Traders Carnival: Decoding The Two Ends Of Options Trading



hello and welcome to Bloomberg quint and this is for all the option traders there who are perplexed whether to write an option or to buy an option just an attempt without expose right here who can actually simplify whether one should write or buy an option this is Chandan type area of Mithila Louis one is a regular feature every week on our aftershow and mr. pious under who has been very kind enough to tell us how much profits he's been making every day and the last figure mind you he shared with me was he's made one point for cross since the start of this financial am I correct sir yes correct alright and you believe in writing options yeah and Chandan you've been advising your clients to buy options okay so let me start off with mr. sunder first why writing and why not buying okay the writing has certain advantages number one you can use the co literal for writing but for option buying your to pay up front and number two in writing even if your view goes wrong you can do some kind of hedging mm-hmm but option buying you can't do anything okay either you can put a stop loss and come out or you may lose and their money and in option Bank there is a possibility of entire capital being eroded and whereas option selling that is not the case okay right so these are so it's sad to write an option you need a person like Chandan who is buying or shooting that but for you to execute the trade search and then why do you go for buying and not writing options is it more riskier see talking about the options buying see writing is quiet riskier because when you're writing something your risk is unlimited reward is limited right and again if your option writer your investment is the margin or you can have to put the collateral but when your option buyers special direction of sell buyer you have to your maximum investment is the entire premium and your risk is limited to the premium which you are paying so now what we do we follow certain rules certain strategy certain indicators however there is a theory that 67% time ups and writers make money right as we are serving to the retails so to get maximize to get the maximum benefit of the options we are the Daleks some buyers in the market and just given it so a little cautious approach sorry to interrupt because you you know advising your clients is it better for a retail trader to actually go for buying yeah that is the right way to be in Dobson market what I understand like what happen yesterday in the bank nifty big nifty started is moved from 26 a 100 in headed to us 2024 it is started it slowed from 25 say 100 headed to us 26,000 zone it is relieved by 300 points and if you are cold writer on higher side you will get stuck while all the premium we started buying this 25700 cold here to fortify that move to 288 rupees now if you are writer in the money strike you will be tripped totally so what do we understand best or certain drew like the change in the validity based on the option congestion of some concentration based on the volume weighted average the volume weighted average of the last week was 25 a 20s market moved beyond the same we understood that years now the short covering could come into the market and this while he became the option buyer and go to the right and option go double and through Bollinger let me tell you mr. Sandler executed the right trade and that too when the markets open so you wrote a couple of bank nifty strikes twenty-five thousand six hundred five hundred and four hundred if I'm not mistaken yeah okay now first thing is that you know sits on top area said option buying you have a limited margin money and you have a limited risk and unlimited profit okay and if that is the case logically speaking everybody should be a buyer okay but that is not the truth okay and you go and buy a lottery ticket for ten rupees you are risk is limited to ten rupees your reward is up to one crore and then okay and your investment is only ten rupees but you still don't want bilateral ticket that is because you know that the probability of winning a lottery ticket is very very very low so there is no such thing in this way you've never bought options in your life beat stock or index options okay I like to give you the answer okay option seller is like an insurance company right but sometimes the insurance companies to insure themselves they go for reinsurance okay right so the same meal so being an option seller you carry certain risk in order to mitigate the risk sometimes need for the purpose of aging we do so will it be safe to assume since these are your personal traits so you can afford to take that risk of selling an option but if you have to go out tomorrow and tell a trader who's a fresh trader into the market and trying to play on Bank nifty or nifty or you know expiry day will it be safe for them to first go ahead and buy options gain some experience and then you know switch to a writing no that is totally wrong okay so you know what you have an experience in option buying it cannot be used for an option selling then other question is you know tomorrow you want to advise to the people leave now – which segment of the people I am going to advise if I'm going to advise an entrepreneur I will ask him to set up a casino right if I want to advise somebody who have got only $10 $20 I am going to ask him to be a gambler so option buying is gambling an option selling is a person or a name ok mr. Sandler is just not willing to switch sides he still believes that writing is better than buying but whatever it be both the participants are required for a trade to be executed by or seller like forecast not running you need them it's ok but you tell me mr. swindler when I was shopping with you yesterday you said you don't believe in stop-loss no I think my message is gotten wrongly okay okay what normally people do okay they say you buy 400 rupees target 110 rupees top + 95 PS you know that kind of thing so they predetermined the stop-loss but in my case I do not predetermine the stop-loss okay the reason being if if you are an option buyer if your view goes wrong and you start losing the money right there's nothing else you can do but if you are an option seller and in case if your bet goes wrong if the market goes against you you can sell options on the opposite side for the purpose of edging okay right and then you know at one point of time if you feel that you know it will not help you then you may come out I'm a book the losses okay you only book your losses but you're not willing to put that number I read it there – helpless ok chundan I think that's a thumb rule for buying yeah for buying in again see when your buyer your risk is limited right and especially when you are seller you have to go with deep out of the money but when you buy any special expired a you can play with the slightly in the money at them in your slight count of diminished strike and again what happens there is probability that observe writers are running the market but the only problem is can you and are you ready to write only for ten rupees to incur the limited list that is the only question for option writers and what we believe we follow the rule of the option writers but we come out with option buyings I'll just give an example for the let's say the Nifty index the ten thousand five hundred is the maximum puta y eleven thousand is the maximum Cola why did scepter to ten thousand eight hundred so now the range for the market is between ten thousand 450 to ten thousand eight fifty fifty so once we understand the range based on the option writing activity we can be the option bar of the market so that is the rule that also writers make the market but can we suggest everyone to sell the option you know I have a question there when you look at the open interest do you see it from bias point of view or from writer's point or II because we are often asked this question you in the office also if somebody's talking about derivatives or from lot of our viewers see when you are trading option or future the one dual is one third is one sentiment if there is bad the reseller true it is per the property of the option that 67% time of some writer makes money but being the profile I don't want to put so much it is that's why I'm reading the data probes and writing point of view and then coming out with option buying strategy I says give an example if you look at the entire broader trading range of this month we were having the bullet element of the Karnataka elections right market fell down sharply from ten thousand ninety nine to ten thousand for twenty levels right if you're writing immediate strikes then you lose so what we understand this is a boundary and if it comes near to the lower bend of the boundary we can start buying the option or we can initiate the customized study whether the bull call spread or the coal later or the butterflies any kind of strategy now one more thing I want to add if you are option right or index that fine but you cannot dare to write the option in stocks and especially if I talk about the name like PC jewellers or the ADIZ group or the real estate counter you can do writing in a reliance as DLC being as dibbsy limited but if you ask me can you do the writing and BPCL no let's assume there would you like to counter that ok see generally you know that every thread has a risk and correspondingly world ok what he says not to some extent is true options sellers will like to stick to the indices ok that's because you know SMI people need their huge liquidity and that will be there in indices but it will not be there in stocks but at the same time it is wrong to say that you know everybody buying the options in that kind of you know they make knowledge and I sold options in PC jeweler so coming to that question yes see somehow whether you are option buyer and writers view first identify the market direction we are also following the concept of the option writing and then we are coming out with the concept of option buying because what we believe yeah we understand the opposite writers are making money but are beyond the place to take so much of this and especially when the options unless are making money they are not making money from home yeah that is that is that rule see when you talk about derivatives this is zero-sum game if someone is making money someone has to lose so there are certain parameters like that I don't have to interact at all just go on okay I think we're running out of time but thank you so much both a few bid option writing or options you know buying I'm not saying it's a battle of buyer's or seller's here but let me tell you both our experts mr. swindler and Chandan have they've had a good success ratio when it comes to advising trades thanks for watching

