Options trading is about to catch on like wildfire in India because of the margins imposed on Futures trading.
The retail investor will get sucked in sooner or later thinking that options trading is easy and profitable.
Nothing can be further from the truth.
Options trading is dominated by the big guys – algo traders, institutions (domestic and foreign), options writers, AI and other tools that can smack the living daylight out of the average retail trader.
Therefore, retail traders must be extra cautious if they want to protect their capital while speculating with options.
The following is a low risk strategy that generates limited profits or losses.
The only caveat is that it should be squared up at the same time.
Step 1: Discover Stocks that are Trending (Up or Down)
You need a screener to discover bullish and bearish stocks.
Use these configurations at Chartink, or at a screener site of your choice. You can do this every EOD:
Latest Close Crossed above Latest VWAP (for bullish stocks)
Latest Close Crossed below Latest VWAP (for bearish stocks)
Step 2: Use The 15 Minute BullBull Price Action Strategy
First set up the discovered stocks on your software tool or at Investing.com. This is how you set up stocks at Investing.com.
Use the following strategy. This will require you to wait for 15 minutes before trading in options, and it will hold you back from making any rash decision.
Step 3: Options Strategy
1. If the 15 minute trade confirms bullish trend – Buy near OTM CE, sell far OTM CE
For example: If stock is bullish at 200, buy 210 CE and sell 220 CE.
2. If the 15 minute trade confirms bearish trend – Buy near OTM PE, sell far OTM PE
For example: If stock is bearish at 200, buy 190 PE and sell 180 PE.
The spreads will be low and so will your your profits and losses.
Just ensure you square up positions at the same time. Don’t keep any one position open, especially the short position.
This is a short post, but there is a lot of reading to do.
So go ahead and soak in the knowledge and try it out and do tweet if it works out for you.