The Ultimate 1-Hour Masterclass on Option Buying Strategies | Option Trading Strategy | Dhan

0:03It is a human tendency that we want to

0:05earn more profit by paying less money .

0:07An option buyer's profit can be

0:09unlimited . The loss can be limited . An

0:11option seller's loss can be unlimited .

0:13The profit can be limited . And overall ,

0:15the whole game is about the

0:17appreciation of the premium . So

0:19basically , our job here is to earn

0:21quick gains with a good success rate

0:23and get out . You cannot play like Rahul

0:25Dravid . You cannot think of becoming

0:26VVS Laxman . You have to be Shahid

0:28Afridi . You have to be Virender Sehwag ;

0:30you have to come in , hit a few fours

0:32and sixes , and get out . If you purchase

0:34an at-the-money option , then just that

0:36half-percent move in a single day will

0:38give you a good return .

0:39Sir , the life of every strategy , the

0:41secret to its profitability , lies in

0:43its risk management .

0:44There is no such thing as a 99 % strategy

0:46; there is nothing called a holy grail

0:48strategy , only one strategy in which

0:49you will always make money .

0:51Okay .

0:51It has a 100 % success rate , that is ...

0:55Hi , this is Ashar Haren and welcome to

0:57another video of Dhan , and today we

0:58have with us the star trader of this

1:00Dhan platform , Himanshu Arora sir . Hi

1:03sir , thank you so much .

1:04Welcome , thank you to your own channel .

1:06Actually , it's more your channel than

1:08mine , and it's great to have you today .

1:10So sir , today we are going to talk

1:12about options , options trading , and

1:13specifically option buying . And this

1:15discussion should be such that for

1:17someone starting from the basics of

1:19options trading , who doesn't even know

1:21what calls , puts , or options are , why

1:24one should do it or why not , we cover

1:26everything from there to intermediate

1:28and advanced level strategies and risk

1:30management in this single video . If

1:33someone watches this video today , they

1:35shouldn't need to go anywhere else to

1:38at least try their hand at options ,

1:40understand option buying strategies ,

1:42and move from that 93 % bracket into the

1:447 % bracket . So , can we do something like

1:47that ? Absolutely yes . I am all in , and

1:49your questions will play a very

1:51important role here . How much can you

1:53get me to talk about it ? I am equally

1:54excited to be able to share my views .

1:56But I will be brutally honest . I can

1:58assure you that I will be brutally

2:00honest with everything and anything I

2:02know about option buying . So , we are

2:04going to keep our focus on option

2:05buying . Right ?

2:06Correct.

2:06So , whatever questions you have in your

2:07mind about option buying , you can ask

2:09me all of them . And risk management ,

2:11who should do it , who shouldn't , and

2:13when should it be done ? All these

2:16things that I have learned over the

2:17last 17-18 years , I am definitely ready

2:20to share them with you . So , ask away .

2:22I’ll give a small disclaimer first . I

2:25don’t want those 95 % or 99 % accurate

2:27strategies you find in the market .

2:30They don't exist .

2:31I want to know what you practically use

2:34in real life , what has brought you into

2:36that top 7 % with real facts .

2:38Is there even such a thing as a 99 %

2:40strategy ? There is nothing called a

2:41holy grail strategy . There is only one

2:43strategy where you will always make

2:44money .

2:45Okay ?

2:45It has a 100 % success rate .

2:46That is :

2:47You swear that you will never sell a

2:48share at a loss . And you keep holding

2:50it for your entire life . Apart from

2:52this , in options , there is no such

2:54strategy that gives you a 99 % success

2:57rate . So , I will be brutally honest

2:59about what the success rate can be , how

3:01much profit you make , how much loss ,

3:03and as you mentioned my own channel , I

3:05will be honest . I will be very true to

3:08my viewers ; of course , as your

3:10questions come in , I will discuss

3:12everything with full honesty .

3:15Got it . So , let's frame this whole

3:16structure like this . We will start from

3:17the basics . After that , we will discuss

3:19some intermediate-level things , some

3:21market insights . Then we will move

3:23towards your strategy . A good option

3:26buying strategy along with risk

3:27management , all the tweaks , nuggets ,

3:29and nuances .

3:30And apart from this , I would like to

3:32add one more thing . I personally feel

3:34that the role of a trading strategy can

3:36only be 49 % . At best . A 51 % role for

3:39risk management , as you said , and let's

3:41add behavior to it too . Because how

3:43should your emotions and behavior be as

3:45an option buyer ? We can have a little

3:47discussion about this .

3:48The mindset part .

3:49The mindset , actually .

3:50Got it . Alright , sir . So , let's start

3:51from the very scratch , from the very

3:53basics . First , what are options , and

3:55second , why should one trade options ?

3:58Okay . So , your question is , what are

4:00options ?

4:01See , there are two types of products in

4:02derivatives . There is a future , and

4:03there is an option .

4:04Right ? So , you live in Mumbai . And you

4:06want to purchase a flat in Mumbai . You

4:09paid ₹ 1 lakh , and the flat is worth

4:10₹ 1 crore . Let's assume this

4:12hypothetically .

4:13In this , you have become a buyer . The

4:16other party has become a seller . In

4:17this , both have a right and both have

4:19an obligation . You can buy the flat . If

4:21the prices go up . You will benefit . If

4:23the prices go down . The seller will

4:25benefit . So , both the parties have a

4:26right and both the parties have an

4:28obligation .

4:28Correct .

4:29Meanwhile , there is another derivative

4:30contract against this . Such as

4:32insurance . Now , if you have insured

4:35your car , you only have the right ,

4:36while the other party has an obligation

4:38. LIC has an obligation . For example ,

4:41if I purchased health insurance , then

4:43if I have a health problem , I can go to

4:44the hospital . This is my right . It is

4:47not an obligation . It is possible that

4:48I might not even go . If I am unwell and

4:50a local doctor can handle it , then I

4:51will not claim this insurance from the

4:53insurance company . Yes .

4:54So , this means that I have a right . But

4:57if I go to the hospital , the other

4:59party , who is the insurance seller , has

5:01an obligation . They have no right to

5:03decline it . Assuming that I am

5:04fulfilling all the conditions , this can

5:06be compared to an option contract where

5:07one of the parties has a right and the

5:09other party has an obligation . The

5:11party that has the right — for example ,

5:13if I bought car insurance and I paid a

5:15premium of , say , ₹ 10,000 for the

5:16year . If this car , in an unfortunate

5:19event , is totally damaged , then I will

5:21receive 10 lakh , 15 lakh , 20 lakh , or

5:23whatever the total insurance value is .

5:25So , compared to the premium , the money

5:26I am earning from here — although it

5:28shouldn't be called earnings . But the

5:30amount of money I am redeeming from

5:31here is significantly high compared to

5:33the premium .

5:34Obviously .

5:34This means that as an option buyer , you

5:36can make a lot of money . Recently ,

5:38there was an unfortunate event in India

5:39. I would say the most unfortunate

5:41event , where a plane crashed . The

5:44insurance company for that will have to

5:46pay approximately ₹ 4000 crore . As

5:48per sources , whether it is 4000 crore

5:49or 3000 crore , whatever the number is ,

5:51they will have to pay it .

5:53Whereas the premium they received must

5:55have been only a few crores .

5:56But the reimbursement that came in was

5:58huge . In it , an option buyer’s profit

6:01can be unlimited and the loss limited ,

6:03whereas an option seller’s loss can

6:05be unlimited and profit limited . So ,

6:08among all the products we have seen so

6:09far , for example , futures or the cash

6:11market ... hmm .

6:13There are two parties in this . One is

6:14the buyer , one is the seller .

6:15Correct .

6:16There are four parties in options .

6:18Because options themselves are of two

6:19types .

6:20Yes .

6:20One is a call option , the other is a

6:22put option .

6:22Hmm .

6:23So , a call buyer , a put buyer , a call

6:25seller , and a put seller . There are

6:27four parties in total . So , today we

6:28will talk about these four parties . Out

6:30of which , today we will primarily focus

6:33on options buying .

6:34Where the mindset of a call buyer and a

6:36put buyer is important . But we will

6:39come to that mindset later . The first

6:41point is that an option buyer’s

6:43profit can be unlimited . The loss is

6:45limited . Whether it is a call buyer or

6:47a put buyer .

6:48That is a major reason why beginners

6:50want to enter this .

6:51Right ?

6:52Because they want to become option

6:53buyers . See , human tendency is actually

6:56towards option buying .

6:58If I take my own example , fortunately ,

7:00I have been purchasing health insurance

7:03for approximately the last 15 or 20

7:04years . Thankfully , I have never had to

7:07be admitted to a hospital to date . But

7:09I purchase health insurance again every

7:10time with the same excitement .

7:12Yes .

7:12I want to mitigate my risk . There are

7:14very few insurance companies . Because

7:16there are fewer people selling

7:17insurance in the market , or fewer

7:18people selling options . Human tendency

7:20to buy options is such that we want to

7:23earn more profit by paying less money .

7:25That is why most people are inclined or

7:27attracted toward option buying .

7:29Option buyers are actually the

7:30insurance buyers , and option sellers

7:32are the insurance sellers , which are

7:34the companies , actually . Right ? Got it .

7:37Now let's talk about the premium . Right

7:39? How is the premium decided ? Because

7:41as you said , you know , it's a type of

7:43insurance . We pay a premium . There are

7:46premiums in options as well . Right ? Now

7:48, when we talk about health insurance .

7:51If I smoke , if I — I don't , but ... But

7:54if I smoke , if I drink , if I have a

7:56very unhealthy lifestyle — and

7:58obviously , if there is a major medical

8:01history in the family .

8:03Then my insurance premium is much

8:05higher . Right ? And if I have a very

8:07healthy lifestyle , I am doing Surya

8:08Namaskar after waking up . Everything is

8:10absolutely fine , which it is . But in

8:12that case , my option premium will be

8:15quite low .

8:16Right ?

8:16Sorry , my insurance premium will be

8:18quite low .

8:18Right ?

8:19What decides this insurance premium in

8:21an option ?

