Top 4 Low Risk Option Trading Strategies For Beginners
Hello friends. Welcome to Day Trade Telugu In the previous vides, we conversed through our screens we started with screen recording, that continued and you supported us I personally wanted to be in front of the camera instead of the screen-talking so I'm taking it slow to be on the screen I will be in the beginning and the ending as our video requires the screen recording clips we are going to talk about four strategies in today's video out of the four strategies, two of them are Bullish, which means the market is going up and the remaining two are Bearish, which means the market is going down we've done regular income videos previously about Strangle, Straddle, IronFly, Ion condor and Long butterfly these are applicable only when the market is neutral or in a certain range and if the market is in the range, we'll end up in profits and most of the time the market will be this way If all the strategies in the entire stock market are on one side just the neutral strategies and Strangle and Straddle will be on other side majority of Option sellers use Straddle or Strangle but no one accepts it openly The disadvantage of thinking that the market will be neutral or in the same range is we won't realise even though the market breaks out and we have a psychology that market may come back to neutral after a sometime & we hang back there like, recently the market was 15600-16000 actually, it was 15600-15900, It was an 300 points zone and the market consolidated there for 2 months and everyone knew that market was in the range but when the Nifty reached 16000 which was more than the range we must understand that the market is in the trending zone leaving the consolidated zone there will be no big advantage by doing strangle or straddles at that point of time as they are neutral strategies and market is in trending zone so, what are the strategies to follow went the market is in the trending zone or falling/rising strategies are simple like If the market is on topside, Call is bought, If it is going down, Put is bought the loss is high when we are wrong here today's strategies explain that even if there is a loss, how to minimize it? if our view is wrong, we'll ultimately get loss following our view, how to minimise our loss and earn money? I'm going to discuss the simple and important strategies of the trending market today the reason I'm completing all these 4 strategies at once instead of separating them and explaining is I have 2 reasons for it if I separate the strategies and explain them one by one in different videos and finally combine them in a single last video they will be 5 videos and they will take 5 weeks of time I don't want to extend it that far and want to complete this series and start the Equity series I don't want to waste that much time for that. One more reason is, you cannot inter-relate these strategies if separated and people who watched these 4 videos might not watch the fifth video they will use the strategies separately thinking that they are the best to use but the two strategies of Bullish can be used on the working days but one strategy on some days and other on some days So, If I explain them individually, you cannot integrate them. so, I've included them in a single video the video will be lengthy because I'm not in a hurry to explain things which would help you understand more clearly I want you to experience these strategies with application along with learning I'm first explaining the strategies which we personally use and get profits I will explain every strategy and I'm not even exaggerating the strategies which good returns will be explained first and then your requests and then our list I am thankful to you all as one of our videos has recently been in trending on Youtube which is a regional language that too a stock market video was trending. That was quite a surprise for us we checked it thoroughly many times as we couldn't believe it the views weren't even in lakhs maybe it was trending because of your likes and positive comments maybe that was recognised by the youtube's algorithm I didn't even ask you all to like that video as I was focused on making the video simpler and understandable yet supported us so much that motivates us everytime to work even harder we try to give our best, not only in the stock market content but we'll provide you the best strategies from time to time thank you so much for your immense love towards our channel and content Before getting into the video, I've recently asked everyone to take up the 30-day challenge to get a cashback from the brokerage Our subscribers asked a question that We have to be profitable, for every day until 30 days or for the entire 30 days? even if you are in loss for 29 days and recovered from the losses and a made a profit on the 30th day you will be winning the 30 day challenge in that, the brokerage you paid will be refunded to you upto Rs.10,000 So, anyone who has a Fyers account will be benefitted from this before trading, activate the 30-day challenge in the Fyers account and at the end of the 30th day, If you are profitable.
