The document provides an overview of options buying, including:
1) Options give the buyer the right to buy or sell the underlying asset at a particular price in the future. When bullish, one would buy a call option or sell a put option.
2) The risks of options buying include the stock moving against expectations, consolidation causing the premium to decay, and higher implied volatility increasing premium prices.
3) Successful options buying strategies include entering trends, setting price targets and stops, limiting the holding period, and managing position sizes based on gains.
The document provides an overview of options buying, including:
1) Options give the buyer the right to buy or sell the underlying asset at a particular price in the future. When bullish, one would buy a call option or sell a put option.
2) The risks of options buying include the stock moving against expectations, consolidation causing the premium to decay, and higher implied volatility increasing premium prices.
3) Successful options buying strategies include entering trends, setting price targets and stops, limiting the holding period, and managing position sizes based on gains.
The document provides an overview of options buying, including:
1) Options give the buyer the right to buy or sell the underlying asset at a particular price in the future. When bullish, one would buy a call option or sell a put option.
2) The risks of options buying include the stock moving against expectations, consolidation causing the premium to decay, and higher implied volatility increasing premium prices.
3) Successful options buying strategies include entering trends, setting price targets and stops, limiting the holding period, and managing position sizes based on gains.
The document provides an overview of options buying, including:
1) Options give the buyer the right to buy or sell the underlying asset at a particular price in the future. When bullish, one would buy a call option or sell a put option.
2) The risks of options buying include the stock moving against expectations, consolidation causing the premium to decay, and higher implied volatility increasing premium prices.
3) Successful options buying strategies include entering trends, setting price targets and stops, limiting the holding period, and managing position sizes based on gains.
Today I am going to talk about some basics of Options & it's
Buying. These are basic points and already known to many, but let's discuss them before we discuss the tough points.
If you don't know what's an Option then let me clarify, Option is
a derivative of an underlying assets which lets you (or say gives you the right to) buy/sell the assets at a particular price in future, by paying a small premium.
You know it by CE or PE.If you're Bullish about a Stock, you Buy
Call Option (CE) or Sell Put Option (PE) & if you're Bearish about a Stock, you But Put Option (PE) or Sell Call Option (CE) but today we'd only discuss Buying Options. When to Buy Call Option?
You buy Call Option when you're Bullish about a stock. For example, if you're Bullish about #RELIANCE that it's going to rise to say 2900 (CMP 2700) in December Series, you may plan to buy 2700 CE of December series by paying ° premium of that Particular option. You're locking that particular price of stock for the number of shares assigned per lot. We've 250 shares per lot in 'RELIANCE F&O Contract.
If the Option is ITM (In the money), Option price would rise in line with the Stock price. So, by paying a small premium, a trader can lock the 1 gains w.r.t. the number of lots in 1 lot.
If you're u capital is 54K, you may buy 20 Shares and your gains would 200/share, so you'd earn 4000 on at total investment of 54K once stock hits 2900. However, gains in Option Buying would be much more as Premium paid is much less than ' the underlying assets itself.
Then what's the risk? And is it as easy as it sounds?
Assuming the stock rose to the levels you calculated, your Option would increase, and you'd be in decent gains. But 2 things which can Option Buying are... 1. Stock moving against your direction 2. Consolidation 3. ViX
1. If stock moves against your direction, you'd lose out on the premium you've paid for the underlying assets. Many low capital traders prefer Option Buying because it requires less capital & losses are limited, but ironically, Option Buyers are major losers in this Zero-Sum game. Majority of the time, Seller (Writer) wins the game, but that's for another day. So, whenever you enter a position, make sure you're clear of the direction you're buying Option of. Call for Bullish Trade & Put for Bearish Trade.
2. Consolidation kills the Option Buyers and, major friend of
Option Sellers. Option Buying Majorly depends on Gamma. If you're clear of me. I the direction, you can buy the Option. But what i if you're not clear and just bought the Option r• and stock is under consolidation, means it's not rising or falling much? In that case Option • Price would not move much, and time would kill *, the premium (theta decay.) So, make sure you 1. enter the Option only if you're clear of the move you think would happen. Don't enter 41 option of the stock which is under consolidation.