8:22Okay . Very good question . Before

8:24answering this question , let me first

8:26segregate the two options . So that we

8:28have clarity on which option we are

8:29going to talk about in the future . So

8:31one is our call option , and one is the

8:32put option . The buyer of a call and the

8:34buyer of a put . We will focus on these

8:36two . If your view is bullish on

8:37something , then you will buy a call

8:39option . A call option provides you the

8:41right to buy something at a

8:42predetermined price .

8:44Okay ? A put option provides you the

8:46right to sell something at a

8:47predetermined price . Both have a right .

8:50Okay , because an insurance buyer or an

8:51option buyer only has a right . So both

8:53the call buyer and the put buyer have a

8:55right . One has the right to buy

8:57something , and the other has the right

8:59to sell something . Now , this purchase ,

9:02the rate at which you are buying , or

9:04the rate at which you have the right to

9:06buy , decides how much premium you will

9:09pay . Let me explain with an example .

9:10Nifty is moving . Let's hypothetically

9:12assume Nifty is trading at ₹ 25,000 .

9:14And even before we proceed with this

9:17entire video , I will mention Nifty ,

9:19stocks , call buying , and put buying

9:21many times . I do not want to share any

9:24recommendation with anyone . This should

9:26only be seen for educational purposes .

9:28These are just names . So , for example ,

9:30Nifty is trading at ₹ 25,000 . ₹

9:3225,000 . Now you have the option to

9:35purchase any option . Basically , you can

9:38purchase any right . Nifty is trading at

9:41₹ 25,000 . You want Nifty to be

9:43available to you at 24,500 on the

9:45expiry day . Such rights also exist in

9:48the market .

9:49You feel that you should get Nifty at

9:5124,800 . Such options also exist in the

9:52market . Such rights also exist in the

9:54market . You say that you want Nifty at

9:5725,200 . Nifty might go to 26,000 in the

10:00future . So , your right is that you will

10:03get Nifty at 25,200 .

10:04Is this clear ? So , at what rate you

10:08want Nifty will determine how much

10:10premium you will have to pay . Basically

10:13, why did I use the word premium so

10:15liberally ? Because I used an insurance

10:17example . Who got the right in insurance

10:19? The one who paid the premium . So , the

10:21premium you paid gave you the right .

10:23Now , what kind of right have you taken ?

10:27For example , you said my medical

10:29insurance should be 5 lakhs . So , its

10:31premium is ₹ 15,000 .

10:33Okay ? Okay . You say my medical

10:34insurance should be 10 lakhs . So , its

10:36premium is ₹ 25,000 . So , an option or

10:39insurance primarily provides you the

10:42right based on which the premium is

10:45decided .

10:46I can show this to you through a chart

10:47as well . I can show it through data too

10:48. If you may allow , I would like to

10:50show you here .

10:51So , here is Nifty , which is currently

10:54trading around 24,827 .

10:55Okay .

10:56Here , I will open a Nifty option chain .

10:59An option chain means a table where you

11:02get full information about Calls and

11:04Puts for just one product , Nifty ,

11:07including some terms we will discuss

11:09shortly like In-the-Money , At-the-Money

11:11, and Out-of-the-Money . What are these

11:15and what is their premium ? Because your

11:17question was about premium . So , how is

11:19this premium determined ? We will come

11:20to that shortly . First , let's see how

11:21premiums look . Let’s see that here

11:22first . So , we went to the option chain

11:26here , and the market is running at

11:2824,827 . Now look , on the left side , we

11:31have the Calls .

11:33On the right side , we have the Puts .

11:35Meaning , on the left side , you have

11:37options that provide you a right to buy

11:38something . If you want the right to buy

11:42Nifty at 24,600 on expiry , which is

11:45June 26th . Hm .

11:47Then you have to pay a premium , which

11:50is ₹ 343 , as you can see here .

11:53Okay .

11:55Wanting the right to buy means right to

11:58buy , right to buy Nifty at 24,600 ; for

12:00this , you must pay ₹ 343 multiplied

12:02by the lot size .

12:04But now , if you want the right to buy

12:06Nifty at 24,700 , meaning you are ready

12:09to buy at a higher price . Not ready to

12:11buy cheap , but ready to buy expensive .

12:12Buying cheap was more in your favor .

12:14Buying expensive is less in your favor ,

12:16so you have to shell out a lower

12:17premium . Its premium is only ₹ 275 .

12:21Hm .

12:21Now , if you say that you are willing to

12:23buy Nifty at ₹ 2,000 , perhaps because

12:25your view is that Nifty will reach ₹

12:272,000 . I will still get it at 25 . For

12:29this , you will only have to pay a

12:31premium of approximately ₹ 100 or ₹

12:34115 . So , which option do you want to

12:37enter ? Which strike price do you want

12:39to choose ? And we can understand a

12:41strike price as the price at which the

12:43deal strikes between the buyer and the

12:45seller . So , at what rate is a buyer

12:47willing to buy Nifty ? At what rate is a

12:49seller willing to sell Nifty ? For that

12:51matter , it could be Nifty , Reliance ,

12:52TCS , or any other stock here . And for

12:53that matter , it could also be

12:55commodities . So , at what rate is the

12:56buyer willing to buy it ? The seller is

12:58willing to sell it . The price that is

13:00determined is called the strike price .

13:02These are limited . The NSE decides

13:05which strikes will be available for

13:07Nifty .

13:07We cannot do it randomly . You cannot

13:09just randomly say that you want Nifty

13:12at ₹ 24,970 on the expiry day .

13:14Strikes are available in multiples of

13:1550 . You will only get them at these

13:17rates . You can decide the premium . The

13:19premium is decided based on demand and

13:20supply . Apart from many other factors ,

13:22the premium is decided based on demand

13:23and supply factors . Now , if the demand

13:25is higher here , the premium will

13:26increase . If the demand is lower , the

13:28premium will decrease . So , your

13:29question was , how is the premium

13:31decided ? It is based on demand . Now ,

13:33your next follow-up question might be ,

13:35how does this demand arise ? Now , if

13:38Nifty was at 24,700 yesterday .

13:41Okay .

13:41Today Nifty has risen to 24,800 . Hm .

13:44Humans suffer from something called

13:47recency bias . As soon as Nifty goes up

13:50by 100 points , we start feeling that

13:52Nifty will go up by 150 points , 200

13:54points , 300 points , 500 points . We all

13:56want to purchase such rights that can

13:58give us Nifty at the cheapest possible

14:00rate . The value of the 24,500 rights

14:02will increase . The value of the 24,600

14:04one will increase . So when these

14:06markets go up , call premiums start

14:08getting expensive . Conversely , because

14:11fewer people feel that the put value

14:13will rise or that the market will go

14:15down , the demand for puts decreases .

14:18So their value decreases .

14:19So their value decreases .

14:21As of today , the date we are recording

14:23this video , Nifty is only mildly up .

14:26Yeah .

14:27So if you notice here , you will see

14:30that the value of some calls has

14:32increased . Hmm .

14:34Whereas you can see that all the puts

14:35are in the negative .

14:36Right ?

14:37Because some people feel that the

14:39market could go higher from here .

14:41Because many people don't feel that

14:42right now as the market is flattish . It

14:44is up by only 20 points . Because of

14:45this , not all calls are bullish either .

14:48But still , some calls are bullish . Not

14:50a single put is bullish here .

14:52Correct .

14:52Everyone's value is dropping here .

14:53So , because everyone thinks the market

14:55will go up , the call value increases ,

14:57and when everyone thinks the market

14:58will go down , in that case , the put

15:00value increases . So , that is how the

15:02premium value is primarily decided .

15:04Okay ?

15:04So , if your view is bullish , you buy a

15:08call .

15:08If your view is bearish , you buy a put

15:10because their value will increase in

15:11that condition .

15:12Correct .

15:13Now you mentioned different things and

15:15different terms here . So let's come to

15:17each term one by one . Sir , first of all

15:18, you mentioned a term called expiry .

15:20Could you explain that a bit ?

15:21The health insurance you purchased ,

15:23Hmm .

15:23Was it for your entire life ?

15:25No.

15:25It was for a term , for a period .

15:27Correct . All contracts , especially

15:29financial market contracts , have a life

15:31. So , derivatives have an expiry .

15:34Okay ?

15:35Nifty ETF has no expiry . Reliance

15:37shares have no expiry . But you want to

15:39buy Reliance at the rate of 1400 . You

15:42entered into this contract with me .

15:43This has an expiry . In the meantime , if

15:46the market goes in your favor , only

15:47then will you make a profit . At the

15:48beginning , you shared a very important

15:50data that 93 % of people lose money in

15:52the market and 7 % make money . These 93 %

15:55of people don't lose money because they

15:57were wrong . They lost because they

15:59didn't prove to be right within that

16:01specific period . It is possible that

16:03Reliance goes up after a year and they

16:04were right .

16:05They said it would go up and Reliance

16:07did go up , or for that matter , went

16:09down . But we have to be right within

16:11that specific period . So , if you look

16:14at Nifty , Nifty's expiry is 19th June ,

16:16which is today . The next expiry is next

16:19Thursday , which is June 26th , then July

16:213rd , then July 10th , then July 17th ,

16:23and so on and so forth . The NSE

16:25recently changed some expiries , or

16:27rather , I should say SEBI issued a

16:28regulation due to which some expiries

16:30will change . We are not talking about

16:32that right now . But there is a Nifty

16:33expiry every week , or there is one

16:35expiry at the end of the month . That is

16:37our major expiry . Okay .

16:38What we call the monthly expiry , so

16:40whatever call or put option you want to

16:42purchase , you have to choose a

16:43particular expiry . You need to be right

16:45before that . Now , there are two

16:48definitions of being right : your view

16:50must match on the expiry day , or it can

16:52happen before the expiry as well .

16:54Hmm .

16:55It’s fine even if it happens before

16:56the expiry . You said Nifty will go up .

16:58You purchased a call option .

17:00Hmm .

17:00The most interesting thing is that it

17:02is not necessary for the market to go

17:03up only on June 26th . Whenever it goes

17:05up before June 26th , the premium value

17:07will increase because there will be

17:09demand for it .

17:09So the option you purchased for ₹ 100

17:12became ₹ 120 .

17:13If you want , you can exit right here .

17:15So you will get the ₹ 20 .

17:16You will get ₹ 20 , but you paid ₹

17:19100 .

17:19So you will make a profit of ₹ 20 per

17:21share , multiplied by the lot size .