people who are following regular income series, even though they are in a loss for 1-2 days they will be in profit at the end of the month. So, ,you can get your refund on the brokerage amount too So, If you are trying to open the Fyers account the referral links related to our channels are in the description and comments If you open the account using these links, it will help our channel's growth try to open the account using these links below Let's get to the content now This strategy can't be executed by people with zero knowledge they must have minimum knowledge they must have a view of how the market works that is, it falls or rises from its position this is not a neutral strategy this is a trend based strategy. market-related important updates like F&O and that day's Intraday view are uploaded in the telegram everyday so this data will be useful for the strategies that I'm discussing now people who follow our strategies, try to review the data every day I'm not telling you to follow blindly, I'm asking you to review it people who want to follow us on telegram, search for Day Trader Telugu there will be a channel with 200k subscribers there will be a message on 8am, every day the majority factors impacting the market and Intraday view is also shared daily there is no need for this for neutral strategy followers I suggest people who are in Intraday to follow these trend related data Let's observe the 4 strategies now and approach them in a different manner I can simply explain the 4 strategies within 15-20 mins but I want the beginners to understand it. So, I'll explain it in detail try to understand the video and be patient If you think the data is too hard to understand at any point take a break and revise the video. Only after understanding it, continue watching the remaining video
there are 4 strategies here if the market goes up there are 2 strategies and if the market goes down there are 2 strategies and their importance is peculiar like If we use a particular strategy on a particular day, there will be great returns I'll explain it to you with a live practical example then you will understand why that particular strategy is used on that particular day I'm combing all of these into a single video so that you can differentiate them the names of the strategy, If the market is Bullish, i.e, the market goes up are Bull Call spread & Bull Put spread If the market goes down, Bear Call spread and Bear Put spread these names may seem similar but let's divide them into some parts lets know the individual name meanings first and then we'll combine them there will be many more Option strategies in the coming days you should be able to know the strategy based on the name itself first we'll divide it what are the names that you can see here? Bull and Bear. Bull means market goes up and Bear means market goes down next is Call & Put. Mostly, everyone must know about these if you don't have any idea about them, there are videos related to them. take a look.
the strategies work on these so, they are very important watch the videos until the end you'll understand everything about Call and Put next is spread. Spread means difference for example, if you want to buy the stocks, the buyer will quote a price and the seller will quote a price if the buyer's quote is 100 and the seller's quote is 110 actually, the seller's quote will be near to 100 but I considered this for the example the spread then will be 10 as is the difference even in the stocks, If the buyer's premium is 20 and the seller's premium is 25, the spread is 5 similarly, the strike prices too. If you bought 16500 Call and sold 16800 Put, the spread is 300 therefore the spread is difference and the difference changes depending on the usage with these simple terms, there are 4 strategies Bull Call Spread, Bull Put Spread, Bear Call Spread and Bear Put Spread. we know the meanings of the terms and Now let's combine these so that we can understand them the first strategy is Bull Call spread. let's first know what is Bull Call
Bull means Bullish view. If your view is bullish and the market moves up and if we have to trade with only Call, will you sell or buy the Call? you'll buy it so, In Bull Call spread, we buy the Call. let's leave it there for now then Bull Put spread means, the view is Bullish but should trade with Put then Put is sold as the market the market is Bullish, Put values fall and selling would be advantageous so, In Bull Call spread, Call is bought and in Bull Put spread, Put is sold when you bought the Call, at the same point if the market increases 60 points and decreases 30 points and still, in the neutral, the premium you bought will fall as you bought it, it will fall then you'll lose due to decay so, we sell the Call at a distance from the Call we bought the main aim is to compensate the loss, as when the market goes down or stays neutral, we'll be in loss in these entire strategies, we are talking about the names like Bull Call means buying Call and Bull Put means selling Put all of these are At the money only so, the next option, Call that has to be sold at a distance the distance will be explained in the rules just follow the strategy according to my words and don't get confused In Bull Call spread, as the market