Suggest the best and most successful strategy for selling options in Nifty/Bank Nifty?
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As we all know selling options involves unlimited risk and limited profits. Also it requires little high capital compared to option buying.
Coming to the option selling strategies, there are many strategies but not all the traders handle it in the same way. The same strategy can give profits to some people and losses to other.
It depends on the following factors
I personally use only two strategies
1. Short Strangle:
Short strangle is nothing but selling far “out of the money” call and put options. I generally trade in Bank Nifty. Using short strangle strategy I am earning 10 to 15 percent returns per month.
It gives consistent returns if you know how to adjust the positions when market moves one side.
However there will be 4 to 5 loss trades in a month. This is due to trending markets.
The reasons for the loss trades are as follows
The above three are the major factors behind losses, otherwise I could have earn 20 to 25 returns in a month using short strangle strategy.
2. Short Straddle:
You must need an experience ;to handle short straddle strategy. Even though it gives high returns in range bound market, it also gives huge losses when there is a sudden move.
I suggest, you must avoid short straddle strategy if you are a beginner. I use this strategy on expiry day and also on range bound market.
Some time it gives loss, but I always put my stop loss. Short Straggle strategy gives 2 to 5 percent returns in a day, if the market stays range bound through out the day.
Conclusion:
If you are a beginner, go with short strangle strategy, It gives consistent returns. If you are a pro trader, straddle gives the best returns.
Best Strategies for the Option Selling in India:
In the option selling covered calls, you are under obligation to sell 100 shares at a designated strike price on or before the expiration date.
And, in addition you shall be paid a premium. Another interesting feature is, you can employ the options strategies for generating income. In option selling you will be able to have maximum gain.
The gain can be calculated using a formula, Strike price minus cost basis plus contract piece and multiplied by 100.
Example:
If you own 300 shares then you are allowed to write 3 covered calls. In this case, the trader will pay you money today for the right on your stocks, the moment the stocks reach a higher price (strike price) set in the trading.
Best Option Trading Strategies:
Synthetic Call:
If you are searching for an option selling strategy with unlimited profits and limited risks. Then synthetic call strategy is the best option. In which, you will buy put options that you hold and those which are anticipated to go high in the future. This strategy is seldom compared to the insurance policy when you observe a sharp decline in the stock prices.
Bull Put Spread:
You are advised to adopt a bull put spread strategy when you are interested to improve the value of the underlying assets in the future. Bull put spread involves selling a put option and buying a put option with a lower strike price. You will have to buy one out of the money and sell another at the money put option.
Best Option Selling strategy for Intraday:
If you incline towards Intraday trading then you will have to consider factors such as risk bearing levels, goal sets and the trading analysis. You can find experts giving their fine advice to adopt the selling strategies like momentum strategy, and reversal strategy.
However, I would say, you must also assess the possible financial condition, stock exchange market knowledge, etc