17:23Right ?

17:23So that will be your profit . So , what

17:25is your target for the ₹ 100 ?

17:26Basically , it's just like how you

17:28purchase shares . You have to purchase

17:30an option . You have to purchase it for

17:32₹ 100 . For example , and sell it for

17:34above ₹ 100 .

17:35Hmm .

17:36Now , Ansh , do you know what the fun

17:37part is here ? When it goes up , everyone

17:40thinks it will go even higher . So that

17:41₹ 100 item becomes 105 , 110 , or 120 .

17:44They keep thinking it will go up to 150

17:45. Then it starts coming down . Then they

17:47think , " No , it will go back up . " So the

17:49problem , as I discussed at the

17:51beginning , is the behavioral issue . You

17:53need such a setup . You just need a

17:56strategy that is predefined : where you

17:57have to buy . This will be your stop

18:00loss . This will be your target .

18:01Basically , you are then looking at a

18:02call option just like a stock . And for

18:04that matter , you are looking at a put

18:05option just like a stock . And as an

18:06option buyer , you want to see both

18:08prices go up , or you want them to go up

18:10.

18:11So basically , the entire game is about

18:12the appreciation of the premium . Option

18:14.

18:15Absolutely right . You used the exact

18:16right word . The whole game is about

18:18premium appreciation as an option buyer

18:20. Whenever you buy , its value should go

18:24up after you buy it .

18:25Okay ? So you have to be right and you

18:27have to be right within that time frame

18:29. Correct .

18:30So that the premium appreciates and you

18:32can sell it at a higher value . And that

18:33will be your return .

18:34Correct. Correct , correct .

18:36There is one more thing to it , but it

18:37would get too deep if we went there

18:39right now . As an option buyer , you

18:41don't just have to be right ,

18:43and right within that time frame . You

18:45have to be right very quickly as well .

18:47Let me give you an example . You

18:48purchased insurance for your car before

18:51COVID .

18:52Hmm .

18:53Six months passed , or let's say for any

18:56period , you bought a car on January 1st

18:59and paid ₹ 100 as an insurance

19:01premium . If you sell the car to someone

19:05else right on January 1st , the

19:06insurance you purchased is valid for

19:08the whole year . Right ? Will you take

19:11the insurance value from them or not ?

19:13You will , you're entitled to it since

19:15365 days of insurance are left .

19:17But if you sell this car after 6 months

19:19, will the other party pay you the full

19:21insurance amount ? They will pay half ,

19:23right ? And if you're selling it on

19:25December 31st , then absolutely not . So ,

19:28this option or insurance is something

19:31where you pay a premium for the period

19:34you hold it .

19:36If the 30 - day premium is ₹ 30 , then

19:38the 29 - day premium will be less than

19:40₹ 30 .

19:41Correct . Let's assume it will be ₹ 29

19:42. Although , the calculation isn't that

19:44simple . But let's assume its value is

19:46decreasing by ₹ 1 every day . So , you

19:48have to win against time ; meaning you

19:51want the price to rise . You also want

19:53it to rise quickly . That is also your

19:55requirement . Because if it rises , but

19:57doesn't rise quickly , then you are

19:59continuously losing ₹ 1 , right ? You

20:01are losing its time value . You used a

20:04word earlier — what is a premium ?

20:05So , a premium is primarily made up of

20:07two things . And let's go a bit deeper

20:09here . And I would suggest our viewers

20:11here to grab a pen and paper because

20:13these concepts are such that , as you

20:15said , we are going to talk about option

20:17buying in detail today .

20:18So , you have a lot of things here that

20:20will be useful to you for the rest of

20:21your life . Rather , let me ask you a

20:23question .

20:24Nifty is trading at ₹ 25,000 .

20:26Yes .

20:27If you exercise a ₹ 24,500 call

20:30option right now . If you bought it and

20:33exercised it immediately . Exercised

20:36means you purchased Nifty through it ,

20:37so you will get Nifty at 24,500 , which

20:39is trading at 25,000 in the market .

20:41So , can I say that if you exercise this

20:43option right now , you will make a

20:45profit of at least 500 ?

20:47It will happen immediately .

20:48If this option is trading at 400 , what

20:50will you do ?

20:50Buy , of course .

20:51You will buy it immediately and short

20:53sell the Nifty future because you know

20:56that at the time of expiry , you will

20:58get Nifty at 24,500 by paying only 400 ,

21:01and it will also sell for 25,000 .

21:03Correct .

21:03So , that means you are actually getting

21:05Nifty at 24,900 , while it is trading at

21:0725,000 in the market .

21:08Right .

21:08You made an arbitrage profit of ₹ 100

21:10.

21:10This arbitrage isn't just known to you ;

21:12everyone will find out .

21:14Everyone will go and buy , its value

21:15will increase due to demand ; when will

21:17this arbitrage end ? When it becomes at

21:20least 500 .

21:20Right .

21:21That means if Nifty is trading at

21:2325,000 , then the 24,500 call option

21:26must be at least 500 .

21:27Yep .

21:28This is called its intrinsic value .

21:30In 99 % of cases , you will find it at 500

21:35.

21:35Okay .

21:36Sometimes it might be cheaper due to

21:38demand-supply mismatch , but broadly ,

21:40you will get it for 500 .

21:41Minimum 500 , you will get . But now , the

21:44right you purchased , you can exercise

21:46this anytime , right ?

21:47You can carry it until expiry . So , the

21:49counterparty has a lot of risk , right ?

21:51Right ?

21:52They will also charge you a premium for

21:53that risk period .

21:54The insurance duration one .

21:56Correct .

21:56That is called time value .

21:58You said it absolutely right . Of the

21:59duration . So , the more time left until

22:01expiry , the more time value you will

22:02pay .

22:03Correct . So , for now , look , the market

22:06is trading at 24,832 . The 24,500 call

22:10option must be at least 332 , exactly

22:13332 .

22:14Correct .

22:14Because 24,832 minus 24,500 is ₹ 332 .

22:18What is this option trading at ? ₹ 425

22:20.

22:20So , 332 plus the time value .

22:22Absolutely right . So , approximately ₹

22:24100 is the time value running here . Now

22:26, if instead of June 26 , you look at

22:27the July 31 expiry , the intrinsic value

22:30is the same , but the time value will

22:31increase because the time to expiry has

22:33increased . Understand it this way : a

22:35one-year insurance premium will be

22:37lower , and a two-year insurance premium

22:38will be higher because the other party

22:40is taking more risk . So , who determines

22:42the option prices ? The option seller .

22:45How much premium do they want to charge

22:46you in exchange for the risk they are

22:48taking ? This tells you how much risk is

22:51in the market . So , when the premium

22:53increases , it means the market risk is

22:54increasing . The option seller is taking

22:56more risk here , and the option buyer is

22:58paying a premium for more risk here . So

23:00, the more profit you get by exercising

23:02an option , the more expensive that

23:04option will be . The 24,400 option will

23:06always be more expensive than the

23:0824,500 one . Because as soon as you

23:09exercise it , you get a profit of 432 .

23:11Correct ? In the 24,300 one , you get a

23:13profit of 500 .

23:14The time value can also be different or

23:16the same . But the intrinsic value will

23:18definitely be different .

23:19One more thing you mentioned just now :

23:22OTM , ATM , ITM , right ? Please tell us

23:24what those are .

23:26Okay .

23:26If you were to exercise any option

23:29right now . Exercising means , for

23:31example , if we are talking about a call

23:33option , which gives you a right to buy

23:34Nifty or a right to buy an asset . If

23:36you exercise it right now , it means you

23:38say right now that I want Nifty . If you

23:41exercise any option right now and you

23:43get a profit as soon as you exercise it

23:44. As in , we don't have to consider the

23:46premium here . Nifty is at 25,000 . If

23:49you exercise the 24,500 call option

23:51right now , a call option means ' the

23:54right to buy at ' 24,500 , so you got

23:56Nifty at 24,500 . What is currently at

23:5825,000 , you made a profit of ₹ 500 .

24:02If you get a profit upon exercising an

24:04option compared to the spot price , it

24:06is called an In-the-Money option . So ,

24:09for example , if the market is at 25,000

24:12. 24,800 , 24,900 , 24,700 , 24,500 ,

24:1524,000 — all these call options below

24:17it , if you exercise them , you will make

24:19a profit .

24:21Right ?

24:21These are called In-the-Money options .

24:23If you make a loss as soon as you

24:25exercise the option . For example , the

24:2725,200 call option . The 25,200 call

24:30option provides you a right to buy

24:32Nifty at 25,200 .

24:34Correct ?

24:35And Nifty is trading at 25,000 . So if

24:37you buy Nifty at 25,200 , which is

24:39already available for 25 in the market ,

24:41you will incur a loss . These are called

24:43OTM options . And if you exercise the

24:4525,000 call option right now when Nifty

24:48is trading at 25,000 ,

24:49Hmm .

24:50So you are making no profit , no loss .

24:52This is called ATM ( At The Money ) , or

24:55sometimes CTM ( Close To Money ) . These

24:58are the three terms . Generally , we use

25:00ATM , At The Money . This is what we call

25:02an At The Money option . If you make a

25:03profit upon exercising , it’s In The

25:05Money . If you make a loss upon

25:06exercising , it’s Out Of The Money .

25:08Let’s take one more example . Let's

25:09take a put , sir , let's take a put .

25:11Nifty is at 25,000 . A 25,200 put option

25:14provides you the right to sell at ...

25:18Sell Nifty at 25,200 .

25:20Correct .

25:20Which is currently trading at 25,000 .

25:22You made a profit of 200 .

25:23Right ?

25:24So you are 200 In The Money . And these

25:26200 are its intrinsic value , which we

25:28discussed earlier .

25:29Right ?

25:30And if this option is trading at 250 ,

25:32then 50 is its time value . And if we

25:34take , for example , the 24,500 put

25:36option , it provides you the right to

25:39sell Nifty at 24,500 — a lower price —

25:41when Nifty is trading at 25,000 , so you

25:44are losing 500 .

25:45Yes .

25:46So you are 500 Out Of The Money , but

25:48its intrinsic value is not -500 . Its

25:50intrinsic value is zero . Whatever the

25:52price of this option is , it is solely

25:54its time value . Then ?