is Bullish and if we buy the Call and left it unnoticed then we'll end up in loss we will sell a Call at a distance to recover some of the losses I will explain the distance in the rules This is Bull Call spread. If the market ends in neutral through this strategy, are you in profit or loss? you'll be in a loss because you bought At the money(ATM) Call and selling Out of the money(OTM) Call if ATM is 100 premium and OTM is 25 premium means, buying 100 premium and selling 25 premium. therefore, the net is 75 premium debit if you are entering the debit strategy through any strategy then if the market is neutral, you'll definitely end up in loss so, the debit strategies should not be used very often we should use it when we have a strong conviction or if you think the market will move for sure or there are some days when the premiums will be less then buying will be better than selling. The debit strategy will have a great advantage on those days
coming to second strategy, Bull Put spread In the Bullish view, we must trade with Put so we have to sell the Put when you sell the Put thinking the market will not go below the Put if the market is above the Put or in the neutral, the you'll be in profit if the market reverses and falls, then you'll incur a major loss so, to cover the loss, you'll buy a Put for hedging capital is decreased, hedging is done and if the market moves against due to hedging, the loss can be minimised that is the intention behind hedging. This is a credit strategy suppose, you sold a 16000 Put at 200 and at a distance from that, you bought a 15800 Put at 50 bought 200 and sold 50. If the market ends in neutral, these both end in zero 50 premium is what you paid and 200 premium is what you sold 200-50=150, it is the net credit you earned through this strategy similarly, there is Bear Put Spread and Bear Call Spread. You'll not need this much explanation for this Bear Put spread, the view is Bearish Bearish view is to be traded with Put as the market goes down, you'll buy a Put in the core strategy, you'll buy a At the money Put In Bear Call spread, market goes down but we have to trade with Call and we shall sell a Call so, the core strategy in this is selling a Call as we bought the Put here, if your view is wrong then what may happen? you bought a Put here and the market is falling from here, then that is not a issue but instead of it, if the market fluctuates and closes within the range, then you'll have some loss to cover that loss, you'll buy 15800 Put at a distance from 16000 Put I'll explain the distance that is needed to trade in all the strategies this is Bear Put spread is this a credit or debit strategy? you are buying ATM and selling OTM as ATM is greater than OTM. when you buy a big premium and the market closes in neutral then you have to pay the money therefore, this is a debit strategy in Bear Call spread, as the market is bearish, Call is sold and then bought again at some distance for example, sold 16000 Call and bought 16200 Call at a distance so, 16000 is ATM and 16200 is OTM suppose, ATM>OTM. let ATM be 120 and OTM be 30 120 premium is collected by selling and 30 premium is paid by buying the net here is 90 and this 90 is credit as you sold the larger premium here. so this is a credit strategy
I'm explaining these terms like credit, debit in this video and not in the previous videos because there was no need then but it is needed now If you know about these then you apply the strategies accurately depending on the day I'll explain an important point here and then I'll explain the rules and then I'll show you the live trade and in the live trade, when I thought that market is going down, I applied both Bear Put spread and Bear Call spread out of these two, which one got me a better profit? and what is the reason behind that? I'll explain it to you let's observe the live trade now and then again I'll explain the rules to you you'll have a clear idea about the strategies this trade was executed on Aug 6, 2021 and that day morning I've shared the view to be neutral to negative on telegram the first 2 strategies are Bull Call spread and Bull Put spread the strategies when the market is going down are, the Bear Call spread and Bear Put spread Bear Put spread means bearish view or market is going down and we have to trade with Put. We buy ATM Put and sell OTM Put where should we sell OTM? If you are buying/selling any Option other than the core strategy the value should be 1/4th of ATM premium it need not to be exactly 1/4th, It can'be near to it. so, the near value of 1/4th of 384 is 124. I'm considering it bought ATM Put and sold OTM Put Bear Call spread means, the market is going down and we have to trade it with Call we sell ATM Call and to balance that we buy another Call at a distance we should buy the premium that is 1/4th of the ATM Premium now the question is if the market is falling, which of these is better, Bear Call spread or Bear Put spread? you'll understand which is the better one at the end of the strategy. That applies to the Bullish strategies too. So is Bear Put spread strategy a credit or debit strategy? As the market is bearish i.e, the market falls down so we have to buy the ATM Put We are spending more premium when we are buying ATM.
