Options Trading Strategy – Why You Should Avoid Selling Options
In this part, I focus on Selling Options as Trading strategy. I have begun this video by covering basics of Call Writing. I also highlight three most crucial elements to take note of while attempting to Write (sell) Call Options. While doing so, I have extensively covered Breakeven point for this strategy along with risk profile graph for this Option strategy. I have also mentioned in detail about Instrument selection while Writing Call Options and selection of Strike Prices while doing the same.
I have explained in detail why Retail trader needs to stay away from Wring options and focus more on Options strategies that offer better risk to reward ratio. Selling Options for Income is certainly doable but it is the select 1-2% who do it successfully. Rest, more often than not take losses and at times enter positions whose risk they don’t fully understand.
While explaining my point, I also take up Bank Nifty Option Trading and the whole propaganda behind writing weekly options for consistent income. I show how risk is completely stacked against the Option trader as lot can go wrong when one writes (short sells) call options. Someone who is Writing Options stands to gain Option Premium but risks losing much more due to spike in Implied Volatility.