1. Know where the market won't go: Our minds are usually wired to be curious about where a stock or an index will move. , However, when it comes to option selling, we need to know where the market certainly won't go.

2: Theta/ Time Decay: Option is a wasting asset, hence theta/time decay is a friend of option sellers. Option sellers have a natural edge because the value of the option decreases as time goes by.

3. Benefit of premium eating of OTM options: OTMs usually have a higher probability of going to zero, option sellers try to gobble up these strikes, and adjust their positions or exit with an SL if need be.

4. When to play non - directional: When an index is trading within a range. Let's say, BNF is trading within a range of 44000-42500 then one can look to sell CE options of 44k and above and PE strikes of 42500 and below.

Selling both a PE and CE at the same time as the view is range bound means selling a strangle.

5: When to play directional: Whenever the index is moving in a single direction, its important to go with the trend. A few weeks ago when BNF broke out of the cup and handle pattern, all we had to do was sell PEs. Pls note: weekly TF chart is attached to just show the C&H BO

Remember never to stand in front of a running train. Similarly, on Dec 15 (Expiry) since BNF was in a downtrend, option sellers had to just keep selling CEs. If one is able to gauge the direction well, one can avoid getting trapped when the market makes a trending move.

In fact, many successful option sellers are directional players. Then there are some Alpha option sellers who get the directional so right, that they know where the index is gonna go and they will sell such deep ITMs. (Hit the like button agar aapko yeh samajh aa raha hai toh).

Disclaimer: Selling Deep ITMs is not advisable for beginners. Beginners should only focus on small but consistent returns.

6. Reversal Trades: Directional players do not just go long or short when BNF breaks out of a range on the upside or downside respectively. Directional players also play uni-directional on the basis of reversal setups. The R/R is always the best in reversal setups.

Eg: CE sell after spotting a shooting star at the top or PE sell after spotting a hammer at the bottom. If you find it hard to spot reversal set ups. You can check 5EMA set up of Subasish Pani. https://x.com/niki_poojary/sta...

Examples of successful 5EMA: Eg 1: Selling CEs Eg 2: Selling PEs 5EMA setup usually hits a lot of SL, however, whenever it works it will make up for the SL's and over and above will reward you. But this setup frequentis not for those who don't like frequent SL hits.

7: Adjustments in option selling : Avoid adjusting frequently. Set your levels, and adjust/ exit as the case maybe only when those levels are breached, as per your setup. Eg: If I have only PE sell, and if BNF tries to come back in the range I will convert it into strangle.

Eg 2: If I have a strangle & BNF hasn't breached either BO or BD levels, and despite that CEs are rising as BNF moves up, I will try to roll up the PEs. I will keep doing this unless my BO level is breached, post that I will take a SL on CEs and simply sell PEs aggressively.

8. Know when to exit the trade: If adjustments is an art, knowing when to exit is the heart of any trade. Never keep a losing position open just because of a hope that the market might reverse.

Define your SL even before entering the trade and respect it, every single time.

9. Right position sizing: If the position sizing is not proper then the movement in the underlying will scare you even before your SL is reached. So always go with the proper position sizing.

10: Hedging: Hedging is done to protect from extreme moves, i.e. 2-3 standard deviations from the mean. In case of BNF, one can buy 500-1000 points away from the sell leg depending upon the individual's risk appetite.

Hedging involves cost. This cost will reduce the return however will provide a cushion for those who have fear of extreme volatile moves or overnight gaps. Hedging also helps you to stay in a trade and doesn't kick you out during usual spikes.

For beginners, try to stay far away from the spot i.e. deep OTMs to build some confidence and to build profit cushion via option selling. Also, have reasonable and achievable targets i.e. 0.5-0.75% in the beginning. Post consistency of 3-6 months try to aim for 1% a week.

If you enjoyed this thread here's another one: https://x.com/niki_poojary/sta...

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