25:55Got it ?

25:56So , In The Money , At The Money , Out Of

25:58The Money . The 25,000 call option and

26:00put option are both our At The Money

26:02options . Assuming Nifty is trading at

26:0425,000 .

26:05At The Money is the same for both calls

26:06and puts . And looking at this criteria ,

26:09the ones that were In The Money for

26:10calls are , in a way , Out Of The Money

26:12for puts .

26:12For puts .

26:13And the ones that were In The Money for

26:14puts are Out Of The Money for calls .

26:16For calls , and you can see it right

26:17here . If we look at the screen , the

26:19highlighted portion you see ...

26:21These are all In The Money options . The

26:23white-colored portion you see , these

26:25are Out Of The Money options .

26:26Okay ? So what you were saying about

26:2925,000 , because Nifty is trading at

26:3124,820 ... Hmm .

26:32So what you were saying about 25,000 ,

26:34that the put option is In The Money for

26:36puts , it is Out Of The Money for calls .

26:38Correct .

26:39So , as puts get more expensive , calls

26:41will get cheaper .

26:43Correct .

26:43And this 24800 something is

26:45at-the-money for both , where your color

26:47changes . So , the option chain itself

26:49provides you a plethora of information

26:51where you can see how much the IV is ,

26:53how much the TV is , what the intrinsic

26:55value is , and what the time value is .

26:57Which option is in-the-money , which

26:59option is out-of-the-money , which is

27:01at-the-money ? And apart from this ,

27:02there are many other data points that

27:04you can extract from the option chain .

27:06Let's understand the option chain in a

27:07bit more detail .

27:08Yes , sure .

27:09So , this is the option chain .

27:10Okay .

27:11In the center , you have the strike

27:12prices which are predefined by the

27:14exchange .

27:15The prices we bet on .

27:16The ones we bet on .

27:17Okay .

27:17So , we cannot make any changes here . We

27:20can only be a buyer or seller of these .

27:22That too , either for calls or puts . We

27:23can only be one of these four

27:24participants . Now , here you can see the

27:27price at which people are ready to buy

27:29and sell at this strike price , which is

27:31the LTP , Last Traded Premium , right ?

27:33Or Last Traded Price , whatever you want

27:35to call it .

27:36Along with that , you can see how much

27:38this price has changed today ; LTP

27:40change can be in rupees or in

27:42percentage , both are provided here .

27:44That this option has become ₹ 4 more

27:46expensive compared to yesterday because

27:48Nifty has gone up . Okay . So , the call

27:50option has become expensive , and this

27:52put option has become cheaper by 17 % or

27:53around ₹ 16 because the demand for

27:55puts has decreased . Right ? So , strike

27:58price , LTP , LTP change , how many lots

28:00have been traded ? How much quantity has

28:02been traded is what you see here in

28:04volume . Then comes your open interest .

28:07Ever since this contract was launched ,

28:09many people have entered the contract .

28:12Many people have exited the contract .

28:13Hmm .

28:14But as of today , how many people are

28:16still in the contract , that is its open

28:18interest . The number of outstanding

28:20contracts of a particular option

28:22contract . You can also call them active

28:24trades .

28:24We can call them active trades . How

28:26many active participants are currently

28:28in the market ? One buyer plus one

28:30seller equals one open interest .

28:32Okay ?

28:33One buyer plus one seller equals one

28:34open interest , not two open interests .

28:36So , that becomes one open interest for

28:37you . All the people who are actively

28:39participating at this moment , holding

28:41positions . Whether from the buyer side

28:43or the seller side , they are counted in

28:45our open interest . But some of these

28:47people might have entered today .

28:48Right ?

28:49Some might have exited .

28:50Correct .

28:51The impact of all these new

28:52participants today is my today's OI

28:54change .

28:56Okay ?

28:56So if new participants have arrived ,

28:57and new contracts have been formed ,

28:59then the OI change will be positive .

29:00Positive . And if people have exited

29:03from new and existing contracts .

29:05They have wound up , they have booked

29:06their profits . Or booked their losses .

29:08Right ? Then the change that came from

29:10that will be negative , there is

29:12negative OI .

29:13Negative change in open interest .

29:14Negative change in open interest .

29:15Got it . Now there are two or three more

29:18terms , I would say , that you see on

29:20this page . Although there are many

29:21other important terms . But as an option

29:23buyer , these terms are less important

29:26for now .

29:27It's not that they aren't important ,

29:28but they are relatively less important

29:29compared to an option seller . Okay .

29:31Like one term is our Delta . Tell me ,

29:33Nifty is trading at ₹ 25,000 .

29:36You bought a call option of ₹ 24,500 .

29:39Okay ?

29:39For example , the premium was ₹ 800 . I

29:42bought an at-the-money call option of

29:44₹ 25,000 .

29:45Okay ?

29:45The premium was ₹ 200 . And let us say

29:48they bought a call option of ₹ 25,500

29:51. The premium was ₹ 20 . The market

29:53went up by ₹ 100 from here . Question

29:55number one : A , B , and C , in-the-money ,

29:57at-the-money , out-of-the-money . The

30:00market went up from here . Who among

30:02them will make a profit ? All three will

30:04. All three will .

30:05Because the market went up , the value

30:06of all three calls has increased .

30:07Correct.

30:08So the demand for all three calls has

30:09increased .

30:10But will all three make the same profit

30:12?

30:12I mean , if it is in-the-money , then it

30:14has become ₹ 100 more in-the-money .

30:16Its intrinsic value has increased by

30:17₹ 100 more .

30:18Increased more .

30:19So my ₹ 100 is guaranteed . You guys

30:21look .

30:22It is not necessary that it increased

30:24by ₹ 100 .

30:24Who knows , its delta ... maybe it

30:26increased by 70 . When the market moves

30:29up by ₹ 100 , the value of all options

30:32is impacted at different levels . And

30:34who decides this ? Delta decides this ,

30:36based on how much in-the-money you

30:38already were , comes a number called

30:40Delta or a data point called Delta .

30:43Delta is the rate of change of the

30:44option premium with respect to the

30:46underlying asset . Meaning , how much

30:48will your option value change for a ₹

30:501 move in the underlying asset ?

30:52How much will your option value change ?

30:53That is what we call Delta . For

30:55instance , look here . The 24,500 call

30:58option has a delta of 0.8143 or roughly

31:010.81 , meaning if Nifty goes up by ₹

31:04100 , it will broadly go up by ₹ 80 .

31:07₹ 81 .

31:08Around ₹ 81 . Although another factor

31:10comes into play here , which is Gamma .

31:11But that is a discussion for later . For

31:13now , broadly , there will be a gain of

31:15around ₹ 80 . Whereas , look at this

31:17At-The-Money option . Its delta is only

31:190.52 , meaning if Nifty moves up by ₹

31:22100 , it will only rise by about ₹ 52 .

31:25Okay . And looking at this

31:28Out-Of-The-Money option , the delta is

31:300.3 , 0.1 , 0.2 , so if Nifty moves up by

31:32₹ 100 , it will only rise by around

31:3420-25 , keeping all other factors

31:36constant . So , the further you move from

31:39In-The-Money toward Out-Of-The-Money ,

31:42the impact of the stock or index

31:44movement on your option premium keeps

31:47decreasing .

31:48It keeps decreasing . On the profitable

31:50side as well as the loss-making side .

31:52Meaning , on the upside as well as the

31:53downside . So , with an Out-Of-The-Money

31:55option , your profit will be less in

31:57absolute terms , and your loss will also

31:59be less . In In-The-Money , your option

32:00value will increase more and decrease

32:02more as well .

32:03Right ? Now , since we are going to talk

32:05about trading strategies anyway . I will

32:07tell you an important point here . If

32:09you are very confident about your

32:11strategy , you would want to gain as

32:13much profit as the market rises .

32:15Right ?

32:16Then go for a higher Delta . Basically ,

32:18if your confidence is high , your Delta

32:20should be high .

32:21Okay ? If your confidence is low . Let me

32:24give you an example . A few years ago ,

32:26maybe two or three years back , I used

32:28to see many people on Twitter . Playing

32:30hero-zero trades .

32:31Or even now , many do . Many people still

32:33do it . But it is relatively less now .

32:35But what a hero-zero trade is , you

32:37purchase an option with a delta of two ,

32:39three , or four , or let's say you

32:41purchase an option worth ₹ 2 .

32:43Expecting it to become ₹ 10 .

32:45Correct .

32:46Basically , you are taking a pure bet

32:48here .

32:48Hmm .

32:50Now , with this thought process , only

32:53Out-Of-The-Money works .

32:55Right ?

32:56Because you are not sure whether you

32:57will make a profit or not . You lack the

32:59confidence of whether you will make a

33:00profit or not . You are just taking a

33:01bet , and bets are taken on small

33:03amounts .

33:04Small amount means small delta . If

33:06there is a profit , the ROI will be huge

33:08. But in absolute terms , it won't be a

33:10large profit . It is a ₹ 2 option .

33:12Even if it increases by ₹ 10 ,

33:13logically think , you are only earning

33:15₹ 8 here .

33:15Right ?

33:16Which is actually 400 % ROI . So the

33:19percentage is good , and since your

33:21confidence is low , that is why it is

33:23called a " Hero Trade " ; because your

33:25confidence is low , that is why you are

33:27doing OTM . Traders with high confidence

33:29, who know that , for example ,

33:31hypothetically , the success rate of

33:33this trading strategy is 70 % . 80 % . They

33:36will work with 70 or 80 delta options

33:38because I know what my probability of

33:40winning is . So I will win that

33:41high-probability option and show it .

33:43Because then I don't need to do OTM ;

33:45when there is an 80 % chance of the

33:46market moving in my favor , why

33:48shouldn't I earn more ? Why should I

33:50earn less then ? So , delta tells you

33:52this too .

33:53Okay ? And there is a term called Theta .

33:56Theta is the rate of change of the

33:58option premium with respect to time .

34:00With time , the option's value , keeping

34:02all other things constant . We discussed

34:03that it will keep decreasing .

34:05Because your premium will keep falling

34:06as the time till expiry decreases . So

34:08Theta is basically a negative number

34:10representing how much daily downfall

34:12there is because of time .

