Trade Stock Options for a living - Do it right!
Hello, Hello friends. I am Vivek Bajaj, founder of stockedge and elearnmarkets. I am doing a job..should I leave that and start trading? do I have enough capital to invest in the trading business? I have many needs at my place will I be able to manage it I am unable to manage with this salary, my job is also not good. It feels like I should leave my job and get into the trading business these questions are so common and I receive them often that I don't know how to answer them can I run my expenses and family with the trading income? All these questions need to be answered. you must have seen me discussing in my F2F videos about concepts, strategies, techniques and the life of a trader. so I thought I should make a video with someone who has left a proper job to enter the trading industry and is doing full-time trading and running a family more than being a trader, he is confident that he can learn about the market and work for more wealth creation so friends, you also want to leave the job and start something, right? it looks easy but it has many dos and don'ts so today we will learn about trading for a living and our today's guest is Mr. Ashish Gupta.
Ashish! Hello! Hey Vivek! How are you? So how are you? Great! now I am happier after seeing you! Thank you for calling me, so how did you like the introduction of the theme? you were talking if trading for a living is easy or not. No, it is not easy, we will talk about this in detail. we will discuss what points should be considered before going full time into trading I am really interested to know about your theory because you also come from a humble background someone who has done their engineering, MBA and worked in some enterprise so tell us about your profile, I am sure many will reasonate with you that it is me sure, and they will understand if they want to be Ashish or not so tell us Ashish so I did my BTech in 2007 and passed out from NIT Allahabad so I did my job for 2 years in IBM and I made my first account in demat then only. Started with investing when people told me about some stocks and I sold them for higher I started with that mentality and at that time I was not aware of futures and options I was not even aware about F&O that time. Then I did my MBA in 2009-2011 there I got the exposure that F&O exists and future and options can help in wealth creation After my MBA, I started trading in F&O we think it is very simple that market will go up so we will buy call, market will go down so we will buy put but 20 rupees call option can be 200, and 20 rupees put option can be 200..so it is lucrative
so people think it is easy to make money, I have been through that phase and I know it is not easy to make money in F&O I started loving it, so I started researching on it, read books, watched videos on youtube. Many contents are available all around. so I came across a channel called tasty trade, it is a US-based channel and I am very vocal about it I am also active on Twitter about it that anyone wants to know about trading then they should check their content I saw and I learned. I realized that this style resonated with me I was getting comfortable with F&O. This was around the 2014-2015 period I started making money and in few years I took trading as a career and this was in 2019, this was a full-fledged plan to get into trading as a career how much capital I have, how much I need to meet my expenses also, what is profitable in these 2 years, will it be profitable in the next 2 years? and if that doesn't workout, do I have a backup plan? So thinking all that I took a decision fortunately, I do not regret this decision and I am doing well full time fantastic! that's about it. It must be really difficult for you to send that resignation email to the HR without any job in hand so tell me, the sound of your salary SMS is so bliss..as it is a fixed income
so when you left you had a source for fixed income, not market but.. any fixed income like FD etc.. so you had some stability before leaving or you thought you can earn this much through market so I have made a rule that your capital should be 6-7 times more than your annual income If your expense is 10 lac then your capital should be 60-70 lac. Now it is your decision if you want to deploy them all at once or deploy them in chunks
so I had 7-8 times worth capital of my annual income I did not deploy them all at once... I started with small like 2-3 times of my capital full time trading is more emotional because, in part-time trading, you know you will get your salary in month-end there is no fixed income full time, so you might think your system is not working, which was working before when you are not getting profit so I started in chunks but then I also deployed my savings, which I thought will be my expenses in the last 2 years, I have used 2-3 times from my saving funds.. now I have sufficient income to run my expenses even now I have sufficient funds so that even if the trading business is not working, I can survive with this money even if we do not have that much income we should have a basic assumption that our system should work if someone needs an idea for capital then they should have this much, otherwise don't think about full time so if you have added in your savings account, approximately how much have you added? if you have 100 then how is it in your trading account so have you kept your savings as a contingency fund, what purpose is it for? my trading style does not allow me to even use 50% of my trading fund so in your 70, only half is used? 80% of the time I use half, rarely it happens that it goes more than that it is important to have saving funds in your account because if your trading capital is deployed and there is an emergency and you need funds for that emergency, then from where will you get them you cannot just square off your position so you should live with that thought and I personally don't think I need to increase my trading funds so I am taking it very slowly, I started in chunks and even in the future I will do the same rationing is very important, and how much capital is needed and not needed is also very important before doing anything. So we will discuss all that so if you are liking this video then you can like it, so we get more motivation to record it. So now Ashish, I will make you the presenter
so Ashish has made this presentation, which he said he will give. So I will give the link in the description so that you can download it. let's learn more using his presentation Vivek, can you see my presentation. Yes Ashish, I can. so before I start with my tradings and techniques. I would like to set an agenda you have already done that to an extent. Now I would like to add more
