How to generate weekly income through option trading?
How to generate weekly income through option trading?
Option Trading can be used to generate regular weekly income using simple MaxPain strategy. Let’s see it in detail.
Note: This strategy should be used only on Expiry day (or) 1 day before Expiry.
Step 1: Spot Price
Check and note down the spot price of the stock or index which you want to trade.
Step 2: Calculate MaxPain
Check the option chain open interest data of the selected stock or index. Analyse the open interest data and calculate MaxPain.
Step 3: Find MaxPain of nearby strikes
Once you find MaxPain and its strike price, check the MaxPain value of nearby strike prices and see whether any of the strike prices have closer MaxPain value.
If any strike prices have closer value, it indicates MaxPain strike price can change easily. In this case, you need to be very careful or avoid selling options.
Step 4: Compare MaxPain & Spot price
- Focus on buying option – If difference between Spot and MaxPain is >200
- Focus on selling option – If difference between Spot and MaxPain is <100
Sample Trade for the MaxPain data below:
Strike Price | MaxPain |
32000 | 253884000 |
32100 | 202164000 |
32200 | 130122000 |
32300 | 245298000 |
32400 | 356600000 |
Scenarios:
- If BankNifty Spot is below 32000, Buy CE
- If BankNifty Spot is above 32400, Buy PE
- If BankNifty Spot is between 32100-32300, Sell PE & CE
One of these 3 scenarios will happen every week, so you can easily use this strategy to generate weekly income by trading Nifty/BankNifty options.
Please feel free to ask if you have any queries.
To learn in detail, watch our video:
One Response
What is probability of profit in this strategy?