Overall we are paying If the market closes neutrally, it is a debit strategy. Bear Call spread means selling ATM Call and buying the Call at a distance As we are selling the big premium and buying the small premium this would be a credit strategy. The market is near 35993 So I've selected ATM at 36000 I am executing these 2 strategies because I thought that the market is going down. These will bring profit even if the market goes down But if you execute 2 at a time, You'll understand which one will bring us more profit. remember that the set of Puts are Bear Put Spread Ans set of Calls are Bear Call Spread. I've executed Bear Call Spread first, Watch how much money is spent to execute a set.
I had 2.5L before executing the strategy. After executing I have 2.2L You can observe the used margin here So to Call a Bear Call spread my expenditure is 29000-30000 In the same way, I have executed bear Put spread This means I have bought ATM Put at 36000 And sold the Put at a distance, for these 2 I have got 54295 Nearly Rs 55000 is my expenditure Observe how it is changing from time to time, I show it simultaneously. We have started our strategy at 36000 how our premium changes according to the market Observe the profits of Bear Call Spread and Bear Put spread so, finally we must conclude when to use the required strategy I've squared off the trade on balancing the profit and loss below we'll calculate the result from Bear Call spread and Bear Put spread When the market was near to 36000, we executed Bear Call spread and Bear Put spread the market moved down and again moved up to a consolidated range here and then we exited we entered at nearly 36000 and exited at 35700 market fell but our Put increased only 205 from 36000 as we bought it we sold the Put at a distance from it as it is Bear Put spread, near Put is bought and Put at a distance is sold the sold Put gave us a profit of 471. even when the market fell the profit from sold Put is greater than the profit from bought Put the net profit will be, from Bear Put spread the profit was nearly 680 and from Bear Call spread, Bear Call spread means, the market is bearish and falls down and we have to trade it with Call ATM Call is sold and at a distance from it OTM Call is bought to avoid confusion and clear the perspective of the beginners, I'm repeating it many times where are the Call positons here? we executed our strategy at 36000 ATM we sold the ATM Call at 36000 and the profit there is 2741 and bought a OTM Call at 36800 at a distance from that, we had a loss of Rs.1250 let's equate the both of them and find out the net profit 2741-1244=1497 which is nearly 1500 and that is the profit both the strategies are bearish and the capital was same for both of them but one strategy gave you a profit of Rs.680 and another gave you Rs.1500 profit
which means, one strategy generated more than 100% returns than the other to let you know this difference, I combined all the strategies to let you understand this, I've used terms like ATM, OTM, credit and debit multiple times the strategies that we followed are Bear Put spread and Bear Call spread Bear Call spread is a credit strategy and Bear Put spread is a debit strategy to conclude this, When you get a doubt about using a particular strategy at a particular time in that entire strategy must get a premium If you are spending on a premium, then your view must be very strong to enter into the strategy If you have a strong view of the market, only then you should enter the debit strategy let's move on to the rules now and Furthur I'll explain some important points there I hope you understood everything. Now, I'll twist some things observe how your mind is receiving this If you are catching up with it quickly then you might have understood it well If not, pause the video and revise the concepts again In Bull Call spread and Bear Put spread, we buy the premiums that are ATM In Bull Call spread, we buy the ATM Call and in Bear Put spread, we buy the ATM Put If our view and options are matching, we'll buy ATM as you are buying ATM, where should we sell it? we'll sell it at 1/4th of the Premium why are we selling? you must have a clarity about it to reduce the loss because if the market is against our view we bought ATM which has high decay rate to balance that decay we are selling that at a distance by selling them this way, there can be question that profit may be decayed Did you ever hold any option that varied 300-400 points in an Intraday trade? No right? So, you should change this mindset that we can get unlimited profit by option buying so, instead of leaving the option after buying, when you set a range for the profit you should sell in that range or that option if your view was wrong and the market fell down, the loss in this range is recovered here for that, you don't even need more money as you are buying big premium and selling the small premium you are taking 30000 and 1/4th of the premium is sold and in Bull Put spread and Bear Call spread, we sell ATM because we have