I won't be giving any setup or strategy so that you can plugin and earn money from the share market I don't believe in strategies that if I have an all-time high then I will buy so the strategy is not the only thing, you need many things for successfully trading so if you are expecting a setup then you should not proceed with this video, but if you want an approach for trading then you should so before I start with my trading style, want to say this is Danning Kruger effect Curve I have also given a video link here, so what happens is that the curve when an individual starts something in the field then their confidence is really high they think they know everything by reading a little bit, that same applies to trading also you think reading about technical analysis or able to draw few lines in technical analysis will make you a good trader so that is the monk or peak of stupidity when you feel you are too overconfident but that doesn't happen and your losses start and then you realize it is not easy then you fall down and you realize you did a big mistake by doing trading if you are able to overcome the phases of loss when you are unable to make any money, and repeatedly you are going through a loss if you move from that then your real curve starts so you have to know about the learning curve at the beginning it is easy to make money, but it doesn't mean that you don't have to make an effort for it the theory that you need to work 10 hours in any field to excel is also applied in trading so you have to make efforts, overnight success is not possible so before I start, I thought of giving this beautiful learning so where have you reached now? you are in the guru zone? are you able to hear me? Yes. In the previous slide, I asked where have you reached wait for a second I am somewhere in the shape of enlightenment, you cannot say that you are successful if you haven't traded for 10-12 years successfully I am consistently profitable, which is fine. I am also doing fine for myself so no I am not a guru. I have a limited set of knowledge because in many discussions I don't know things. I am trading in a restricted zone so in the share market, it happens that you are consistently making money but then you blow up so if I call myself guru then it won't be fair I like your modesty, now let's move ahead I am being honest, it is not about modesty. Of course, of course. so my trading style is delta neutral positional trading and I trade in stock options.
many traders from bank nifty or options trading mostly it is in stock options and by delta neutral I mean is that I am not betting on directions delta means direction, so I don't go with the direction that if the market is up I will make yield and if it down I will make money I mostly trade in volatility, so if I feel any trade has high volatility so I will take a short sight positioning so I took a call and put from delta So I shorted them, this is short volatility the nature of the volatility is main reverting if volatility is going up, then in some time it can go back to its mean so it will come down, this is the reason for betting In options premium you have time decay primarily I do not sell according to time decay but options selling Ashish, I will be asking questions in between. Maybe some of my viewers will not be able to understand the concept of volatility by volatility, you mean employed volatility? yes the employed volatility is high if at present I take an example, such as hindalco I use IVP.. one is IV percentile..Vivek ji how do I close this? you can put it on the side, there must be an arrow..okay okay so there is an IV percentile and IV rank you can follow any of them, I follow IV percentile so if your IV percentile is more than 70 IV percentiles are usually yearly, which was high last year so it was not in a true reflection, back in time you should not follow quarterly, so if the percentile is more than 70 then it is better to trade in the short side such as Havells..can you teach more basic IVP is a little complicated..make it more basic
so first tell me what is IV? so I am opening NIFTY options sell so NIFTY is trading around 15200 the call side IV is 16 the IVs are 16-17 so last year in March, the market was very uncertain when there is too much fear in the market, then the IVs will shoot up how much the market can fall. So in premium, there is an option of IV if the IV is clear, then the option of premium will be high so if you are selling options, then you would like to sell expensive options if you want to sell expensive options then you have to see the short site and the trade I am trying to explain in a basic way, but it is not so simple it's not so simple that I saw the IVP and sold my options you must have heard GameStop that trades in USA gamestop started going up, the $50 share turned $100 and its IV that time was more than 100 which is very very unusually high, so if you think you can make money with that volatility it is difficult, so if volatility is rising then it means that it will go high at some point no one can guess or predict at which rate it will how will you handle the volatility if it has started going down even if you are trading price action, then you will see if the market is going up it will keep increasing that time you don't think that the market is up so I should short it it is the same with volatility, then if it goes low I will make money so you have to wait for the stock or the volatility to calm down if the volatility has increased then it is for some reason so I have 2 criteria when the volatility goes down or the stocks are settled I am talking about unusual cases, in usual cases, it is safe to trade in high volatility such as GameStop and here it was corona..the market was going down if at that point you short your volatility then it can give you too much loss got it. In such times, volatility should not be sorted just give an example of a high volatility stock such as Adani in two sectors there is high volatility, which is metal and pharma I roll my position in the next month, I have positions in vedanta the position of vedanta is around 275, so I have sold 17 delta port 240 strike this is the 15 delta call of 340, which has the highest call available, so I have sold these 2 options one is going 4.75, which I sold in 5 rupees and this 340 call option I sold in 3.50 rupees that I sold in 5.5 rupees 2 questions I have. Sorry to disturb
the one you said 14.5 delta..what does it mean? if we talk about ATM option, then its delta is 50 this means that if the underline will increase then the call option will also increase if the underlying will go down then the put option will go down by 50 paise so 14.5 is the percentage, if the underline will go down by 10 rupees then it will go down by 1.4 rupees keeping in mind all the factors are constant, the pricing of option is not only delta based if I ignore all the other factors, the time decay is untouched and the volatility is the same if I make all the factors constant then the impact of delta is only this got it. so put IV you sold in 55% and 60% below for call IV
