7 Option Trading Strategies | Option Buying Strategy - LONG STRADDLE, LONG STRANGLE
Hello friends. Welcome to Day Trade Telugu we are going to discuss seven strategies in our today's video you might have seen more than 1 hour run time for a single strategy but even though there are 7 strategies, the video wouldn't have much run time the main reason for this is while listening to these strategies, you may think that they will have less loss and more profit with less stop-loss, we can earn unlimited profits and Option buying strategies so, if we buy them we can have unlimited profits these all are theoretical figures but in reality it is different They look very unique and interesting but when you enter the market and try one of these there won't be big results overall, as you may have profit on one day and loss on another so we try to avoid them because there are no results but we must use these strategies at a point of time so, how it looks theoretically and in reality how it looks we'll discuss this theory vs reality thing and we'll discuss some very important Option buying strategies and before starting the video, you can see the strategies on the screen when we started this channel, we told you that these strategies will be discussed If you observe here, on the neutral side, Short Straddle Strangle, Iron Condor, Iron Butterfly are covered and below them are Long Straddle, Long Strangle, Long Iron Condor, and Long Iron Butterfly will be explained and we've already discussed Call, Put, their difference and their usage and also discussed Bear Call spread, Bear Put spread, Bull Call spread, and Bull Put spread I will explain Cash secured Put and covered Call and they are very important If you understand them completely and use them carefully, you can earn regular income I have already explained in the main channel and I'm taking some easy and quick topics here I will explain Cash Secured Put and Covered Call I will also explain Synthetic Call and Synthetic Put in this video and also Synthetic Futures which will be very interesting this will be a different concept and after understanding it you may want to apply it in the market as it is very simple but I'll explain what happens in the reality and I will discuss the rest of the topics below along with them, If you think there are some strategies that you along with our followers need to know, feel free to comment them below I will explain them too If you see the way of approach, starting videos had a greater run time like Straddle, Strangle, Iron Butterfly We spend more time on those videos because those strategies gave us better returns 80% of the strategies we use are those strategies and the remaining 20% is time-Options related buying or UV directional Buying or Futures related hedging etc., If anyone's earning, they don't need to be working hard. they can earn through simple means too so, you must know to earn by simple means first The concept is simple but understanding it and its application will take some time so, practice the strategies from the start, perfectly those will lead you. I don't mean that leading will get you profits for sure profits are based on an individual's psychology about the stock market even if the strategy I use is completely exposed to you, you may exit at a certain profit or stay a little longer even at a loss adjustments will also differ based on the individuals we are trying to explain whatever strategies worked for us and we are following them for many years Today's strategies are very rarely used by us but still, we have to learn them as It's like reading a book and underlining some important points in the examination, we expect those important points. so, I've explained those important points first
we will discuss the whole book because we need to study the market careful with important as well as unimportant points we will try to understand the advantages and disadvantages of them so, there are 7 Option strategies Firstly, Synthetic Futures, Synthetic Call, and Synthetic Put keep them on one side the remaining four are Long Straddle, Long Strangle, Long Iron Condor, and Long Butterfly or Long IronFly so, first, the strategy, construction, and money required for the strategy and how to place the order at present will be shown to you on the app too I will not place the order but give you a brief idea about it because there are 7 strategies and If I place orders for each of it, It may be very confusing so I will not place the orders but I will show you the sets then I'll explain the important strategies and theory vs reality view on strategies the first strategy is Synthetic Futures while you are watching the video, If you like the content we are providing encourage us by liking this video If you haven't subscribed to this channel take a look at the channel's previous content F&O content and Equity content is yet to be started If you like our idea to start from the basics and if you think this content would be useful to you subscribe to the channel and hit the bell icon because many of you are forgetting to subscribe If the content is useful to you, subscribe to our channel after buying the Futures, If the market is going up we'll be in profits as we bought it and if the market goes down, we'll incur losses In synthetic Futures long segment, we won't buy any Futures by using two Options, If the market goes up, the profit obtained from buying the Futures and if the