biggest mistakes of an choice client: Shubham Agarwal
alternate in rules is brining in a want to create greater directional techniques. This requires us to be a consumer of the option or a internet customer of the option in maximum instances.
internet consumer manner we grow to be paying premium when we create the method.
If it's miles directional buying and selling we are able to must thing beyond indices like Nifty, bank Nifty, Sensex choice. As quickly as we get deeper into the directional trading, we start venturing into stock options as properly.
maximum of us choice traders have a first rate grip of alternative writing. all of us understand that after it comes to buying alternatives, we need to deal with many different difficulties. with the intention to keep away from many of them we turn out to be making errors.
let us study what those errors could be and discover a solution for the equal.
Mistake1: One size healthy all strategy
imagine you grasp driving an elephant and would love to try using the identical knowledge and experience a cheetah.
Elephant being gradual shifting indices and cheetah being the shares will never supply us the equal output. specially the ease with which option dealers use Index alternatives, the same ease cannot be applied in stock options. five% pass in an index in a day can also halt the buying and selling however five% flow in a inventory is very everyday.
We need a solid strategy particularly while writing alternatives on shares for directional buying and selling.
solution: deal with shares and Indices in a different way. With shares the Volatility and top rate each are excessive, so do no longer be shy to buy a better name / decrease put against a put or a call sold. this will avoid any large accidents and restrict the losses.
Mistake 2: decrease top rate Does no longer make it higher options
choice rates paintings very scientifically. Majority of alternatives that move up ten or twenty folds are the ones that had been a Rupee or so in some unspecified time in the future in time. most of the choice consumers fancy this extravagant motion. The capacity to make 10X money is real however no longer common.
in search of those the buyers could often buy higher Calls and decrease strike places certainly due to the fact they're cheaper. If the inventory does pass in a day via a massive margin, they would make cash as well however if they do not or they do over a length of 10 days, there may not be any money or maybe a loss.
this mistake by myself has positioned away loads of humans out of alternatives buying and selling.
solution: try to buy options with not greater than 2-three strike faraway from the strike closest to the modern market charge.
Mistake three: shopping for into Illiquidity
Many options stocks do not have enough liquidity. This not handiest make the entry difficult due to difficult to get a very good good deal however additionally make an go out difficult. At times in lots of stock options there are not any rates after a big flow. This makes it not possible to e book profits.
answer: exchange options where each quantity and Open interest is more than 50 plenty.
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