ViX is an index of Volatility its major component used while
calculating the price of Options Premium. Higher the volatility, more the price of Option and vice-versa Major Players buy during low ViX and sell during high ViX (last Friday was such an example)
When to enter Option Buying? 1. Find the stock which are in trend, ready for Break Out or already have broken out.
2. Find the Cash/Fut levels of the Assets as your Entry/Target/SL.
If entry triggers in Cash/ Fut, enter the Option irrespective of the price of Option. Similarly for Target & SL.
3. Don't plan to enter Option for multiple days. Intraday to 3
days at max, that's it. (Unless you've bought an OTM and waiting for a mega move but that rarely happens, you can't count on that every time).
4. Keep multiple targets. After achieving 1st Target, keep the SL
at cost. After achieving 2nd Target, keep the SL at 1st Target and so on... (for low capital traders, better to Target small gains and book consistently to build capital. Once decent capital is built with enough confidence, one can slowly increase the position sizing) .
5. As mentioned above, don't enter stock under consolidation.
6. Last but most important point, don't enter Option Buying if you're low capital trader thinking you'd only lose out on Premium. That's also your hard-earned money. Plan your trade, execute the plan and earn. Take it as a business not a money- making Machine. It may soon surpass your main Money source of you do it effectively without any greed. Use the gains to invest rather than increasing your position size.
Read all the points carefully and let me know if you've any questions. I'd love to help you practically as well. Give me like if the I message has been passed properly.
Would add one more point and a very important one....
Many make decent gains in Option Buying. Sometimes 2X, 5X or even 10X. Problem is, this seldom happens. So, whenever this happens, a Buyer consider himself/herself immune to losses and increases position sizing. Remember, with greater Positions come great risk as well. Always remember to be in your limits whenever you enter a position. Even the calculated risk should be less than half of your total risk-taking capacity. Whenever you get lucky and get decent gains, more than you thought, use the additional gains to invest in stocks or keep the capital as it is but don't over leverage yourselves.
METAVERSE TRADING ACADEMY Creating Successful Traders That’s our vision. Often referred to as Metaverse Trading academy, is a financial education and training company based in Rajkot, Gujarat. We provide education to beginner, intermediate, and advanced traders.
For many, MTA is synonymous with high standards, effective
teaching, sound instructional materials, and a dedicated commitment to performance-oriented results.
For more information, visit metaversetradingacademy.in
Trading exchange on margin carries a high level of risk, and may not be suitable for everyone. Past performance is not indicative of future results. The high degree of leverage can work against you as well as for you. Before getting involved in foreign exchange you should carefully consider your personal venture objectives, level of experience, and risk appetite. The possibility exists that you could sustain a loss of some or all of your initial deposit and therefore you should not place funds that you cannot afford to lose. You should be aware of all the risks associated with foreign exchange trading, and seek advice from an independent financial advisor if you have any doubts. The information contained in this web page does not constitute financial advice or a solicitation to buy or sell any Forex contract or securities of any type. MTA will not accept liability for any loss or damage, including without limitation any loss of profit, which may arise directly or indirectly from use of or reliance on such information.
Day Trading Academy: Complete Day Trading Guide for Beginners and Advanced Investors: Top Trading Strategies that Every Elite Trader is Using: Option and Stock Trading Advice
Stock Market Investing Blueprint: Your Best Stock Investing Guide: Simple Strategies to Build a Significant Income: Perfect for Beginners - Forex, Dividend, Options Trading Information
Day Trading Guide: Create a Passive Income Stream in 17 Days by Mastering Day Trading. Learn All the Strategies and Tools for Money Management, Discipline, and Trader Psychology (2022 for Beginners)
Day Trading Academy: Complete Day Trading Guide for Beginners and Advanced Investors: Top Trading Strategies that Every Elite Trader is Using: Option and Stock Trading Advice
Stock Market Investing Blueprint: Your Best Stock Investing Guide: Simple Strategies to Build a Significant Income: Perfect for Beginners - Forex, Dividend, Options Trading Information
Day Trading Guide: Create a Passive Income Stream in 17 Days by Mastering Day Trading. Learn All the Strategies and Tools for Money Management, Discipline, and Trader Psychology (2022 for Beginners)