to trade opposite to our trade and we should sell ATM and we buy 1/4th value of ATM why are we buying here? as we are selling big premiums, even if the market is Neutral, we can gain profits but why are we buying there? because the market is moving in the opposite direction to our view and we may big loss from that so, what are Bull Call spread and Bull Put spread they are debit strategies Bull Put spread and Bear Call spread are credit strategies we'll have more profits in credit strategy In both of these cases, if the market moves along with your view, only then you can generate profits only when the market moves along with your view or closes neutrally, you'll end up in the profits because you are selling a big ATM premium even if the market is in the range, you'll have your advantage this is a directional strategy but still, if it ends in the range, you'll be profitable so, we follow the credit strategy more often and most of the time we avoid the debit strategy If we try to learn these strategies theoretically, they will seem similar and they look alike but we use credit strategies most of the time so, we must never buy ATM or sell OTM they can be used only on the day of expiry or the day before it i.e, on the last Thursday of the month and Wednesday before it. like buying ATM and selling OTM the strategies that are following that logic at Bullish is Bull Call spread and at Bearish is Bear Put spread but especially on friday never go to a debit strategy because credit strategy will be profitable that day even if the market is neutral, you can get good returns If you go oppositely, as this is a view based strategy you may get loss but if the market moves along with your view or neutrally, you'll have high profit Friday, Monday and Tuesday. these days only use credit spread strategies I want to clarify this if you observe any strategy on youtube or internet or anywhere else you can get data regarding the profit/loss and their start and end but in reality, does the Option strategy have it's importance after starting it? will we calculate, from where our loss starts? will we calculate our maximum profit or maximum loss? that's the reason I didn't gave much importance in my previous videos because that will increase the length of the video and in reality the probability of beginners usage is very less but I've added some things within my experience and I wanted to explain stop loss and target in this video along with these strategies this will be funny because the view based strategies don't have stop loss or targets because it's the individual's view and if that's wrong he has to exit it that is his stop loss and according to his view about the market reach is his target there is no stop loss or target in this but still, as beginners don't have any idea about this or the next step related to pattern and where it breaks our view are not noticed by the beginners. so, keeping beginners in mind I'm going to talk about stop loss and target Anyone with the knowledge of trend lines and chart patterns don't need to follow these fix the stop loss and target according to your view The thing I'm going to explain is for the beginners with zero knowledge about proper risk-reward Previously, stop loss or target was taken according to the premium we undertook everything based on premium but here that isn't possible because we are going on view based approach when we have a view, the level at which the market sustained that level must be broken by the market and reach the downside we don't care about premiums here because it is not a neutral strategy the stop loss and target are completely based on the level that we undertook for example, I'm entering a Bullish trade based on 15920 or if that level is broken, I'm entering into a Bearish trade we have to keep the stop loss below this point because when the market reverses and touches this point, we exit with profit/loss within our options we observe the levels here instead of premiums here because we entered based on our view so, remember this difference because, in the previous strategies, I've never focussed on the levels I focussed only on the premiums but I'm talking about level here the percentage 0.3 is completely level based so when the market reverses and reached that point, I have to exit it the level at which we are entering the market, 0.3% of it should be noticed
the level at the present is Nifty 50 points and Bank Nifty is 100 points and the market will move further even if it's down side or top side 0.3% of that level is the stop-loss point so, the level at which you entered, either it may be support or resistance at that level, 0.3% is taken to exit when the market is moving opposite to you let's apply this to the four strategies for example, I'm considering Nifty. for 15900, if you are taking a Bullish or Bearish view if you are taking a Bullish view, the first one in this is Bull Call spread the core option in this is buying ATM Call as you bought ATM Call, you'll get profit when the market goes up otherwise you'll be in loss then when should you exit? I took 15920 as resistance and it sustained there you entered the trade at 15950 at the time of entry, it was 15950, now even if it's 16000 it doesn't matter the level at which we made the conviction is 15920 we have to take 0.3% from that. I'm taking 50 as an example but you calculate the 0.3% of the number and take a rounded figure of the resultant value