so in what basis you judged the IV was high? so let's go to the abstra dashboard, so I will open vedanta IV chart let me clarify that abstra is not sponsored, we both have no commercial gains I am using abstra since 2-3 years, it is an easy tool. Even I have no commercial interest see Vivek ji this is an IV chart, let's make this 10 days chart is in 62..see one is realized volatility and the other is implied volatility realized volatility is the actual and implied volatility depends on the option price The IV is always going high for this one the short site can be created if the HP is below..this is a good filter IV is more than HP, which is good IVP is sufficiently high if you see the range of stocks then it is in a range this is at an all time high...around 52 weeks high for sure 292 is not breaking above, and it is not consolidating..so the options will keep decaying then we have to understand if we can stay in the trade or not so these are some ideas through which trade is taken fair enough so we are not doing a strategy discussion but we are getting an idea what you do so these are some high probability trade such as I have sold 16 delta trends the advantage of high probability trade is that you have to keep the trade of the bedside high and the number of trades should be high usually, I have a position in 12-13 stocks given my account size, sometimes I also have positions in 20 stocks in this trading style, you don't need to make a lot of money through trading site you have to make money from many trades in trend, it is the opposite like you take many small loses then you take one winner that will overcome all your loses this is the opposite, you take many losses, and in the outlier, you have to ensure that your loss is less your loss should not be more than your gains like how I said, IVP greater serves as a good filter this is one criterion to take the trade other criteria such as range of the stock and how much premium it is collecting I have collected 34,000 premium in one trade so I will get the yield soon and the profit will not talk about the margin, it is in lakhs you are getting 34,000 in that..no this margin might be in the bank nifty..Vedanta must be having a different margin
I don't see the margin for one trade I look at the exposure in the stock and according to that I size my position okay okay I understand, you are a very conservative person yes I am a conservative trader, the strangle I keep for 30-35 days there are 16-20 deltas where I keep the stocks that I keep near the expiry, the reason being that the OTM options decay early in the expiry and in the atm options, the decay starts later in the expiry if there are few days left then I work into the strategy if you are selling straddle then there are risks involved, and if the delivery is already there..yes it is there yes then you can sell the straddle I did a face2face with Pran Kataria, he does the same thing. He keeps the straddle and sells the shares how much can you take by rolling upwards, can you take the pressure of 35%? no so if you are not coming out from such situations then your limit of loss will keep increasing that gives very slow yield, now if you buy 1000-1000 points for NIFTY just to reduce margin you will not save much because the position sizing is aggressive what is the discount balance in the average brokers? it is 1-2 lac only..so such people should not do option trading they have not seen the black swan days so they think why they have stopped intraday trading we should give 20 times..so how do we solve that problem?
I think anyone who has less than 5 lac capital should not trade in F&O it is very risky in both buying and selling and selling requires a margin of 1.5 lac if your capital is 3-4 lac and you are putting 2-2 lac in bank nifty then it is a very risky business my advice is that if you have less than 5 lacs then you should trade inequity and build capital and then go for F&O I do conservative trading so expecting aggressive position sizing is difficult in 2019, I had a 30% return in 2020, it was almost 60% because 2020 was an outlier year, which had a very high volatility it is difficult to replicate it and I don't even want to replicate I don't make a 60% target, I do 30% and then if it is more then will see you analyze it and make an informed decision if you have less capital then try to invest in stocks..I have tried to explain this here in time I can take a position in 20 stocks will have a 5% allocation in every stock and I have put a price in every stock, so if the loss is more than 10% then I take the loss and leave if my stop loss is in one stock then my loss will be 0.5% and if all the stop loss is gone then the loss will be 10% so for full-time trading, you need to plan it out and give it a thought you should have a rule-based system, like people say discretionary trading..I do the same but it does not mean I don't have any rules you feel that the market will go up so you buy it, this is not discretionary trading, this is random trading if you have definite rules then a definite size of entry and exit is also there what will we teach in trading, we will teach you some system or psychology, strategy, and other briefs but all this is already available online, so if your system is so good.. why are you selling it? I attended a training in 2009 when I was directionally trying to explore those setups were not working, so I did a backtest on those systems and saw that the best out of the 4 gave a CAVR of 15% if you are attending such training then you need to ask for the backtesting report if the backtesting result is not matching then you can ask for a refund. I was in talks with a renowned trader on Twitter
he told me that he took a similar system we have a stark difference in our backtests..so thankfully he got a refund it was a really great experience. It looked like someone is genuinely trying to earn and help their family through trading it needs to work because you are running a family, it is not a video game Thanks, Vivek, thank you so much! anything you want to say to the learners before closing. my DMs are open I have given the account link..I try to respond as much as possible and avoid the abuses..you can also tag me I will also do a spaces session on Twitter fantastic! I want to give good luck to all aspiring traders and you have to do hardwork if you are not able to understand anything then you can connect with Ashish and ask for the technical terms and can also watch the video again this is not a video game, do not get lured by discount broking, and Twitter..many families are destroyed thank you so much for watching the video and bye bye Ashish!