Let aware yourself with the fact that “Options are complicated in comparison to stocks and futures”.
So if you really want to become a successful trader, then for all market conditions you have to prepare your strategy and make aware yourself with all those conditions. This might be a challenging task, when it comes to real life calculations.
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Factors Affecting Stock Option
There are so many factors you need to learn about.
- Options Expiry:You know that we can hold our position for long term in other segments, but this is not applicable in Option trading. Unlike Future trading, options have a expiry period, so if the Nifty is not trading as per your position, your option may expire worthless. In such cases if you know that 500 points movement you seek may take 20 days, while current expiry only left with 10 days, go and trade in the next month contract.
- Trade the Cycle:Nifty options trading can’t be done for long time. It simply refers that there are times when you should be aware that a Trade-able Cycle will be due after may be 7 days, don’t take any position till that time. And when time comes trade the Cycle. Check those cycles in the below Daily Chart of Nifty, which are somewhat very similar in duration.
- Sit aside when there is no trend:As per Gann Methods the tops are rarely spiky meaning that there is a distribution phase on the tops and a lot of sideways movement takes place. So you should be aware on Tops that you are not stuck on sideways movement.
- 60–70% times market is sideways:You need to understand that Nifty is in sideways trend for 60–70% times. So you will have to be disciplined when trading in Nifty options on the Buy side (I am assuming you are talking about earning by buying the options and not selling, coz option selling requires capital like 10 Lacks minimum.)
- Cycle Identification:Very Simple and Effective Method. This is a real example of Nifty Check on the Nifty charts. If the market is in Bearish mode. I mean if the high made is lower than the previous high and Nifty Starts moving down breaks the previous low, this means the trend is down. Now measure the low to low number of days, suppose its 20, again measure low to low its 25, you have catched the rhythm or vibration of this cycle. You know now that there is a high probability for nifty to make a next low between 20–25 days. look to cover your shorts in this area. Same thing could be done for high to high.
- Know yourself: Ask yourself that, How much time you could dedicate for Trading? Don’t go for fast decision, because fast decisions are usually wrong decisions. the ticks of up and down are very addictive and people waste their entire day in front of terminal and end of day not able to take home any profits.
- Take the service of Advisory: There are many people who waste their entire day and just observe the market on their own, but at the end of the day they earn nothing. The ticks of up and down are very addictive, so please go for this suggestion. Do subscribe the services of Profitaim.com, because we are the best stock option tips provider.