market goes down, the loss obtained from buying the Futures can be replaced for this, we will use At the money Call and At the money Put remember this carefully If you are considering Synthetic Futures Long, you will buy At the money Call and parallelly, At the money Put is sold. Those two strike prices must be the same For example, If Nifty is 16000 at present we'll use 16000 Call and 16000 Put as we are considering Synthetic Futures Long, means we want to buy the Futures but instead of Futures if you are considering to trade with Options without buying Futures, If you buy At the money Call and sell At the money Put, it will equal to buying the Futures Similarly, If you are selling a Future, If the market goes up, we'll incur loss and If the market goes down, we'll be in profits because we sold the Futures to match this, we buy At the money Put and at the same strike price, sell At the money Call this will be equal to selling a Future For example, If the Bank Nifty Future is at 36200 we will trade At the money Call & Put to match the Future so we are trying to buy the Future so to buy the Future, we will buy At the money Call and sell At the money Put which will be equal to buying a Future. here At the money Call is 36200 Call and At the money Put is 36200 Put we are buying 36200 Call and selling 36200 Put if the Future closes at 36200 the buying and selling positions are the same, so we get nothing but zero exclusive of charges and tax but the settlement will be zero.
and as we took 200 Call and 200 Put, that will also close at zero so, we don't get anything from Futures and also from Options if it closes at 36300, which means 100 points f rise from 36200 36200 At the money Call will be In the money Call If the Future is 36300, then where will 36200 Call settle? it will settle at 100 points because 36200 Call is In the money, so it will settle at 100 whereas, Put is Out of the money If the market closes at 36300, 36200 will be Out of the money we don't get anything there and it will be zero So, In Futures we got 100 points gain and in Call we got 100 points gain and at the end of the expiry, the profit of both is matched If we look at the loss scenario, If the Futures drops 100 points from 36200 the Future is down to 36100 and If the expiry is also at 36100, we'll have a loss of 100 points if the market closes at 36100, what happens to 36200 Call? It will Out of the money there won't be any settlement for Out of the money so the Call will be zero, but Put as the market closed at 36100 then 36200 Put will be In the money and also as we sold there, we have to pay 100 premium to the market so, the loss at Futures is the same as these Options when combined This is the Long side. The short side will be similar to it so, buying and selling At the money Call and At the money Put is same as buying the Futures and buying and selling At the money Put and At the money Call is same as selling the Futures I will discuss the important points related to this later but observe this data here To buy and sell one Bank Nifty Future, nearly Rs. 201 is charged as the brokerage & charges but if you're trading the same in the Options, let's say you are buying at 450 premium and selling at same 450 if you are taking only a single lot, you'll be charge nearly Rs.68 so instead of trading a single Future, we are buying At the money Call & selling At the money Put and to sell the Futures, we are buying At the money Put & selling At the money Call we are trading 2 trades which is costing Rs.136 for both including all the charges still, I'm gaining an advantage of Rs.65 so by theory, we can say that the charges can be reduced by using Options instead of Futures theoretically but I'll explain the reality of it too How much money is required to buy the Futures or to buy At the money Call & sell At the money Put or to but At the money Put & sell At the money Call? let's see how much margin does a broker asks related to this.
If the Bank Nifty is at 36200, I bought 36200 Call & sold 36200 Put which means, I took the required steps to buy the Future for that, they are charging me nearly Rs.1,50,00 in the same case, If I want to buy a 36200 Future, the margin required is Rs.1,62,000 If we buy through Options it is Rs.1.5 lakh and If we buy it through Futures it is Rs.1.6 lakh. there isn't much difference in the selling too I'm buying At the money Call & selling At the money Put. which means, I'm buying the Future through Options
they charged Rs.1.5 lakh for this and to buy or sell the Future it will be the same margin which is Rs.1.6 lakh so, to buy a Future or buy through the Options, there won't be much difference in the margin so, according to our view, the advantage we can get through Futures can also be obtained from Options So, you might be having doubt about why the Futures exist when we can directly trade in Call and Put But the reality is different First, we will talk about the Positives and Negatives of this content if you observe the positives, the charges will be less not only brokerage but there are also many other charges like SEBI charges, STT security charges stamp duty, GST, and exchange charges are also collected from us some of these charges depend on turnover The overall brokerage and charges are much more But in Options, we buy premiums so that differs in taxes. There's no difference seen in brokerage. The brokerage is the same for both Futures and Options.
As the taxes and charges in Options are less than the Futures. Instead of Futures, buy 2 Options even if we are paying the brokerage twice In Futures, We'll buy and sell once that makes 40 for it In Options, we are buying 2 different things. Even after combing both the charges for buying the Options the charges in Futures are more than the Options. We will be benefitted in order of charges if we trade using Options.
Most important, Collateral advantage. I haven't said anything about collateral till now in the channel. Because of the options selling There's no rule that you should know about collateral while selling Options. If you are an investor, performing Option selling and having stocks in your portofolio.
If you have a 1 lakh investment in your DEMAT account and you want to perform Option selling You can lend money and use them for Option selling by keeping the investments for surety this is about collateral. If you are an investor and trading Options and want to take an advantage of them, Collateral is the best Option. I'll explain it simply but it has different terms and conditions. If you want to know that too, mention it in the comment section.
It had different parameters and I'll upload a dedicated video on it. If you have 1 lakh worth of investments in your DEMAT account You'll go to the broker and asks to lend money so that you can perform Option selling with it. There will be a haircut depending on the volatility and nonvolatility of those stocks. They'll not lend you the complete value of the stocks Suppose if they lend you 85K for those stocked the haircut will be 15% for it. You can follow the Options strategies using that money.
If you buy and sell the Futures, The profit and loss will be settled every day. If you gain 1 lakh profit by buying the future at the end of the day it'll be settled. You can withdraw it too. But in Options, Your profit and loss don't get settled. It'll be with your position. It'll settle only if you square it off. If the loss is nearly 50000 If you have pledged stocks worth 10 Lakhs and lend 5-6 lakhs of collateral which is in your account now The loss that occurred in the Futures doesn't match the collateral money.
But in Options, it'll match. If your broker lends you 5 lakhs of collateral money and you face a 1 lakh loss in Options then the collateral money will be settled. So, whoever trades/follows the strategies by using collateral It is better to use Options instead of Futures. Instead of buying Futures, you can take advantage of them by Options. This is the only advantage of Synthetic Futures.
If you are adding money and trading in Futures and Options, these Synthetic Futures are not useful to you. Synthetic Futures are useful If you are using both money and the investment to trade by collateral If you have no position to settle it with cash then collateral balance can also match it. Instead of using Futures we can use Synthetic Futures to settle with collateral money. The main important advantage of this strategy is the third important, there'll be Near, Next, Far in Futures.
If we're in august we can see August's, september's, October's Futures. Byt if you want to go long in nifty This advantage is only available in Nifty. after taking it in Nifty and holding the position for one year then Synthetic Futures will be useful Options can be traded more than 3 months in the market whereas Futures are only for 3 months for more than 3 months, especially for Nifty, If you are going long or short the Synthetic Futures will be useful then theoretically, there are 3 advantages to this but the disadvantage is, the Call and Put values won't be equal every time which means, we can't consider that adding them both gives us zero and the value can't reach the Futures there will be a marginal difference between Call & Put and related to the trade in Futures, there will be this marginal difference sometimes, it can be an advantage or it can be a disadvantage so, the charges that are less in theory will be neutral in reality as I said, the strategy will have some variation and can't be exact neutral if we sum up all these, the advantage with less charges will finally be neutral so keep this advantage aside the second one, is the most important one, Collateral basing on that single point, we can use this strategy If you want to settle with Collateral money instead of cash, only then this strategy can be used for everything else, we don't have much advantage from this as we thought, this strategy can be used to hold the positions for more than 3 months let's say when we are at 16000, If the market increases more than 16000 instead of buying the Futures at 16000, we'll buy 16000 Call & sell 16000 Put we are following the synthetic Futures we bought the Options for 6 months and we can hold them for 6 months now If the Nifty is 18000 after 6 months when it is 18000, if you want to sell it, there must be a buyer 16000 will be Deep in the money at Deep in the money, Liquidity is difficult i.e, the buyer and seller will be far away from each other so, selling will be difficult here In Options, after holding it for months, even If the market moves along with your view, there might be a disadvantage there won't be any liquidity for Depp in the money Options whereas in Futures, mostly Liquidity is available and the trades will be nearer Liquidity is also an issue if we sum all these up and If we want to settle only by collateral advantage money which is not possible in Futures but it is possible in Options. so, we use this strategy
so, don't think charges are less and holding positions for a longer period is the advantage because they will be neutral eventually If you get some practice, you'll understand that there will be no big advantage by this the second strategy is Synthetic Call If you are holding the long positions either Futures or stocks in the underlying asset or Futures If you buy At the money Put, it is called synthetic Call the advantage by this is, If you observe the pay-off graph, you bought a Future and if the market rises, you'll get unlimited profit and if the market falls, you can also get unlimited loss so, to control unlimited loss, you will buy At the money Put at the same place where you bought the Future this will help you to cover unlimited loss and also the brokerage will also be less to buy or sell a Future, Rs.1.6 lakh is charged from us I will show you how much this strategy will charge you but to control unlimited loss, you will buy At the money Put, which is synthetic Call now, Synthetic Put is buying At the money Call when we have an existing position in short or long if you sell the existing Future, If the market goes down you'll get unlimited profit but if the market moves topside, unlimited losses can be incurred to restrict the unlimited loss, we buy At the money Call this is called Synthetic Put Let's see how much is the expenditure here and how to place orders here to buy a 36200 Future, the broker is charging you Rs.1.62 lakh If you are buying the Future, we'll get an unlimited loss when the market is down If we buy At the money Put to protect ourselves from the unlimited loss At the money here is 36200 If we buy 36200 Put, it was Rs.1.62 lakh but let's see how much is charged to us now it is Rs.43,000 so, there is protection for the unlimited loss and also the expenditure is greatly reduced this is Synthetic Call let's see Synthetic Put to sell a Future here, they are charging Rs.1.62 lakh and I'm taking At the money Call
after taking it, the charge is nearly Rs.44,000 from Rs.1.62 lakh If we sell a Future and the market rises, we incur an unlimited loss and to protect ourselves from unlimited loss, we buy At the money Call, which is hedging. as we are out of unlimited loss, they'll charge less that's why the price dropped from Rs.1.62 lakh to Rs.44,000
If the market rises, we'll get unlimited profits and If the market falls, we will be in limited loss and the charge is also less looks best right? but there are some important points related to this this strategy looks good with minimum loss and maximum profit so, while learning the strategies, we can see Synthetic Call & Put but there are not even strategies Synthetic Call is also called as Married Put and Protective Put these are not strategies but techniques to save ourselves from a event now, think about this. We bought a Future and also bought a At the money Put so, the logic behind buying a Put along with the Future is Future is to get unlimited profits when the market rises and Put is to control the unlimited loss instead of all this, we could have bought a Call instead of buying a Future and a Put, we can buy a Call easily At the money Call and At the money Put are mostly in the same range and if the market is on the topside, the money we used in At the money Put should be recovered by the Future the money left with us after recovery is the real profit we will get profit from the Future and loss from Put the Future should recover the loss incurred by the Put till the end of the expiry to get real profit but instead of this, we could have bought the Call easily In Call, our