How to trade in options during high volatility i.e. India vix>22-23 ? In the current scenario, option sellers who are deploying strangles are unable to make money

E.g.: If a trader is selling a strangle of Rs. 100 each leg then during a fast momentum on either side, one leg becomes 80 & the other one Rs. 200 So overall, the strangle seller is at a loss Strangles & Straddles are easy to manage in low vix During high vix, find reversals

Mitesh Sir follows 3min TF in Bank nifty futures chart Specimen:

In a down trending market people are tempted to sell CE & avoid selling PE's, however it would be disastrous to hold those CE's till expiry Trailing is the answer during high VIX, as the momentum is faster on both sides Check past few days charts on 3min TF for more clarity

How to find reversals? Whenever market breaks a support, check the volumes in the downfall If you intend to catch a trend, then volume is the best indicator for trading, rest all indicators like RSI, MA's etc. are lagging indicators as they indicate post the movement in price

Hence, volume can be used as a leading indicator Whenever volumes are declining when prices are making fresh lows, it indicates that the participants are not interested in fresh/further selling for the current period (in intra)

For reversal you just need to take the decision basis one candle which has the highest volume However all the pre-conditions needs to be met, Lets recap all the conditions to capture reversal from the bottom:

1⃣ The ongoing trend was downwards i.e. making fresh lows in intra for the day 2⃣ However, the volumes were shrinking whenever prices were making a fresh low, indicating no more interest by the sellers to push the prices to fresh low 3⃣ LL2 was not breached for the day

4⃣ Now wait for reversal 5⃣The moment you get a significant volume, on the upside, play for reversal 6⃣In this case, all you need to do is, if you sold CE’s just exit them

Mitesh Sir’s trades on March 4, 2022: Post gap down, he had sold 35800 which was a PDH and also acted as a high for the past two days, the moment he spotted a reversal from the bottom, he exited from CE’s at 12.35 hours

Reason: In current scenario, trading is based on news, so if in case there is a cease-fire, market might reverse entirely, so always have to have a SL

How to spot a reversal from the top? Basis the below chart, he sold 35800 CE at 14.45 again

Worst case scenario: Post selling a CE for the 2nd time, lets assume if the prices again start to move up, then you will have a surety of atleast 80% that market is taking support of that level so in this case, the 2nd time after selling a CE, you can sell a PE to adjust it

In the first reversal, we wont sell PE’s as we are not sure when it will reverse from the upside, especially when the overall market is in downtrend, however in the 2nd attempt one can take that risk after observing multiple supports

Another set-up: Rejection Candle: 🖊️Ongoing trend: upwards 🖊️After a small consolidation there is a BO 🖊️The very next candle rejected the entire upmove 🖊️Action: CE sell

One can utilize the same set-up for PE sell as well 🖍️Ongoing trend: downwards 🖍️After a small consolidation there is a BD 🖍️The very next candle rejected the entire down move 🖍️Action: PE sell The key in finding rejections is to spot large sized candles

For intra-day all you need to focus is on huge candles Spot the big candles, you need to act basis the break of the High or Low of that huge candle Example 1: Here SL got hit

Example 2: Trade worked here

Rejection Set-up: You might get stopped out once twice or thrice , lets say each time it takes 10 points, but then whenever it turns in your favour, you'll be able to fetch 70-80 points However for this you need to sell high premium options only then it will work

How to play Breakouts (BO)?

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Another set up to sell CE’s with a small SL and a better R/R set up:

Strangles are not favorable on Friday, Monday & Tuesday in current environment i.e. high VIX Better to play with reversal set ups on these days, with small SL Overall profit/loss ratio would triumph the lower win ratio

Mitesh Sir trades only in weeklies & avoids monthly options, as it is difficult to predict the trend beyond 3 days Trade set up: He uses one indicator i.e. VWAP, if prices trade > VWAP indicates buyers are strong & vice-versa Thereafter, he relies only on big volume candles

How to initiate option selling during normal market conditions? In times of normal market conditions when there are no gap ups & gap downs, then you just need to spot weekly S/R

During normal market conditions, spot the weekly Support & resistance Scenario 1: if the prices are between both, one has to simply sell 1% above & below the resistance & support respectively to make consistent returns via options selling

Scenario 2: If price is hovering near support, only Sell CE’s Scenario 3: If price is hovering near resistance, only Sell PE’s Greedy traders think that they can eat prem on both sides while keeping their margin low as strangle attracts lower margin than directional

However during Scenario 2& 3 such greedy positions traders would be badly screwed Lets take the example of current weekly S/R i.e 34k & 36800, assuming VIX is normal & there are no news. In that case, as a positional trader one is supposed to sell only CE’s

Lets understand the worst case scenario: if the market takes support of 34k and bounces back and starts to trade above 1.5% above the lows i.e. 34500-34550, then one can have an outlook to sell PE’s as well as some kind of immediate bottom for the week has been made

So the idea is to then convert your directional only CE sell to strangle by selling a PE after it taking some support However remember you don’t have to exit the CE’s unless the resistance of 36800 is taken out