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Why you should be careful in Options trading{Vikramjeet}
| From : Vikramjeet Singh at 09:05 AM - Aug 21, 2009 ( ) |
Share it on FacebookIt is dis-heartening to note that, some of the new comers trade in options without realising the risk involved. For their benefit recent data to open their eyes :-
on 17th when nifty Spot was at 4503 the 4400 Put option was at 62 , on 20th when nifty came back to almost the same spot the 4400 PE was at 44. within four sessions, while the future trader would have NOT lost single paise, the option trader had lost 18 rupees for an investment of 62, this is astonishing 29 % Loss in four days. This is Premium erosion.
Let us review another comparable price range : on 17th when the nifty went down to 4358 the 4400 PE was trading at 137, after bouncing back on 18th and fell again on 19th to 4340 Low, the option price was at just Rs. 130 - only. So even on the favourable direction there is premium Erosion.
on 18th when market went to 4455 (last tick) the 4400 PE was at 74 (last tick), after falling on 19th and when recovered on 20th when market was at 4449 (last tick) the 4400 PE was at 60.
So friends please study and understand fully what is option, before you enter in a trade in options.
In stock options it is more pathetic, take for example ICICI-Bank .
On 18 Aug 2009 when the cash price was at 721, the 720 call option was at 26.50, after two days on 20-aug-2009 when cash was at 723 the same 720 call option was at 16. 10 rupees loss in two days for an investment of 26-50 is 37 % loss in just Two days.
Beware friends ! Option trading needs not only experience but also many other qualities.
Happy Trading
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THANX TO ALL FOR BRING THIS 265 DAYS OLD POST ON FRONT PAGE.
Now reguarding to this article and some questions raised on options buyers i want to throw light on another side.
Most important thing in OPTIONS TRADING is VOLATALTY.
If there is no sign of any volatalty in that specific underlying it is very foolish thing to buy its options.But most of small traders avoid this basic thing and then blame to the...
According to me OPTIONS is only segment by which u can earn 100-1000% in very short time and on very small capital.
As well as according to vikram ji not only EXPERIENCE is helpfull.I strongly object this-IN OPTIONS TRADING U ONLY REQUIRE EXPERIENCE NOTHING ELSE.
Here some friends suggest writing of options instead of buying them.(here i want to clear that-i also write options if condition suggest so.im not against options selling.) but in this condition u can loose all ur gain in one trade which u got from previous 10-20 trades.But u can cover all ur losses in one trade and gain handsome money if u r on buy side.But as said early it require vast experience.
So try to play on volatile counters if u want to earn from options.
Here i just shared my views which may be totaly wrong.members can judge better.
[ MISTAKES DOING OPTIONS TRADE]
1.DONT KEEP GREED IN MIND............ U WILL DEFINETELY LOOSE MONEY FOR SURE.
2.DONT EXPECT MORE MONEY FROM LESS AMOUNT..........U WILL DEFINETELY LOOSE U R SMALL AMOUNT OF THAT MONEY ALSO
3.AVERAGING AGAIN AND AGAIN LEADS TO............... SMALL AMOUNT TO LOSS IN DOUBLE LOSS
Dear Jitendra..... the Best remedy and the Pill taken by everyone to save them from Loss is to Put a STOP LOSS on every trade they do,,,, If U already have loss, then will better advise to BOOK LOSS and try to make Profit in the next trade
True friends,I also consider option writing much profitable than buying them. plz check my below threads http://www.mudraa.com/singlepost.php?messid=48306 http://www.mudraa.com/singlepost.php?messid=48353 http://www.mudraa.com/singlepost.php?messid=49282
Good Info but please some one can provide some sites or info to save onself from big loss...
to avoid premium erosion, there is one way, and the great ParvinderJi is doing it repeatedly every month making profit only......... He only sells options, NEVER Buys... Wait for two days more U will be able to see his post on June series Sale of Options
vikram good artical bro....but insaan ka man to bawra hey,,,,jaha paise dekha waha pe dil laga leta hey...without seeing pain...
jane kya janey man bawra....woh to chala f&o khelneyyyy 
Dear Vikramjeet Singh I do have 9lots 5400 call @ 38 will it be prudent to book and stay away with the losses incurred.
Really good ......... i avoid option maximum trade in mini nifty future .....
lagta hai specifically mereliye hai i am blindly doing options as per reco as i have lost money and want to makeit up
excellent information timely warning it is good to learn to play bouncers otherwise one may be out of world cup
thank you very much ji ...... very informative.... keep posting like these
thank u Bade Bhai jaan and also prachi jii.. reques all members to post there view regarding option so thant many could be benifited..regards Surjit..
informative........thanks vikramjeet ji.........and prachi ji......jai sai nath........jai dasha maa.
Option buyers gain ONLY when market moves unidirectional in favourable direction. In all other cases, they loose.
In a range bound market, Options are bound to loose time value.
Its options writers, who gain. Theoretically it is said that Buying options has limited loss and unlimited gain while selling options has limited gain and unlimited loss. This thing scares retail investors from writing options. Instead they end up buying options and loose money.
The other reason is, for buying options, you dont need margin money but for writing option, you need to block margin. Most brokers dont allow small investors to write options.
In the end, options writers gain, who are generally big players in market.
Simply saying, buying naked options is the most risky way to trade. Small investors can instead go for selling stradles and strangles. It gives them limited but sure shot profit.
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