34:13Because of time decay , and there is one

34:15term I deliberately missed here , which

34:17is IV — this IV is not intrinsic value .

34:20This IV is Implied Volatility .

34:22Hmm .

34:23Meaning , how much of a volatile move

34:25market participants are expecting .

34:28Okay . On that basis , they are deciding

34:30the value of the premium . The more the

34:32option premium , or the higher the

34:34option premium , the higher is the IV ;

34:36meaning , if someone's expectation

34:38regarding volatility increases — like

34:40last night there was a US Federal

34:42Reserve event .

34:43Hmm .

34:44So , at such a time , if it is expected

34:46that the Federal Reserve might increase

34:47its interest rates .

34:49Then it means volatility could increase

34:50. So options automatically become

34:52expensive .

34:53On events .

34:53On events . Before the budget comes ,

34:55before election results come , all

34:57options become expensive because IV

34:58increases .

34:59Okay ?

35:00So these are some terms that any option

35:02buyer should broadly know .

35:04So , if you look at IV and such , it's

35:06essentially a measure of risk . Because

35:09if it increases , then naturally , the

35:10risk increases for both the option

35:11buyer and the seller .

35:12The risk will increase for both . As the

35:13risk increases , premiums will rise .

35:15But the risk increases much more for

35:16the option seller .

35:17Correct .

35:17Because their loss is unlimited , right ?

35:19Yes .

35:19The buyer's loss is defined .

35:21Their risk will not increase . They are

35:22just paying a higher premium for that

35:24risk .

35:24Right ?

35:25I mean , if some disease has spread ,

35:26then the insurance company's risk has

35:28increased .

35:29We are just compensating them by paying

35:31a small amount .

35:32Got it .

35:32So , the option buyer's risk is limited

35:34anyway . The risk increases for the

35:35option seller . So , the option seller

35:37looks at this IV to decide how much

35:39premium to charge . Or , I should say ,

35:42looks at the volatility to decide how

35:43much premium to charge .

35:45Hmm , okay ? So , from the entire

35:47discussion we've had , we first

35:49understood what options are . They are

35:51contracts that give you a right . Right

35:53to buy , right to sell . There are two

35:55types . Call , put . Call means the right

35:58to buy . Put means the right to sell . If

36:01your view is bullish , then you buy a

36:03call . If your view is bearish , then you

36:05buy a put . If your view is correct ,

36:07meaning the market goes up , the call's

36:08value will increase , and the put's will

36:10decrease . If your bearish view for the

36:12put is correct , then the put's value

36:13will increase , and the call's will

36:15decrease . And the whole game is about

36:18premium appreciation ; if you bought a

36:20premium at 100 and sold it at 150 ,

36:22that's your 50 - point profit .

36:25Correct , inside this we also talked

36:27about ITM , OTM , ATM — In the Money , At

36:29the Money , Out of the Money — we talked

36:32about expiry , strike price , and also

36:35intrinsic value and time value .

36:37Okay , we talked about how the premium

36:39is decided , intrinsic value , time value

36:41, and then we talked about implied

36:43volatility , theta , and delta .

36:44Correct , right ? This could be a summary

36:47of what we have studied so far , that

36:48okay , these are the different

36:50components of options . Now , if this is

36:52understood , how to actually execute

36:54your orders , how to actually buy a call

36:56and how to actually buy puts and make

36:59money out of it . Let's talk about the

37:02most exciting part . This is the

37:04strategy part of today's video .

37:07Okay? Great . Look , I would like to add

37:09a small point to this entire discussion

37:11of yours . As an option buyer , you are

37:14riding a bicycle against the wind . The

37:18reason is that I mentioned an important

37:20point , which I stated in simple

37:21language , but it's a very crucial point

37:23: theta is working against you . There

37:25is at least one thing working against

37:27you .

37:27Hmm .

37:27Because I said theta is the rate of

37:29change of the option premium with

37:30respect to time . And time will always

37:32keep passing .

37:33Okay ?

37:33Meaning the value of the option will

37:34always keep decreasing . You don't just

37:36have to win . You have to win against

37:39time . Meaning your option's value

37:41shouldn't just increase . It must

37:43increase more than the theta decay . So

37:46an option buyer has to win on two

37:48fronts . First , in terms of direction .

37:51Second , in terms of speed . So the

37:53option seller doesn't need speed . The

37:55option buyer needs speed . This means

37:57that as an option buyer , one thing

37:59becomes very important for you . And

38:02that is , your trading strategy should

38:05not only give you profit , but quick

38:08profit .

38:10Okay ?

38:11Because in my experience , Ansh , let me

38:13tell you , you purchased an option .

38:15Unless your trading strategy is

38:16specifically built for it . In general ,

38:19if we discuss it generally , you

38:21purchased an option . If this option

38:24doesn't become profitable in the next

38:26four days . The chances are very low

38:28that it will become profitable now .

38:29Because the premium has already dropped

38:30significantly .

38:31Because the time value is working

38:32against you .

38:33Right ? And theta decay , you know ,

38:35it’s not linear . If you study it in

38:38detail and read the theory , it

38:40decreases exponentially . It’s less in

38:42the beginning but very high near expiry

38:44. So , as you get closer to the time ,

38:46meaning closer to expiry . Time will

38:48move against you sharply . So as an

38:51option buyer , you face two challenges .

38:53First , your market view must be correct

38:57. Second , it must be correct quickly .

39:00Hmm .

39:01This means an option buyer will only

39:03make money if the market moves sharply

39:06in their favor , or makes a very large

39:08move such that even though time is

39:10working against me , delta is in my

39:12favor — meaning my option went from

39:14deep out-of-the-money to deep

39:16in-the-money . Now time can't do

39:18anything to me because I have already

39:20earned so much through delta that even

39:22if theta decays , it doesn't matter .

39:24Otherwise , the success rate of an

39:25option buyer will remain low . See , an

39:27option buyer plays on profitability .

39:30Hmm .

39:31An option seller plays on probability .

39:34Okay .

39:35Because an option buyer makes a big

39:37profit .

39:38Do you remember the car insurance

39:39example ?

39:39That you pay a ₹ 20 premium and can

39:41claim up to lakhs against it .

39:43Correct .

39:44If someone wants to claim on a term

39:46plan , you pay a ₹ 100 premium and get

39:48₹ 1 crore after you're gone . Which is

39:50a huge amount .

39:51But the insurance company is playing on

39:53the probability that you won't die .

39:55Right ? Right , that out of 10 people , 9

39:58won't die , so they'll keep all the

40:00premiums , or out of 1000 , 999 won't die

40:02. So the option buyer's profit is very

40:05large , but the success rate is

40:07relatively low . So , our job here

40:10basically is to earn quick gains at a

40:12decent success rate and exit as an

40:14option buyer . You cannot play like

40:17Rahul Dravid . You cannot think of

40:18becoming VVS Laxman . You have to become

40:20Shahid Afridi . You have to become

40:22Virender Sehwag . Force .

40:23You need to come , hit a few fours and

40:25sixes , and get out .

40:26You are not supposed to stick at the

40:27crease . Sticking at the crease is the

40:28option seller's job . Hmm .

40:30As an option buyer , you come , play , and

40:33leave .

40:33I mean , Virender Sehwag stays at the

40:35crease . He scores 300 runs . But the

40:37target is that when he plays , he plays

40:39aggressively .

40:41Right ?

40:41An option buyer's thought process

40:42should be the same . So , you have to

40:44come here , play aggressively , and leave

40:47. It is very important for the option

40:49buyer to leave . He should not stay in

40:50the market . If you are getting a profit

40:53in intraday , take it and get out ,

40:55because if you hold it until tomorrow ,

40:56it's not necessary that the profit will

40:58remain after 4 days . If you bought a

41:01call option of Asian Paints and it

41:03stays flat . After 2 hours , you will

41:04notice you are in a loss . Even though

41:06Asian Paints has moved up slightly , you

41:08might still be in a loss .

41:09Because .

41:10Because time is working against you .

41:11Time is working against you .

41:12Right ?

41:13This means the strategy we create

41:15should have two things . First ,

41:18direction ; second , momentum .

41:20Right ? Direction is useless without

41:21momentum , and if the direction isn't

41:22right , you won't know whether to buy a

41:24call option or a put option .

41:25Correct . That is why the trading

41:27strategy I use for option buying . There

41:30are a few trading strategies , but one

41:33of my favorites is a parent-child

41:35trading strategy ; if the parent time

41:37frame has momentum , and the child

41:39starts to catch that same momentum , it

41:41means the child is following the parent

41:43— so catch it there . It's a multi-time

41:46frame strategy . Not exactly multi-time

41:49frame , let's say dual-time frame ;

41:50multi-time frame complexity becomes too

41:52much for option buying , but dual-time

41:54frame is more than sufficient . So , I

41:56have two conditions . First , find the

41:58direction and momentum on the larger

41:59time frame .

42:00Okay .

42:01And replicate it on the smaller time

42:02frame when it starts to align . See , I

42:03am telling you this because most people

42:06chase strategies .

42:07I personally feel one should chase the

42:09logic behind the strategy .

42:10Right ? Because when the market turns ,

42:14or the market conditions change , or a

42:16component of the market shifts , if you

42:19have the logic , it will be easier to

42:21adapt . Correct ? So , that is the logic .

42:26Now , we can apply this strategy here . I

42:28need to check the market on two time

42:29frames . One is the hourly chart and the

42:31other is the five or 10 - minute chart .

42:33The best time frame for an option buyer

42:36is intraday .

42:36Hmm .

42:37Because in intraday , hardly anything

42:38happens with Theta decay .

42:39Right ? So , you have to fight against

42:41Theta much less . If you get a move of

42:43around half a percent in intraday , you

42:45will be able to make money . Then our

42:47remaining question will be which option

42:49to buy : In-the-money , At-the-money , or

42:50Out-of-the-money . We will see which one

42:52.

42:52Half a percent in Nifty , or ...

42:54In Nifty , in the underlying asset .

42:55Okay .

42:55In the option , the replica move will be

42:57much larger .

42:58The ROI of the option will be higher in

42:59that case .

43:00Now , I will show you how it works .

43:01Let's see , sir . Also , one more thing

43:04before we move on to the strategy ;

43:06there are a few things a trader should

43:08keep in mind for themselves .

