3% Nifty Option Strategies Trade Limited Profit & Loss – TheOptionCourse.com

In this article you will learn how to trade using the risk to reward ratio.

Risk to Reward Ratio is the concept where a trader knows before taking a trade where to take a stop loss and where to take profits out.

A novice trader never writes anywhere before taking a trade where to take a stop loss. However an experienced trader knows very well what risk he is taking in a trade and what reward he is expecting. An experienced trader will never move away from a decision he/she takes.

Let me take an example of a Long Call. Let us assume that Nifty ATM CE is trading at 100. A novice trader will buy it “thinking / hoping” that Nifty will move up without realizing that options have time value that melts away with time if there is no move. They treat an option buy equal to futures buy which is not. read more

One of the best ways to short stocks, nifty or banknifty is on a bad news. I am a great fan of bad news. See this chart of PNB after the news came out of the Nirav Modi scandal. The Punjab National Bank scam came to light on 14 February 2018, and since then it has been a downhill ride for the Indian Banking community especially PNB – Punjab National Bank.

See the downhill chart of PNB from the news came out:

PNB Stock Chart 13-Feb-18

The downhill continues for months for PNB:

PBN on 18-May-18

It is almost certain that a stock will fall heavily when bad news hits the company. Resignation of a top manager, employee specific scandal, tax hiding getting caught (like Satyam), any illegal activity – even a small illegal activity will take the stock down by 5%. read more

Learn the psychology of option traders and learn why they lose money.

There are certain days when Option Buyers make small profit and Option Sellers lose HUGE.

Look at this graph of Nifty on 07-June-18:

NSE 7-June-18

There is no stopping.

What does an option buyer think?

Wow huge profits – buy at 10 am and sell at 3 pm.

But what happens in reality? Buy at 10 am and sell at 10.30 am. A very small profit and then regret of leaving money on the table.

And what happens to option seller?

Sell at 10 am on the hope that Nifty will fall down – but do not exit at 11 or 12 or 1 or 2 because of the HOPE that Nifty will fall and they can exit in profit. Ultimately exit at 3-3.25 pm with a huge loss. read more

In media, news channels and among traders there goes a lot of buzz on what will be decision of RBI policy, its impact on stock markets, what trade to take based in RBI policy – go long or short, buy calls or puts, which stock to buy or short etc.

Whenever someone gets a strategy they start back-testing forgetting that a strategy can be made based on back test, but can you really future-test a strategy? You cannot. For that you have to trade that in live markets.

I personally do not believe in back-testing but for those who believe one of my course subscribers did a back-test on my Conservative Nifty Strategy for 2 years and found it too be superb. He is an experienced Technical Analyst and Full Time Trader. He did my course in 2015, so is it working now? Yes Course Testimonials of Year 2018 are proof of that. Three years in a row if a strategy is working in live markets then it will work in future too. read more

I keep getting calls from people all around India telling me that they have allowed someone else to trade in their account and are now losing money heavily. Do not let anyone else trade in your account. Keep your account username and password secured like you keep your bank account password secured. Let us see what damage it can do.

Out of greed/expectation/laziness/in faith or for whatever reason people let someone else (mostly brokers) trade in their account.

This is a a very bad practice and should never be done. Do not allow anyone whether your broker or friend or relative trade in your account on your behalf. You do not know what they have in mind and what they may do to your account. read more

On 24-May-2018, BANKNIFTY closed at 26016.18:

BankNifty 24-May-2018

But something strange happened. See this image:

BankNifty Option Closing Price on 24-May-18

What is the problem?

Options on the expiry day after trading is over expire worthless if Out Of Money (OTM), or At The Money (ATM), or just have the intrinsic value left for options that are In The Money (ITM).

If you are trading bank nifty weekly options my bank nifty weekly course will help you a lot to trade bank nifty weekly either intraday or positional. You can use these properly hedged strategies to trade in stocks and nifty also. read more

What Is Volume?

Stocks trade when markets are open. Some stocks are traded less some more. The number of shares that is bought and sold over a given time period is volume. Note that volume can change over given time period.

For example when the PNB Scam news came the next day PNB witnessed more than average volume.

Where to find high volume shares on a particular day in India?

Top 25 – Volume Gainers – Source NSE India

Most Active – Volume – Source Economictimes

Stocks that are witnessing a huge surge in volumes – Source Moneycontrol read more

Look at this first trade of a trader who traded option for the first time:

Jaykumar Testimonial 4-May-18. He traded option for the first time in life and made 1.2% return in 10 days – Results may vary for users

Jaykumar sent this Testimonial on WhatsApp for Web. He traded option for the first time in life and made 1.2% return in 10 days – Results may vary for users.

Margin block was approx 95k and he made 1200 so approx returns: 1.26% in 10 days.

Average return comes to more than 3% in 30 days.

This is approx 36% in a year. Ok fine lets take even more conservative approach

30% in a year.

Now think about it – COMPARE YOUR TRADING RETURNS VS 30% A YEAR. read more

What is Short Selling?

Short selling is selling stocks without have the stocks in demat account. Short selling equities must be closed the same day (intraday) or market makers will close the stock in auction and you will have to accept whatever price market makers get in auction. Usually this results in losses. Therefore short selling should be done intraday only and must traded under (MIS) Margin Intraday Square-off.

Short selling can be done in derivatives (options and futures) if the trader wants to hold the position overnight. But overnight gap up and down comes with huge risk. Overnight losses can exceed 10,000. read more