of the low entry barrier. To be able to reach that assumptive trading size where I can quit my job and become a full time trader. Thanks, Rajesh, for the insights and hopefully your good run in the current day challenge continues and be able to trade full time soon. Love playing poker, basketball, and guitar.
Thanks Zerodha for sharing this …. It contains Lots of Value and very helpful for the people who are there in this market…. Congrats and Thanks for sharing your thoughts Rajesh!!! Wish you all the best for your future plans. Because of his natural talent he is gonna achieve greatness.
I see him as a teacher. You say correctly that Full Time job is a blessing in a disguise. But how you are able to do Day Trading with FT job? How you are able to manage daily screen time required for day trader along with FT job?
How about charts-on mobile? Most of the time, the major moves happen within the first one hour of market open and again in the last one hour. Being in software industry where you have flexible timing helps a lot here and the day is still long after market hours!
For tracking other parameters on the OI and IV skew, I use the system built inside my website tripleint. An iitan is paid atleast 30 lakhs per annum sal.. He does it because he has the potential.
He gets satisfaction from it. Why do you play chess? I am retired aged 61, earning a pension. And i trade options. Because i am not yet brain dead. Money is not always the main motive. Wish you all the best for your future trading plans. I hope this article is very inspiring for all of us! My problem is getting uninterrupted internet connectivity and reliable tick by tick charts for intraday trading.
I am based in Mumbai western suburbs. I use the live proprietary system developed to track OI and IV skew defined in my website tripleint. Most of the analysis is based on EOD charts, levels, traps and research is to select the right day for placing the trades.
During the day the live Option system and price levels are used for timing the entries. Thanks to Zerodha for publishing my interview!!! For people who have been asking details on the option trading system and methodology, please visit my website at tripleint. Thanks again for all the likes, shares and encouraging words!!! I almost have similar background as yours IIT, M. I am interested in building a trading system. Can you throw some light on how to proceed.
Did you build your own trading system? Is there a mechanical way using which you search for traps? Will be very grateful of you can share your technique. Rahul — For traps, not using a mechanical way of finding it out and I have explained the details in my blog http: Under Categories you can find articles for bull and bear traps. Please find some scholarly articles at http: Each have their own advantage and disadvantage as has been explained. The articles might help you to understand how each of the parameters of OI, IV and direction decides the option price and you can then decide on which strike suits best for what you are looking for.
Best wishes to you! Mr Shirish — Thanks for your message! Expecting a return of risk free rate is far too less to consider for any business and to maximize that we use the power of leverage.
Trading is to be considered more of a business and to begin with, one needs to start off only with the capital one can afford to lose. In all probability there will be multiple times when one goes bankrupt in the trading account and it is continuous learning and perseverance and might take a few years before one could zero-in on the strategy and markets that one would be trading profitably.
Derivatives as a product itself is designed to factor in leverage and so handling risk: Being a personal trading account, one would not want to reveal the absolute value and that is the reason why returns are talked in terms of percentages.
I have been trading from past 1. I always end up losing money just because of these traps. The most common mistake i always do is i carry my position overnight, that has killed my account literally. I found a trading system back in May where i was making consistence profits with it, infact i doubled my trading capital in a week, but i lost the momentum because of a bad trade carrying overnight position.
I lost my confidence with that single trade. Since, I have been researching a lot over internet and reading books to have a trading system which works for intraday option trading but I have not found one. I would be grateful if you can help me with Where i should be starting with and how to make your own trading system.
Are you doing option trading only? Great article or interview. Everyone has their own strategy. Good to know he is able to sneak some time from his full time job and do trade on his mobile platform. Congratulations and wish you continued success.
I have read it many times. I thank Zerodha team for this opportunity to learn about the strategies and thoughts of other traders. It was nice reading your interview. I am Henry Solomon from Mumbai. I have planned to trade in option intraday. I have joined a advisory company for the same. As you have advised, I am investing a amount which i can afford to loose. Dear Rajesh, thks for the important valuable trading tips, one important thing to know where exactly we will get information about open interest, implied volatility and option prices.
I also trade in options. Recently I have developed my own tool in excel for certain option strategies.
I check the pay-off and also ROI on the margin money blocked. If I am convinced about the profit margin and risk-free range of the underlying I take the trade position. Its working well for me. I am also able to track it along the dynamic market from my tool. I am not a software person.
I want to take this tool to further refinement. I am looking for some experts to help me out. Hi Charlu, I am a software engineer, I could able to help you if there is any requirement from my end. I am a software developer by profession.
I can help you to refine your tool if needed without any charge. If interested revert me back. Hi Rajesh, i have read that you never hold position overnight. Hi Rajesh, Congratulations on your success. It is infact the opposite. One request from the Zerodha team. Instead of focusing on others losses or strategies, we should focus on our own. At zerodha, is there a way to get our past trade book analyzed, maybe even for a small fee? At hindsight, it is always easy to have made the right investments.
But fact of the matter is that it is not always possible to buy at lowest and sell at highest. Some of us are just not made for the market, but we may realise it a bit too late in our lives.
Have you checked out Quant? Tried contacting thru your website but got no response. The issue with stoploss is that there is no guaranteed execution price. Nithinji why you are not updating this section after I found Mr.
Rajesh post of and there was also post from you as a trader that too from I think now its time that you should post some fresh traders in this 60 day competition. Yep, on my to do list, just too many things on my table. Will get someone from our team to do this from now. When in a drawdown, best thing to do is to reduce your trading size significantly before doing anything else. I am a student. And I have saved rupees for opening trading account.
How should I start trading initially with such small amount. Start trading in equity intraday, suggest you to go through http: Technical analysis is a good way to get started trading. Here is what I have learned in my 6 months of option trading….