43:10Okay .

43:12In option buying , and for that matter

43:13in any option trade , liquidity plays a

43:15huge role ; you cannot expect the same

43:17liquidity you find in stocks in the

43:19cash market .

43:21To be available in options as well .

43:25Because participation is relatively

43:27lower than in the cash market , so we

43:29should only choose stocks that are

43:31highly liquid ; you can apply and deploy

43:33this strategy on the top 100 stocks of

43:36Nifty , which are highly liquid . And you

43:39must check whether the option you are

43:41trading in is liquid or not .

43:43Anyway , options aren't available for

43:45everyone .

43:46Still , options are available for

43:47approximately 230 stocks . But even

43:49among those , you won't find liquidity

43:50in all of them .

43:50Okay ?

43:51However , you will find liquidity in

43:52shares of all the big companies . So ,

43:53you will easily find liquidity in the

43:55top 100 shares . That being said , the

43:57problem is still less for an option

43:58buyer . This is a much bigger problem

44:00for an option seller .

44:01Because when they sell an option , their

44:02loss can be unlimited .

44:03Right ?

44:03For an option buyer , the loss is still

44:05limited . But still , you must always

44:07check the liquidity before trading in

44:08options . Check the bid-ask spread . If

44:10it is nominal , then go ahead and trade

44:12in it .

44:13Alright ?

44:14So , I apply this strategy to the Nifty

44:16100 . For example , a stock is running in

44:18front of us , Bajaj Auto . And now , what

44:24did I tell you ? I need momentum .

44:26Hmm .

44:27Now , how to find momentum and direction

44:29? So , to find momentum in technical

44:31analysis , there are two types of

44:33indicators . One that helps you identify

44:35the trend .

44:35One that helps you identify momentum or

44:37reversals .

44:38Correct .

44:38For instance , to find reversals or to

44:41identify them , you have Williams % R . You

44:44must have heard the name RSI very

44:45commonly . Commodity Channel Index .

44:47Apart from this , we have MACD . And to

44:51identify the trend , for example , we

44:52have Supertrend . If prices are above

44:54the Supertrend , it's bullish ; if below ,

44:56it's bearish — moving averages , simple

44:58moving averages , exponential moving

44:59averages , and so on . Correct .

45:01First , I will find the momentum of my

45:02stock here . So , to find the momentum

45:05here , I need an indicator , so I will

45:07use MACD . Okay ? Now , how does MACD

45:11indicate momentum ? Like you see , when

45:13this ... let me make it a bit darker . So ,

45:16when this blue MACD line ... ... is above

45:19the orange line , then look , you see a

45:21good bullish trend during this entire

45:23period .

45:24Correct .

45:25And when it turned bearish , when the

45:27orange line came above , the trend

45:29weakened here . So , this is what tells

45:30you the momentum . But we don't want it

45:33to give signals repeatedly ; we want

45:35fewer but solid signals . So , for this ,

45:37I increase the parameters of MACD and

45:39let's say I make it four times . You can

45:41make it three times , four times , or

45:42anything . Multiplying this means , I

45:44mean , we could have increased a

45:46parameter as well . But if we increase

45:49it in proportion , the MACD won't lose

45:50its basic purpose or function .

45:53What are its parameters , sir ?

45:54It uses moving averages of 12 and 26

45:56periods as parameters .

45:57Okay ?

45:57I'll multiply both of them by four .

45:59Okay .

46:00So , it will show me the trend of a

46:01larger period . So , I have changed all

46:04three parameters here .

46:06Hmm .

46:06And I've set it here . Okay .

46:09Okay .

46:09Now it will give me fewer trades , but

46:11larger ones . For example , notice here .

46:14When the bullish signal formed here ,

46:17the high it hit came out to be

46:20approximately 11 % . Now it gives big

46:24trends .

46:25So , it isn't fluctuating within small

46:27movements .

46:27Yes , it won't give me constant whipsaws

46:29in it .

46:30We need to find an area where it is in

46:32a big trend . Also , notice one more

46:36thing : the two lines you see here ,

46:37which are the signal lines , and the

46:39histogram below .

46:41Both their signals match , right ?

46:43So , what is the need to keep both ? We

46:45can just keep the histogram here . So , I

46:49will remove these lines . Now , if the

46:51histogram is green , it means a bullish

46:54trend , and if it's red , it's bearish .

46:56Simple . It is showing me the momentum .

46:58Right ?

46:59And regulatory requirements state that

47:01I cannot take current data . So , I will

47:02go back a little bit in this . Here ,

47:05throughout this entire period , your

47:07MACD was bullish .

47:08Correct ? In the same way , if we notice

47:12here , your MACD was bullish throughout

47:14this entire period as well . Now look ,

47:17this is a bullish trend . It is broadly

47:20bullish . This is the parent on the

47:22hourly chart . I will take a smaller

47:24time frame for the child time frame .

47:26Now , when this child also becomes

47:28bullish , I will buy . We can add one

47:30more condition to this . To find the

47:32momentum , we add two or three moving

47:35averages here . This will give you

47:37clarity that your trend is broadly

47:39bullish . So , I have added three moving

47:40averages here . 10 - period , 30 - period ,

47:43100 - period . 10 , 30 , 100 — this lets me

47:46know that my trend is broadly bullish .

47:49If the 10 - period moving average is

47:51above the 30 , and the 30 is above the

47:53100 , then I know my trend is broadly

47:55bullish . When the short moving average

47:57goes above the long moving average , it

47:59means the short-term trend is bullish

48:01compared to the long-term .

48:03But sir , isn't MACD telling the same

48:04thing ?

48:05No , notice this here . The moving

48:08average gave a buy setup here . Whereas

48:10the MACD helped me capture this entire

48:12trend as well . Correct . So , sometimes

48:14it will be lagging and this will be

48:15leading , and sometimes this will be

48:17leading and that will be lagging . So ,

48:18this will give me their common domain ,

48:21their LCM , the period where there was

48:23the most momentum .

48:25Okay ? Let me show you . Like you see

48:28here , in this period , MACD became

48:30bearish .

48:31Correct .

48:32And here , the moving average also

48:33became bearish .

48:34Right ?

48:35Now look at how big and how good a

48:36downtrend you got to see here . Now ,

48:38whenever I see small downtrends in this

48:41period , I will catch them . How ? First ,

48:43let me show you a put option trade .

48:45Then I will show you a call option one .

48:46Okay . So , which date is this ? This date

48:50is 13th February 2025 . Let's go to the

48:535 - minute chart . 13th February 2025 . Now

49:02look at this line here , we marked this

49:04line there .

49:05Right ? Now here in the shorter period ,

49:08as soon as MACD gives you a bearish

49:11trade , we

49:13I will buy a put option here . The

49:16moving average also turned bearish here

49:18and MACD also gave a bearish signal at

49:20this spot .

49:21Correct .

49:22You bought a put option .

49:23I will come to the point of which put

49:25option to buy shortly . In the money , at

49:26the money , or out of the money . For now

49:28, I am taking the liberty that you have

49:29bought a put option .

49:30Right ?

49:31Now look , this stock has gone down 2.5 %

49:34in a single day . It has gone down

49:37almost 3 % . Whichever put option you had

49:40bought . Even if you had bought slightly

49:41out of the money , it would have come in

49:43the money .

49:43Correct ? So at such a time , your put

49:45option would have given you a good

49:47return . Its premiums would have

49:48increased .

49:48Its premiums would have risen . So if we

49:51want to check these premiums , since

49:52this is a February contract , the old

49:53option contracts won't be available now

49:55.

49:56But if we put in a lot of effort , data

49:58can be extracted from the exchange

49:59website to see what this option was

50:01trading at then and what its value

50:03became in one day . But let me tell you

50:05one thing , if you purchase an at the

50:07money option , then this move of just

50:10half a percent that came in 1 day , we

50:12Or within half a day , you would have

50:14gotten a good return there , and your

50:16option would have performed very well

50:18at 1 % , and after one day , it would be a

50:20multibagger . Completely after 10

50:22minutes of the first day , so these are

50:23kind of multibagger returns . Although I

50:26wouldn't want to use the word

50:27multibagger here , the value of your

50:29option would have increased manifold ;

50:30if you purchased a ₹ 100 option , it

50:32would have at least become around ₹

50:34150 , ₹ 160 , or even ₹ 200 . Yes . So ,

50:36options can even triple or give 3 %

50:38returns . Correct .

50:39Meaning , it could be 3 % , 4 % , or 10 % here

50:42. But these options can even triple

50:44within four or five days . As I

50:46mentioned earlier , an option buyer is

50:48looking for profitability . That is when

50:50the profits are very large . Just ride

50:52the bicycle at the right time when the

50:54direction is in your favor , when the

50:56wind is blowing in your favor .

50:58Then you will get a push from behind .

50:59That is exactly what we tried to figure

51:01out here . So we are following trend

51:03with momentum .

51:04We are following the larger period

51:06trend plus momentum and replicating it

51:08in the shorter period .

51:09Correct .

51:10So you are right ? We are following

51:11trend and momentum by looking at

51:13multiple periods .

51:14Right ? So if we look at this strategy

51:17in a way , based on what you have

51:19explained so far , overall , this is a

51:22stocks strategy . Right ? If you are

51:24doing intraday trading . If you didn't

51:26know about options until now . Then you

51:29would either do short selling in

51:30intraday or you would buy and hold in

51:32intraday . Right ? One share , 10 shares ,

51:34whatever your risk management allows .

51:35So when we are talking about option

51:37trading here , we are just replacing the

51:40underlying asset . Instead of buying

51:42that stock , we are just shifting to an

51:44option contract . But there was a

51:45problem with the stock . If we talk

51:47about this same stock . How would you

51:49carry it forward to tomorrow in the

51:50cash market ? No , that would then just

51:52be intraday . That is why options beat

51:54the cash market in this way . Of course ,

51:57you should only trade in options when

51:59your risk management allows it .

52:01But if your risk management allows it ,

52:04then options in some aspects are better

52:06than the cash market . And this 3 % ROI ,

52:09this Bajaj Auto share has given you

52:12this . Let's assume this was a bullish

52:14trade . So you got a 3 % ROI . But in your

52:16options , the 100 - value option must have

52:18become at least 150 . You are getting a

52:2050 % ROI there .