maximum loss is Call's premium and if the market is topside, we will get unlimited profit so, instead of buying Future and Put, we can buy a Call but the advantage of this strategy is If you already took a Future position based on your technical setup, like the market may rise or there could be a result or you have the Future with you for some reason like an unexpected event, due to which the market in the next market may start with gap up or gap down to protect your position from that particular event, we are using this Option with long position, It may be a Future or a stock, we add Put to that position to restrict the increasing loss this is Synthetic Call or Protective Put or Married Put when you see these names, don't think of it as a strategy. It may seem like one because of less loss and high profit but the impact created by this can be created with a simple At the money Call so, you should use this strategy only when you already have a Future and protect yourself from loss after the event is over, the bought Put or Call based on the strategy we have to exit it and there is no logic to stay till the end and as we discussed Synthetic Put, exactly the same is applied here So instead of Synthetic Put i.e, selling a Future and buying a Call, we can directly buy a Put the maximum loss here is At the money Call If we take At the money Put as the maximum loss the advantage from buying a Call and Future will be the same as buying a Put so, Synthetic Put, Protective Put, and Married Put are the same the scenario here is also the same. If you sell the Future and buy the Call if the market goes down, by selling Future, you can get unlimited profits and if the market goes up, It will incur a loss to limit the loss, you'll buy a At the money Call if the market closed at the same place as well as the Future and It is zero then the Call's premium is the maximum loss instead of doing all these, you can buy a Put. the maximum loss for both is the same and the unlimited profit for Future and the Put will be the same So, selling the Future when the market is going down and buying the Call when we are incurring loss is not the best strategy instead of it, you can simply buy a Put what is the advantage of this strategy? you may have already sold Futures or stocks in Intraday It may be one lot of stocks or one lot of Futures to protect ourselves from a certain event like if there is an RBI meeting at 11am & after that the market may go down to protect from that we use this but this is not a strategy so, consider these both as tools to recover from the event than strategies now, let's discuss Option buying strategy If anyone's profitable with Option selling, for the same strategies if the selling strategies can be buying strategies, you should imagine the profits from that I'm mentioning again, our overall usage of these strategies is less than 20% and that too in very rare cases. We don't trade indefinitely 2 trades out of 10
If there is a need we will do that but overall, we used them less than 20% this percentage is obtained from the data from years, not weeks or months we follow these strategies very rarely but once if the strategy works, you can get good returns at once unlike Option selling strategies there is a limit in Option selling but here it is unlimited profits Let's discuss Option buying strategies. The first one is Long Strangle before explaining Long strangle, let's recap short strangle as it is already discussed if the market is at 36200 and selling 35800 Put and 36600 Call on the either side with 400 points difference that is short strangle to simplify the understanding, I'm considering 100 premium at 36600 Call and 35800 Put we will sell here which means, if the market is between this range, we can get profits If the market goes below 35800 point, even then the loss will not start because you collected 100 premium by selling Put and collected 100 premium by buying Call if you add those up, you have collected 200 net premium from this strategy so, from your range, you will get an edge of another 200 points if the market is below 35600 then you'll enter the loss if the market is above 36800 then you'll enter the loss when you add the 200 premium collected by you to 35800 Put and 36600 Call then, your safe range is 35600-36800 so, because of short strangle, your range is increased your view was neutral but as a Option seller you got some edge from this so, the profits will be in the range and if it is out of range then it'll be loss so in the entire pay-off graph, the green portion is very small and the red portion is large and If you see Long strangle, it is quite opposite to the previous one If the market is 36200 and your view is that market will move aggressively in a direction but you don't know which direction it is It can be topside or downside so, by selling, you may think that you are getting into a trap with all the adjustments and rising premiums and get into Option buying strategy with Long strangle, then you'll be profitable only If your view is right If the market doesn't move according to your view, then you're money will be zero when the market is 36200, you bought 35800 Put & 36600 Call and started waiting for the market to move more drastically so, when will you start making a profit? is it below 35800 no. you spent 100 premium to buy 35800 Put and 100 premium to buy 36600 Call. In total, you spent 200 premium so, you have to go 200 points below 35800 and 200 points above 36600 so the market must be below 35600 Put or above 36800 Call so, in the earlier case, the Option seller got an edge of 200 points to cover loss which was an advantage but Options buyer doesn't have the profit even though the market is out of his range Option buyer will have the advantage only if the market moves more than the range in one direction So if the option buyer combines the premium which he has to spend on both the sides and if the market moves in one direction, by the combined premiums, we can calculate the breakeven point, and also they can be seen on websites.
there's only a small bit of red zone seen in Long strangle when compared to Short Strangle. we assume that this one is much profitable than Long Stangle by the data observed in the graph. But in Long strangle the probability of profit is 43.59% which means you have a chance of getting profit up to 43.59% whereas, in story strangle is 56% We can understand that selling makes a profit more than buying according to the data.
In short-strangle, we think about margins but in long strangles we buy both, and the broker charges accordingly. Let's take a look at investment for it. The next one is Long Straddle, let's discuss short straddle before jumping into long straddle.
A short straddle is nothing but selling the Call and Put at the same strike price For example, the market is at 36000 and we are selling ATM Call and Put Let's assume that the premiums for both CE and PE are 300. As we are selling 36000 Ce and Pe we assume in end in loss when the market moves Maybe t reflects the same in intraday too. But we are collecting the premium of both Ce side and Pe side which is 600 within the expiry. Even if we go for the downside which is 35,400 or the topside which is 36600 As we have collected the premium, the appeared loss will recover itself from the premium. If the market goes beyond this point then the real loss occurs. So this is the safe zone and the payoff graphs look like this.
The collection of premium and selling points and the level of market closure is known as breakeven point. If we end up in the range we assumed will lead us to profit and vice versa. This is short straddle, now let's talk about long straddle which is exactly opposite to short straddle. We will buy the Call and Put at the same price as market. example, Call and Put at ATM. After buying a Call and Put at 36000 we'll end up assuming that it'll be profitable if the market moves in any direction.
But we have already paid 600 to the market and it should be recovered by the direction it moves Even it is top or down sides, the profit starts only after recovering the invested 600. So if the market closes after going beyond 36600 then that's our real profit. And on the downside, if it closes after going beyond 35400 and then it's our real profit. Maybe the profit and loss change in intraday according to the movement.
I'll explain what happens if we hold until expiry. Look at this payoff graph. If we stay in the range after performing long straddle we'll end up in a loss, we can gain profits if we break the range in either of the directions. This is buying, the brokerage will be the same as the premium charges.
But still, let's look at the expenditure. Next is Long Iron Condor. Let's know about Iron Condor before going to the Long Iron Condor. I'll try to brush up previously explained topics. In Iron Condor, We sell a Call and Put far from the market. We are selling 36300 Call and 35700 Put. We'll go a bit far from those too, Like 300 points far from both Call and Put And we'll buy the options there, Like the 35400 Put option and the 36600 Call option.
Let's assume that our premiums are at 250 both As we are selling Call and Put at a distance we can collect 500. As we are going a bit far and buying the Call and Put we have to pay 300 So we have a credit of 200 points. So if this strategy closes as we expect, our profit will be 200 points premium.
So, even if we sell at 35700 we obtain an edge of 200 points. 35500 edge on the top side and we have sold the Call at 36300. As we have a net credit of 200 points even if the market moves to the topside we'll have an edge up to 36300. So our range is not 35700 -36300. We'll have the edge till 200 points beyond that. This is about Ion Condor.
And the payoff graph looks like this. if we stay in the range we expect leads profit and if it goes beyond that's lead to loss. But Long Iron Condor is the exact opposite. If the market is at 36000, we go downside of 300 and buy the Put at 35700.
And buy the call at the topside for 36300. We'll buy this and sell it at a point farther than it. So this is exactly opposite to Iron Condor, We buy here and sell father whereas the Iron Condor is vice versa. We'll spend 500 premium to buy and gain 300 points to sell them. So we are paying 200 points to the market and if the market doesn't move in our favor we'll lose the 200. If we buy 35700 Put and 36300 Call, and if the market closes at that point we'll face the loss.
