5 ways to make money from options I.e. call and put For basic of Derivative learning click Here
1) Buy Both call and put :
Buying both call and put during
volatile market makes trader rich. Many times due to huge uncertainty one
cannot decide direction of stock movement but expecting huge movement either
side. During such period one can take position in both side and make huge
money.
Example: on 19th June India Bull housing
was the stock moved almost 25% in a day. During market hours suddenly premium
of option goes up around 10 am while implied volatility was near 68 goes to 75
without any news. It was the point one can initiate position and stock
started falling around 11:15 am and implied volatility reach at 140, premium
run like anything. Moreover, straddle of India bull reach at 25% while expiry is on
27 June it mean just 8 days and at the time money call and put premium total
near 25%. Buyer made huge money.
Another example I am sharing is jet
airways on 20th June I made an history of highest % increase in a day. The call
of jet strike 60 was available at 10 paisa made high of 15 rs. It means 150x in
a day. But it was in banned stock so no one can initiate new position.
2) sell both call and put option :
Generally, short position is
preferable for index due to less impact cost and liquidity.
One survey suggest that 90% of option
seller made money by shorting premium. Being a wise investor many times we
think selling nifty option having 3% straddle is foolish strategy. But can you
earn 3% per month even earning 3% is bad amount. One of the study suggest that
except event months like election, budget and such critical announcement month
remaining months a trader short 300 point far call and put made average 2% p.m. Nowadays, nifty and bank nifty having
weekly option available but I will suggest to work next week only like expiry
on 27 June do position in 4 July once it expiry carry forward to next week.
Why?
On the expiry days generally the
theory of max pain works, option seller never lose battle in any case someone
due to huge buying or selling such level goes wrong and nifty may witness huge
short covering or short selling. Many people earn lakhs of money from weekly
option. Study 10 times max pain theory learn, relearn and apply is only way to
earn from market.
3) sell naked call:
Many times long term investor having
huge investment in blue chip company like infy, TCS or reliance. Start selling put
option every month and earn premium on it. Over a period of time it will reduce
the cost of shares. Even dividend is also another Avenue for such stock.
Do short 10% far call option every
month.
4) sell naked put:
4) sell naked put:
On 20th June or 21st June trader who
short 20 strike jet airway put around 6-8 Rs. and think of buying 2200 shares
in case it reach to 12-13 Rs. For buying 2200 shares of jet @ 13 needs almost
28000 Rs. while closing of 13 or above is profit for trader. In case jet close above
20 the profit one can earn per option lot of 20 put was 15000 Rs.. For investment of 28k
against profit of 15k.
One can do such strategy in Rel
infra, Rel capital, yes bank, Jain irrigation and many more. Only point should be in mind is one
should have money to buy full lot of equity in case stock cross decided limit.
Let's think more in deep in case I
initiate my strategy by selling 100 put option of yes bank @ 8 Rs. and stock
goes below 92 and I bought 1750 shares @ 92. Now stock reach at 85 what should
I do?
Well, from next month onward start
selling call option of 95 strike regularly at 4-5 rs. Premium.
Well, I did same thing and stock
close next month at 130 I earn only 5 rs. Premium only right ? Now my costing
of yes bank came at (92-5) Rs. is equal to 87 but I am in loss in call which i
sold so my cost will consider closing price of share on expiry. Now next month
i will sell 130 strike call option at 10-11 Rs. due to higher price. So, my
earning will increase in case stock move sharply. I will make 17500 rs.
In case stock close below my cost I
will sell 95 strike call. This strategy is excellent if you have money of
buying stock for full lot.
5) Buy put sell call with future hedging buy as per (click here) Deltavalue :
This is excellent strategy I have
ever seen till date for few events.
Start this strategy when stock moved
10 or more down in any day example : I bull housing goes down 20% buy put near
480-460 when stock was near 490 and sell call of 600 or 580 and buy future as
per delta value. When stock goes up implied volatility of put might remain same
but call option implied volatility must reduce 10-15% for sure and reverse
position I will give excellent return. Same thing happen in UPL Ltd on 20th
June as it was down almost 12-13% implied volatility of call was at 80 and put
was at 85 today on 21st June UPL was up 3% and reach 900 rs. Today call implied
volatility was at 55 and put strike around 840 and 820 was near 75 so, call
premium reduce much more compare to put and future will be in buy. So, this is
very very excellent strategy for such situation. Even downside risk always
limited in this strategy while premium always be willed in downside only up
side it always stable.
learn full strategy click
For any query comment here or mail me at derivativelearn@gmail.com
Happy Reading
Derivativelearn.
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