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Now these calls should be close to spot price of nifty. If market is in downtrend then buy Nifty Puts eg. Hope this answers your question. Keep track of FII fund flows, current account deficit, stay away from news driven market activities.
Divide caital into Use one part for trading while the second part is left as reserve trade in case the existing trade to go wrong. The final part is a Capital Reserve. Keep loss ratio on ur invested capital. Make sure to book ur profit. Divide capital into Enter the trade of ur choice. Caution adviced with overtrading. Probability is the mantra on this method. I treat trading as just the game of numbers.
Time is money in Options. So, as a f irst step divide the timeline into short, medium, long term. Next, study the interested security index or stock or usdinr. Based on the projected analysis of a security, decide to go long side or short side and the timeline that the security might fall into as mentioned above.
Options and Futures are sure way to loose money as these instruments are like gambling where in you place your bet. Be aware of market conditions. Have a basic understanding of factors that effect the price of an option. If you are a buyer, time is always against you. Then there is also an impact of volatility. The volatility is never realised. So, buyer always pays this premium. 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. Then, based on your risk capital decide on the type of Option strategy that you want to play.
The charts and indicators are forecasting tools for your wishful thinking. In the end its the broker who is making money, not you. I am trading in options with limits up to 15 days to expiry not after that.
Check out the below article for a comprehensive guide on OI analysis with a supporting excel sheet: