Dear Smart_trade , OK u might be a Good trader , but ....
Correctly Said :
1) If one is selling nifty options and trying to protect by taking a position in futures, one looses lots of points in " protecting " the option positions.....so by end of the month one does not make more than 100-120 points max.....but one is open to lots of risk.....gaps, global markets......
Again Well said:
2) Option trades DO NEED STOPS....it is not that we write and ferget....they also need close monitoring.
I STRONGLY DIASAGREE with u on this:
3) The protecting options by futures works great in theory....but in practice and markets volatility.......not easy....and in case of sudden gaps you end up having options and futures both bleeding you......my experience : I used to trade huge quantity in selling options ( straddles ) but very rarely I could make more than 60-70 points .....not worh all the hassles.....much better off with futures....
But learning is continuous....I am willing and eager to learn better ways of selling options....
Smart_trade
I will tell u an important difference about the scenarios in writing options OR trading futures.
Rewrite ur options once they loose good value, so if a 100Rs option becomes 40Rs Rewrite an 100Rs option. Bcoz 40Rs option will approximately hold almost same margin as 100Rs option,so if 40 becomes 20 it wont be much beneficial to u as it wud be 100 becoming 50.
Option writing sides u along with the KING of options ie DECAY, when u write options u can still be quite safe when mkt goes little against u.
For those talking abt unlimited loss, some advice :
OPTION WRITING is just another form of BUYING FUTURES i will explain u this : Only condition REWRITE and u will be along the DECAY KING
OPTION WRITING is equivallent to FUTURES in view of RISK profile.
Risk profile of option writing IS always same as buyig futures, u pay the same margin and u r entitled to same amt of loss too. SO DONT ever believe those stupid analysts on TV who on one side say new traders shud not write option but on the other hand say buy futures. THEY R fools bought by TV, they dont know what they r saying.
Yes option writing entitles u to a little less profit as against futures but then they put u along with the decay king as i explained earlier. And also they r the only intrument in the world which entitles u to gain money even when wrong.
One biggest secret of gaining by writing options is REWRITING of options and dont keep junk with u. So if 100Rs wrtoe option gets to 30Rs rewrite it down.
And anyone wanting to clear ny doubts regarding option WRITING can post them and i will clear them as much as i can
:clapping: