Are you an index trader?
Then this thread is definitely help you
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Then this thread is definitely help you
Like 👍& Retweet🔄 is always appreciated
1. Option premium decay
👉For an option buyer theta is the main enemy means decay in option price with time
👉Decay will higher in OTM ATM ITM(In the same order)
👉Generally option buyers prefer to buy OTM options in hope of getting 2x 3x returns and these are low priced
👉For an option buyer theta is the main enemy means decay in option price with time
👉Decay will higher in OTM ATM ITM(In the same order)
👉Generally option buyers prefer to buy OTM options in hope of getting 2x 3x returns and these are low priced
👉OTM means Money going out of the pocket(Mostly). 75% of the time OTM options ends in loss. Never do the mistake of buying OTM options
👉Example : Bank nifty is at 43000 and 43200 CE is at 100. At 11:30 Bank nifty would be at same level but 43200 CE option price would be at 90
👉Example : Bank nifty is at 43000 and 43200 CE is at 100. At 11:30 Bank nifty would be at same level but 43200 CE option price would be at 90
Thats 10 points loss already, Always choose ATM or ITM even they cost you little higher but decrease the position size and maintain strict stop loss
Don't commit mistake of buying high quantity premiums are less in OTM
Don't commit mistake of buying high quantity premiums are less in OTM
2. Option buyer mistakes
👉Not maintaining a strict stop loss. When your trade goes wrong we should accept loss and move onto next trade
👉Averaging the loss making trade is one of the sin you commit. Never ever do that
👉Not maintaining a strict stop loss. When your trade goes wrong we should accept loss and move onto next trade
👉Averaging the loss making trade is one of the sin you commit. Never ever do that
👉Not timing the entry. Even if you are right in direction entry must be on time. Neither early nor late
Maintaining same position size for all stop losses
Ex: Buying 20 lots for 30 points stop loss is not same as buying 30 lots for 40 points stop loss, Later gives us more loss
Maintaining same position size for all stop losses
Ex: Buying 20 lots for 30 points stop loss is not same as buying 30 lots for 40 points stop loss, Later gives us more loss
3.Option selling area VS Option buying area
👉VWAP is one the widely used indicator by option trader.
👉If option price of selected strike trades above VWAP then buyers are in control
👉If option price of selected strike trades below VWAP then sellers are in control
👉VWAP is one the widely used indicator by option trader.
👉If option price of selected strike trades above VWAP then buyers are in control
👉If option price of selected strike trades below VWAP then sellers are in control
4.Option strike selection
👉To buy always trade in ATM strike because
we can take full advantage of strong one sided move(As the instrinsic value is hgh than OTM)
Effect of theta would be less
👉To buy always trade in ATM strike because
we can take full advantage of strong one sided move(As the instrinsic value is hgh than OTM)
Effect of theta would be less
👉To sell always trade OTM and ATM strikes because
Theta is high
Extrinsic value in option premium will compensate if the index moves against our position
Theta is high
Extrinsic value in option premium will compensate if the index moves against our position
Will update if I find any useful information related to option trading,
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for more updates you can join👇👇👇
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