52:21Correct .

52:22So you don't get this liberty or this

52:24good profit in the cash market . At the

52:26same time , where it is giving us such a

52:28big return . Right ? If I place a stop

52:31loss for this , it will be around 1 / 2 % .

52:33Right ?

52:34Right ? Now , if we consider that 1 / 2 % and

52:36the delta point we mentioned , right ? So

52:38if that delta goes against us , if this

52:40movement goes against us , then the same

52:42delta will work against us . Correct . So

52:44our capital will also reduce by that

52:45same amount . Very good point . But we

52:47are working on a 5 - minute chart , right ?

52:49Correct .

52:50So whatever exit is needed , it will

52:51make us exit in the next 15 to 20

52:53minutes . It will make us exit in half

52:54an hour . So theta decay will not happen

52:56. And because we have replicated the

52:58large momentum in a small period . The

53:00large momentum is strongly bearish . The

53:02probability of the small momentum

53:04becoming strongly bullish is low .

53:05Correct .

53:06So delta won't go against me too much .

53:08And theta won't go against me anyway .

53:10So I will be losing less and gaining

53:12more . And that is actually what a good

53:14business is . When your loss is small

53:16and your profit is large .

53:17Correct .

53:18So that is why I will be losing a

53:19smaller amount of money . While I will

53:20be gaining a larger amount of money .

53:22This is actually the case with any

53:24option buying strategy . Your losses

53:27always remain much lower compared to

53:29your profits . You just have to work on

53:31your success rate and probability .

53:32Because in the case of an option buyer ,

53:34if the market doesn't move even for a

53:35little while , it starts working against

53:37you . That is why it is very important

53:38for you to catch the momentum .

53:40Right ?

53:41So here , notice that as soon as the

53:43momentum came , the actual move you got

53:45started the next morning .

53:48Right ? So within 4 hours , you actually

53:50got a move of over 2.5 % from this . Let's

53:52take an example of a call buy . Let's go

53:54. So here we go back a little further .

53:58So we need an hourly chart . On the

54:01hourly chart , look here , at this point

54:03your moving average and MACD are both

54:05inclined .

54:07Correct .

54:07In this period , it is the 13th of May

54:102025 .

54:10Hmm .

54:11So now we have picked up the data here .

54:12Correct .

54:13And not to share any recommendation to

54:15buy or sell something . I just want to

54:16show you through historical data how

54:18the strategy works . Now let's move to

54:20the 5 - minute chart here . Here is that

54:23line . Where did my bullish trend form

54:25here ? Right at this spot . Or Now , the

54:30profit you made here is a move of about

54:330.5 % within the next 10 minutes . Now you

54:37just have to think about where to book

54:38your profit . And this depends on which

54:41option you have bought .

54:43Okay . Now , even if you are making a

54:45loss here , let's assume you didn't book

54:46a profit . Let's assume here that you

54:49didn't book profit , you booked a loss ,

54:51so the loss you are incurring is around

54:540.7 % , where your profit , your premium

54:57— let's assume you took an ' at the

54:59money ' option worth ₹ 100 which could

55:02become 150 in a big move — would exit

55:05at approximately 80 to 85 rupees here .

55:07As per my personal experience , in the

55:09trades I keep taking , if you are

55:11sitting for a big move in a 100 - rupee

55:13option . I will generally use this for

55:16intraday , and in intraday , I start

55:18taking trades after approximately 10:00

55:21AM .

55:21Okay .

55:22I initiate trades after 10:00 AM . I

55:24mostly don't initiate trades after 2:30

55:27PM . After 3:00 PM , I certainly don't .

55:30Okay .

55:31Meaning , before 2:45 and after 3:00 , my

55:33trade will not go through my signals or

55:35my system .

55:37No new position will be created .

55:38No new position will be created . I

55:40mostly initiate my trades between 10

55:42o'clock and 2:30 . Because the moves

55:44before 10 o'clock are quite volatile .

55:46Hmm .

55:47Most of my best trades are formed

55:48around 11:00 AM . Around 11:00 AM , 12:00

55:51PM , or 1:00 PM . At that time , I get

55:53good moves in options . So now , let's

55:55look at an example here . Here you took

55:58a trade . This time is May 14th at 9:35

56:02AM .

56:03Correct .

56:04My risk management does not allow

56:05taking a trade here . If yours does , you

56:08will take profit immediately and exit

56:10the market when you get a move of

56:12approximately half a percent . Okay , my

56:15trade will form in the market here ,

56:18which is 10:35 AM , and now until when

56:21will I hold this trade ? I will hold

56:24this trade . I will hold it as long as

56:27my 10 - period moving average is above 30

56:30. I will do partial profit booking once

56:32I reach a certain level . When this

56:33stock moves in my favor between half a

56:35percent to one percent , I will do

56:37partial profit booking on the option .

56:39If it goes intraday , the theta decay

56:41isn't happening , but I am getting the

56:42profit here .

56:43Hmm .

56:44In this entire period , look here , as

56:45soon as the nine-period moving average

56:47went below 30 , the market took support

56:48right there and came back up . The low

56:50of that candle was not breached . This

56:52trade of yours turned out to be very

56:54big . But I don't want all this profit .

56:57I do not want to make entire money in

56:58the world . I just want to make money .

57:01And here , as soon as my stock goes up

57:03by around 1 % , hmm ...

57:06Within 3 hours , my stock is up by 1 % .

57:09I will get a decent enough return . Now ,

57:12a question that might come to

57:13everyone's mind here is , which option

57:16to take ? In-the-money , at-the-money , or

57:19out-of-the-money ?

57:20Correct .

57:21Now , I have already partially answered

57:23this regarding how much confidence you

57:24have in the strategy .

57:25Correct .

57:26If your confidence is very high , then

57:28in-the-money . If confidence is very low

57:31, then out-of-the-money , so less money

57:33will be lost , and if your expectation

57:35from the trade is moderate , then

57:37at-the-money . Okay ? I use a special

57:41thing here . I purchase a slightly

57:44out-of-the-money option here . It is

57:47available cheaper ; the most overvalued

57:48option is at-the-money . Overvalued

57:50means it is pumped up inside . It has a

57:51lot of air filled inside it . Because

57:53most people are confused , they purchase

57:54at-the-money options . So its demand is

57:56very high . Now , if I use an

57:58out-of-the-money option , purchase it

58:00slightly out-of-the-money , then its

58:01delta will be lower .

58:03I will lose less money .

58:05Hmm .

58:05But if the market moves in my favor ,

58:07this option will become at-the-money .

58:09It will get filled with air .

58:10Correct .

58:11So this will give me extraordinary

58:13gains .

58:14And this will only happen when the

58:15market moves in your favor . But if it

58:16goes against you , that condition will

58:18not apply .

58:18If it goes against me , I am at 40 delta

58:20.

58:20So my loss will also be less .

58:22Correct . And if it moves in my favor ,

58:2340 delta will become 50 delta . 50 delta

58:25to 60 delta , so I will have an

58:27exponential upside graph .

58:28Right ?

58:29And the downside graph will not be that

58:31bad . That is why I buy one or two

58:33strikes out-of-the-money for this

58:35strategy .

58:35Hmm .

58:36So , by doing out-of-the-money options ,

58:38your losses will be relatively lower

58:40and your profits will be relatively

58:42higher .

58:42Hmm .

58:43So that is why I choose slightly

58:45out-of-the-money options .

58:47It’s your personal recommendation .

58:48Yes , yes , yes . But otherwise , that rule

58:51always applies to all my strategies : if

58:53your conviction is very high , your

58:55percentage conviction or your

58:57conviction in percentage is equal to

58:59your delta .

59:01Hmm .

59:01As an option buyer .

59:02That makes sense . Now , in this strategy

59:05, could you please explain the proper

59:07entry rule and the proper stop-loss or

59:09exit rule that every strategy has ?

59:12Sure .

59:12First , we will go to the hourly chart .

59:14Okay . On the hourly chart , we will look

59:16for stocks where the MACD , for which we

59:18have slightly changed the parameters ,

59:21Correct . ... is entering the green

59:23territory on those parameters , turning

59:25bullish , and the 10 - period moving

59:26average is above the 30 and 300 .

59:29Right ?

59:30Once this setup is formed on the hourly

59:31, this stock should now be on your

59:33radar . It should be on your watchlist ,

59:35indicating that it is time to buy an

59:37option in it . Now , in this period , for

59:39this stock , you will track the 5 - minute

59:42chart . Hmm , if you want , you can even

59:45find out through a scan where its buy

59:47signal is being generated . But mostly ,

59:49there aren't many such stocks because I

59:51limit myself to the Nifty 100 . So , at

59:53any point in time , I have four , five ,

59:54or six stocks in front of me .

59:56Right ?

59:57I apply my window for these four , five ,

1:00:00or six stocks to track multiple charts

1:00:02here .

1:00:03Hmm .

1:00:04So , all four charts come in front of me

1:00:05on a 5 - minute timeframe . Now , as soon

1:00:07as my MACD turns bullish on the 5 -

1:00:10minute chart , and again , the 10 , 30 ,

1:00:12and 100 - period moving average bullish

1:00:15setup is formed . Where these two things

1:00:19match .

1:00:19I buy above the high of that candle ,

1:00:22assuming this setup is forming after

1:00:2510:00 AM and before 2:30 PM . I do not

1:00:28take setups that form before 10:00 AM .

1:00:30After 2:30 PM , I might take it

1:00:31sometimes . It depends on conviction .

1:00:33But after 3:00 PM , I certainly do not

1:00:35take it . I let the ongoing position be

1:00:37held until profit booking or exit , and

1:00:39I do not carry forward any of these

1:00:41positions to the next day . It is a

1:00:44different matter if you want , this

1:00:45strategy is not purely intraday . Only

1:00:48... hmm .

1:00:48I use it for intraday . But if you want ,

1:00:50you can also carry this option for a

1:00:52day or two . There is no problem . In

1:00:53that case

1:00:53BTST sort of

1:00:54You can do a BTST type of thing . When

1:00:56the high of the candle on which the

1:00:58signal was generated is broken , I buy

1:01:00its option . I buy a slightly OTM option

1:01:02. And when the value of this option

1:01:05increases by approximately 20 to 30 % , I

1:01:08book my profit . Or understand it like

1:01:11this , if my margin requirement is ₹

1:01:1310,000

1:01:13Then I need approximately ₹ 2500 in

1:01:17this option .

