How to generate weekly income through option trading? Archives

How to generate weekly income through option trading?

February 29, 2020

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
1. Focus on buying option – If difference between Spot and MaxPain is >200
2. Focus on selling option – If difference between Spot and MaxPain is <100 Consider MaxPain is at 32200, there are 3 Scenarios: 1. If BankNifty Spot is below 32000, Buy CE 2. If BankNifty Spot is above 32400, Buy PE 3. 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.

Option Trading Basics

February 8, 2020

Option Trading Basics

Let’s see in detail about the option trading basics every option trader should be aware of.

Why Option Trading is Famous?
Where the money goes, people’s energy flows. Since 85% of all the market action and market money is concentrated on option trading, option trading is extremely famous.
Also, the capital required for buying option is too low, but profit potential is extremely high when compared to stock/futures trading.

Strike Price
Strike price is the various price points at which option contracts are available for each stock.
For nifty, we have strike prices for every 50 rupees. For banknifty, strike price is in multiples of 100.

Underlying Price
Underlying price is the spot price of the actual stock or index from which option price is derived.

Option Premium
Option Premium is the value at which option is currently trading. It is simply the Last Traded Price (LTP) of the option contract.
If you are an option buyer, you need to pay the option premium to buy options.
If you are an option seller, you can sell options and collect the option premium.

Option Expiration
Option Expiration denotes the date in which the option contact will go void/invalid.
In India, stock options generally expires on last Thursday of each month (has monthly expiry contracts) whereas index options expires on every Thursday (has weekly expiry contracts).

Hope this post helps you to understand the basics of Option Trading.

How to regular income through BankNifty Weekly Expiry Strategy?

February 2, 2020

How to generate regular income through BankNifty Weekly Expiry Strategy?

BankNifty Weekly Expiry can be used to generate regular weekly income with a simple strategy. Let’s see it in detail.
Note: This strategy should be used only on Expiry day (every Thursday).

Step 1: Spot Price at 1.00 PM
On Expiry day, Check BankNifty Spot price at 1.00 PM and note it down. Let’s say BankNifty Spot is trading at 32180.

Step 2: Select Strikes to Trade
Select the strike price just above and below the BankNifty sport price. Strike above the current price should be our CE and the one below should be our PE.
Since BankNifty is trading at 32180, we will select 32200 CE and 32100 PE.

Step 3: Entry Trigger
Place aorder to Buy both at 32200 CE & 32100 PE at 25 Rupees each. Your total investment will be 50 Points, which is 50*20=1000 Rupees.

Step 4: Target & SL
Your Target for this trade is 75 Points. If either CE/PE (or) combined premium hits 75 points, you can exit the trade. Your profits will be 25 points, which is 500 rupees.
Your SL for this trade is 25 Points. If the combined premium hits 25 points, you can exit the trade. Your max loss will be 25 points, which is 500 rupees.
If SL Hits, reverse the trade (Sell 32200 CE & 32100 PE, and collect 20-25 premium), you will earn 25 Points easily. SL for reverse trade is 50 Points

Note: You need to wait till 3.00 PM for either SL/Target. If neither target nor SL is hit by 3.00 PM, you can exit the trade.

Tag: How to generate weekly income through option trading?