I got 50 here which means from 15920 if 50 points fall down then I'll exit there. We may get a loss here as we bought a big Call here but as we entered the market depending on our view if the market is moving opposite, it means our view is wrong this strategy is not linked to golden rules. so, these are just rules after explaining this here, risk-reward can be explained simply by adding to this point as a stop loss and then exit it but I'm explaining it this way so that beginners can understand it better 0.3% is 50 points and the view is topside
but if the market is downside, if you subtract the 50 points from that, you'll know the exit point this is Bull Call spread. then what about Bull Put spread? In Bullish view, we are trading the Put by selling ATM Put when we sell ATM Put and if the market goes down, we'll be in the loss then at the time of loss, when should we exit? when the market falls 50 points from the level of entry i.e, 15920, we exit the market 15920-50=15870. this is where we exit these both are the same. Also, our view towards the market is downside if we want to trade with Put, we'll trade with ATM Put so, when the market is topside when we bought Put, we'll end up in loss then from the level of entry, 0.3% will be our stop loss i.e, if the market moves 50 points towards topside, we exit at 15970
In Bear Call spread, our view on market is downside and we trade it with Call. so, we sell the Call and if the market moves topside, we'll be in loss the stop loss here is 0.3% of entry, i.e, 50 points and when the market reaches it, we will exit the market I'm explaining this only for risk-reward, and this is not a part of the strategy you cannot find this anywhere else because I designed it this way to maintain a proper risk-reward If you have a clear idea of how the market moves, you don't need to follow this risk-reward It is enough to follow your core strategy ultimately remember this. Credit strategies should be used on Monday, Tuesday and Friday and debit strategies are used on expiry day(Thursday) and the Wednesday before it the important points to remember If you enter and exit this entire strategy in the same week you can enter next week or next month too remember this, If your contract is going to expire in one or two days then follow the debit strategy if there is more time, you can follow the credit strategy and when you are executing a strategy we are first selling ATM and then buying OTM even if in this case after adding them to the watchlist, we first buy OTM and then sell ATM which would reduce your money if you want to sell an Option, then we have to pay above 1 lakh and if we buy ATM and sell ATM then we have to pay only Rs.30,000
and we should exit at your desired profit or else as you entered the market at 15920 level so, this is an important level if the market is Bullish and it is moving topside then you can see the profit and it will be increasing the profit will be in both Bull Call spread or Bull Put spread when the market is increasing, try to lock your profit you may have locked the stop loss at 15920-50=15870 if the market increases 0.3% i.e, 50 points from the points you entered then adjust your stop loss to 50 points too and upon increasing of the market, increase the stop loss too so, if the market reverses quickly, mostly we'll exit with profits if we are exiting with profits after entering the strategies the monthly or yearly net will have good returns So, after entering the strategy and fixing the exit, if you don't know how to book the profit, follow as I said or If you have an idea about the market range and If you want to wait for the next important resistance then you can wait for it If you don't have any idea about all these support or resistance, 0.3% of your level should be calculated and the points you get there are taken for the stop loss which is to be increased along with the market so that if the market reverses, you'll exit at a proper level and profit will be locked Can it be used for stocks as well as Nifty and Bank Nifty? this can be used for stocks too because this is a trend and our view is based on the trend I hope you liked this video [Bloopers] I hope you like this video If you like our content, like this video and encourage our efforts this is today's video did you like it? then like it and share it to the beginners if you think this will be useful and If you haven't subscribed to our channel take a look at the channel's content. if you think this will be useful subscribe to the channel and hit the bell icon
I'll be back with another interesting video until then take care JAI HIND.
2021-08-14 06:46