1:01:18Okay ? So as soon as it hits that , I

1:01:21will book my profit . And exit the

1:01:22market . Because options have a problem .

1:01:24The problem with options is , if the

1:01:26market moves by x , what will be the

1:01:27value of your option ? Hmm .

1:01:29It depends on delta , gamma , theta , vega

1:01:32, rho , and everything else .

1:01:34Okay ?

1:01:35So we won't be able to precisely tell

1:01:36where its value will be .

1:01:38For that , we would need software which ,

1:01:40as retail participants , we mostly don't

1:01:42have . And even then , that the value

1:01:44will be exactly the same is not

1:01:45guaranteed .

1:01:45Right ?

1:01:46That is why I chase profitability , like

1:01:48if I have deployed a margin of 1 lakh .

1:01:50Though 1 lakh isn't required to buy one

1:01:52option . But let's assume I deployed 1

1:01:54lakh , then I want ₹ 5,000 from here .

1:01:56Right ? So if the margin is 500 , I will

1:01:59take a profit of around 2200 to 2500

1:02:01and exit the market . That is why it

1:02:03remains easy for me to place an order .

1:02:05So I broadly place a limit order here .

1:02:07I initiate the trade at the market ,

1:02:09well not market , but I place a limit

1:02:11order on that day and set my target

1:02:13directly . For stop loss , I track it ,

1:02:15and if the 9 - period moving average goes

1:02:18below 30 , I will exit . If the MACD

1:02:20becomes bearish , which is less likely .

1:02:23Okay ? If that happens , I will exit , or

1:02:27if the day ends , I will exit . But if

1:02:30you want to carry it forward , you don't

1:02:31need to exit just because the day ended

1:02:33.

1:02:33Okay . So one is our time stop loss .

1:02:36Yes .

1:02:36And the other is our basic

1:02:37indicator-based stop loss .

1:02:39Got it . Now , it's the same thing . If

1:02:44you are not comfortable , you can also

1:02:45do this in equities . It is a good

1:02:47strategy .

1:02:47Yes , yes , yes . It is undoubtedly a good

1:02:49strategy . You can increase the time

1:02:51frame in this . For example , you can use

1:02:53it on a two-hourly or 15 - minute chart .

1:02:55Basically , there should be a large gap

1:02:57between the parent and the child .

1:02:59Right ? It's a good trend-following plus

1:03:02momentum strategy . You can use it for

1:03:04cash and you can use it for options as

1:03:07well .

1:03:07And because it has momentum , it's a

1:03:09great strategy for options .

1:03:10You will find many strategies for the

1:03:12cash market .

1:03:12Correct .

1:03:13It is difficult to find option

1:03:15strategies .

1:03:15Right . Right ? Because catching momentum

1:03:17is very difficult . Catching a trend is

1:03:18not that difficult .

1:03:19That is why I would like to use

1:03:21momentum strategies for option buying .

1:03:25I wouldn't want to waste it in the cash

1:03:27market because there are fewer

1:03:29indicators or setups that can capture

1:03:31momentum well .

1:03:34Hmm , got it . Now sir , the soul of every

1:03:37strategy and the secret to

1:03:39profitability lies in its risk

1:03:41management .

1:03:42Correct .

1:03:42Right ? Risk management in equities is

1:03:46still easier because your position size

1:03:48is under your control there .

1:03:51And you know exactly how much you might

1:03:54lose if it drops by 1 % . This is not the

1:03:57case with options because the first

1:03:59thing is the lot size . You cannot buy

1:04:01just one or two . You yourself said that

1:04:04there is a lot size decided by the NSE

1:04:06and SEBI . And secondly , the stop loss I

1:04:10have placed is based on our underlying

1:04:13asset . I won't know with exact

1:04:15precision how much loss this will

1:04:18translate to in my option contract .

1:04:21This is a huge problem in option

1:04:23trading .

1:04:23Right ? So , this is inherently a very

1:04:25big problem with option trading . Buyers

1:04:26face this problem , and sellers face it

1:04:28too . You won't know what the value of

1:04:30your option will be when the market

1:04:31reaches a certain level . So how should

1:04:34one manage risk in this ? My risk

1:04:36management for this is that when I take

1:04:38this trade , the recent swing low is ...

1:04:41... this is my stop loss . Because if it

1:04:44goes below this , the market often

1:04:47reverses from there . But I have to stop

1:04:49myself somewhere , right ?

1:04:51Because I cannot carry a position ... ...

1:04:53just on the basis of hope . So , wherever

1:04:56I have taken the trade , the recent

1:04:58swing low formed there will be my stop

1:05:00loss . This is my ultimate stop loss . As

1:05:02soon as this hits , I will be out of the

1:05:04market . Otherwise , mostly the stop loss

1:05:06that gets hit for me is a trailing stop

1:05:07loss .

1:05:08But this swing low , this is the index

1:05:10or the underlying's swing low , or our

1:05:12option price

1:05:13This is the underlying's swing low . We

1:05:15cannot place a stop loss based on the

1:05:16option price . That is a major issue

1:05:18within it . It’s not that I can’t

1:05:21open an option chart and place a stop

1:05:23loss there .

1:05:25But I have noticed many times . I have

1:05:27tried this out . But many times I’ve

1:05:29noticed that it hits the stop loss and

1:05:31then the option moves back up . Because

1:05:32the underlying is still in a bullish

1:05:34momentum . But because of time , if my

1:05:35trade didn’t materialize for 2 hours

1:05:37or the VIX dropped , then sometimes the

1:05:39market comes down because of that . So

1:05:40that’s why I don’t use that stop

1:05:42loss . I only stick to the

1:05:43underlying’s stop loss . It is

1:05:45recommended that if you are a beginner ,

1:05:47for example , if your target is ₹ 2500

1:05:50, then you should set a stop loss of

1:05:53around 1500 to 1700 at most . Once this

1:05:56much is lost , you will exit the market .

1:05:57Although , if we look at it from a risk

1:05:59behavior point of view , this isn't a

1:06:01very good risk-reward ratio .

1:06:021 : 1.5

1:06:03It only comes out to around 1 : 1.5 . It

1:06:05doesn’t become 1 : 2 or 1 : 3 . But this

1:06:08is how the strategy is working right

1:06:10now . However , mostly the stop loss that

1:06:12gets hit here is after some time , or

1:06:15the day ends

1:06:15Hmm .

1:06:16When the day ends , whatever profit or

1:06:18loss you have — the momentum is there

1:06:19but the day is over — so in that case ,

1:06:21your loss is mostly around 4500 . In

1:06:23that strategy , on a margin of 5 lakhs

1:06:25where a profit of ₹ 2500 could have

1:06:26been made , you exit at a loss of only

1:06:284500 .

1:06:29Exactly , theta decay , but one thing is

1:06:31important here , I don’t decide at

1:06:333:15 PM whether I should carry it or

1:06:35exit .

1:06:36Okay .

1:06:36I have already decided . Look , whatever

1:06:38you want to think , you must think

1:06:40before taking the trade . After taking

1:06:42the trade , a trader is in love with the

1:06:44trade .

1:06:45And when in love , a person is blind . So

1:06:47you will make the wrong decision there .

1:06:49Correct .

1:06:49That is why whatever you need to think ,

1:06:50you must think before taking the trade .

1:06:52This is my , I mean , one of the very

1:06:54important suggestions . I can just

1:06:57imagine how much our audience will

1:06:59connect with that " blind in love " point

1:07:01and how many comments are coming . All

1:07:03right , sir . I think in this video , we

1:07:05started from the very beginning . Like ,

1:07:07what exactly are options ? Why do we

1:07:09trade options ? Along with that , when

1:07:11and who should trade options ? What are

1:07:13the different components of option

1:07:15trading ? And ultimately , you also

1:07:18revealed a strategy to us , along with

1:07:21proper risk management . Correct ? And if

1:07:24we follow this , then hopefully we can

1:07:27also be part of the 7 % population that

1:07:29trades options .

1:07:32Great job , but this was about option

1:07:34buying , right ? And now I want to know

1:07:37about option selling because you

1:07:38mentioned " option seller " so many times

1:07:40, along with option Greeks like Delta ,

1:07:42Gamma , Theta , and other advanced

1:07:44concepts . Now I am curious to know

1:07:47about them .

1:07:48And I know this video would get too

1:07:49long if we

1:07:50It would be very difficult for you to

1:07:51digest everything at once .

1:07:52Correct , correct . Correct .

1:07:53So let's conclude this video right here

1:07:55. But let's do one more video for all

1:07:58our viewers . Where we discuss option

1:08:00selling and some more advanced concepts

1:08:02of options . Do we have a deal on that ?

1:08:04I will be , I will be more than happy .

1:08:05Perfect . All right then , how did you

1:08:07guys like this entire video ? Let us

1:08:09know in the comment section below . I

1:08:11hope these concepts of option buying ,

1:08:13which many people have made very

1:08:15complicated , There are so many myths

1:08:18surrounding it . Many people consider it

1:08:20very dangerous . It is risky , of course ,

1:08:23but if you manage it well , we can

1:08:25actually become part of the 7 % group . So

1:08:28, yeah , thank you so much , sir , for

1:08:30your time and for being here on your

1:08:32own channel . And we look forward to

1:08:35more such informative content . And all

1:08:37of this content is brought to us by

1:08:39Dhan . So , if you haven't opened an

1:08:41account on Dhan yet or downloaded its

1:08:43app , What , what are you guys even doing

1:08:44? I mean , how will you trade options

1:08:47without Dhan ? So , our account opening

1:08:49link is in the description or in the

1:08:51pinned comment , click on it . Open a

1:08:53Dhan account through it . It's free . You

1:08:55can use all these softwares and

1:08:57platforms to trade efficiently and

1:08:59effectively . We will see you in the

1:09:01next informative content . Till then ,

1:09:03keep learning and keep trading with

1:09:05Dhan , and subscribe right now as well .

1:09:08Investments in the securities market

1:09:10are subject to market risks . Read all

1:09:13the related documents carefully before

1:09:14investing .