As we are paying 200 to the market. The market have to move 200 points beyond those points till 36500 and 35500 If the market closes betr=ween 35500 and 36500 we are Null. but we'll gain profit for each point moving from there. Being in the range is null but if we move out of the range the data will show the profits As it shows both buying and selling let's look at the expenditure related to it.
And finally, Long Iron butterfly or Long Iron Fly. Before going into Long Iron fly let's discuss the normal Iron Fly. Let's assume that we have sold the Call and Put ATM. and bought a farther Call and Put as a hedge and going a bit farther after selling the Call and Put which were bought at 36200 moving downside for 500 points and buying Put at 35700 and moving topside for 500 points and buying Call at 36700 We'll be credit 900 points due to selling ATM And we'll be paying the 500 for buying the hedge Net profit will be 400. even we are selling at 36200 if the market moves 400 downsides, i.e to 35800 or moves to the topside, i.e to 36600
We'll not face the loss on the expiry day. If the market closes in this range(35800-36600) we'll not face the loss on expiry day. we'll face a loss if the market moves by crossing this range. Even it is downside or topside from the selling point, we'll not face loss until we being in that range We'll face the loss only if the market crosses the range.
Long Iron Butterfly or Long Iron Fly is the exact opposite of it. We'll buy ATM and move father from it sell the Call and Put. so we'll spend 900 as we are buying at the money.
and as we are selling at a distance we'll be credited 500 points. If the market stays in the range bound we'll face the loss of 400 points. So the market needs to move downside to an extra 400 points, i.e more than 35800. or should move to more than 36600 on the top side. There's no need to move this much in intraday, I'm talking about the expiry day moving a 100 or 200 points shows the profit and the real profit will be seen on the screen on expiry day, Even if the movement is at either topside or downside from the selling point, you'll face loss on expiry day.
we can observe real profits only if the market moves to 400 points on either sides Let's look at the expenditure and strike selection related details on the screen. I have told this in the beginning too, the option seller shout always wait with patience after selling But the option buyer should wait a long time to buy the options. There's no need for convictions about the movement of the market, Movement in the market is enough.
The movement is mandatory in market that shouldn't be between 200 or 300 points up and down. The movement should be strong. in rare cases, the market has sustained top side and braked the important support/resistance the strong movement in the market would be either topside or the downside. If you think it has a range or if there's an important event that causes a moment in stocks Suppose if the market has moved up to 20-30% before the result the market is expected to be good that's the reason the stack is rallied. A slight disappointment leads to a 7-8% of correction.
These strategies are very useful in those cases. These strategies are applied only if there's a strong move in the market. We cannot use these Option strategies whenever we want. We have to gain knowledge on it and if we use these strategies with 0 knowledge You'll face little loss consequently which will lead to great amount later That money goes to the people who earn by selling Options, like transferring money from one to another.
The option buyer always gains a lot of profit and faces short little. But if you sum up these short losses, it'll be more than the money you've gained But Option sellers can only make short profits. so they'll collect all their short profits. But sometimes the Options sellers can be against the market. If they leave the stocks without proper hedging or stock loss All the short profits he has gained will be lost in one day. So, for Option selling, there are adjustments to make the losses short.
By proper adjustments, they can reduce the loss and be profitable in the end. The Long strangle/straddle/Iron condor/Iron shows a beautiful graph of max green and min red. But the market often closes in the red zone, closing in the green zone is a very rare case.
So do not get confused by watching the payoff graph. You'll understand it after practicing it. Option sellers are the majority of the people getting succeeded in trading and selling the Options.
there are multiple strategies present in Option selling but Strangle and Straddle are the most important. There's less amount of both profit and risk in Iron Condor and Iron Butterfly and we can be peaceful. So if you want to take risks you can go for it It's up to you. All the strategies I've explained today are only performable if you observe a strong movement in the market. I hope you like this video.
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2021-08-19 15:48
