This article is dedicated to my friends who asked a question on covered calls — Pallu aka Saurabh and Rakesh Hegde. What is a covered call? You have Infosys, which you purchased at 900. You think the stock is stuck in a range, say 880–920. You sell a call against your stock and get some premium every month. … Continue reading You Should not be Doing Covered Calls
Here is a video attempt to answer the most important question for options traders. We hope you enjoy this! https://youtu.be/tr-tJlz9RAw If you would like to find out the best option to trade for your view, from a list of thousands of complex strategies like calls, puts, call spreads, put spreads, straddles, strangles, iron condors, iron … Continue reading Which Strike to Choose for an Options Trade?
The rules of STT in options work this way: Exercise of Options: Option exercise happens when you buy an option, do not square it off and it makes money on expiry. In this case, STT is charged on the underlying NIFTY price — which is around 10500 for NIFTY as of Dec 2017. The buyer of the … Continue reading Just how bad is STT?
Nothing happens in financial markets on most weekends. So an options trader will sell call options and put options and try to earn the time value decay for three nights — Friday Night, Saturday night, Sunday night. If it is a long weekend, the selling will be more, because of more time value decay. Due to selling, … Continue reading The Weekend Effect
6. Trading Illiquid Options Some Options are Illiquid. That is, the bid and offer don’t exist, or they are wide apart. Examples are Deep In the Money Options Next month, or next to next month Options Options of smaller stocks. How does this affect you? Let us take one example: The bid-offer on Castrol December 410 … Continue reading 7 Sins of Options Trading — Part 3
4. Not Selecting the Right Strike Price NIFTY is at 10000. NIFTY future is at 10020. Expiry is in 10 days. Scenario 1 You think NIFTY future will go to 10090 in 4 days. Which call option will you buy? 10000, 10050, 10100, or something else? Return on Investment for options of different strikes 9900 Call … Continue reading 7 Sins of Options Trading — Part 2
1. Buying options with a lot of money 1. Buying options with a lot of money The biggest mistake of all times. This often ends up in investors losing a big part, if not all, of their capital. NEVER do this. People do this because: They think they can make some quick money They lost big money … Continue reading 7 Sins of Options Trading — Part 1
You think a stock, say Infosys will move down. Options expire in 30 days Here is the question. Buy a put paying the premium, or sell a call and receive the premium? Assume that you will buy/ sell this option and hold until expiry. Break Even If you sell 900 Call, you will make 30 Rupees … Continue reading Buy Put, Or Sell Call?
A long time ago, in a galaxy far far away… Nah. Long years ago we made a tryst with destiny… Nah. It was a dark and stormy night… Nah. Okay, we are back. In 2013, Sensibull was founded with a simple mission. “Retail investors should stop making losses”. We figured that the retail losses were … Continue reading We Are Back