30 thoughts on “Traders Carnival: Decoding The Two Ends Of Options Trading

  1. SELLING OPTIONS CAN MAKE U BEG IF YOU ARE HIT STOP AND HOLDING, WHEREAS BUYING IS SAFE ,IF PROPERLY DONE..

  2. P R Sundar is putting RS 1 crore capital as retail invetor. Who is having so much cash – If I have that money Will enjoy sitting in Beach

    Directional Option buying liking to the underlying stock would be wise. PR Sundar is for HNI people..

  3. https://www.youtube.com/watch?v=YLgEkz-8vWU

    ONE YEAR TARGET OF 50% RETURN ACHIEVED IN JUST 2 MONTHS. SEPT 7TH TRADE DETAILS. 5.3K PROFIT

  4. Comme on guys pr Sundar trades in crores even 2 percent would be 2 lakhs per days in options writing taking 2% profit it's not a big deal that when you have good experience. When it comes to retailers we always try to expect atleast more than 5% just in 1000s of investment which is highly risk involved either selling or buying is risky when you trade with small capital. Incase if you do not have knowledge on stock market put very small capital and learn for atleast 3 months still if you're not confident so please don't get me wrong this not your cup of tea.if you are confident enough after back testing for three months then give a try with ur savings money don't borrow from others at any cost.if you are atleast 7 trades profit out of 10 trades goes in your favour then you could take trading as profession. Remember neither Warren buffet nor Rakesh jhujhunwala can make 10 trades profit of 10 trades it's impossible may be by investing they are earning crores but not by trading.

  5. One said I'm right other said I'm right.. Both r arguing that I'm right, I'm right, I'm right.. It's really very confusing interview, who is right?
    Is it interview for confusing purpose?

  6. Good video.OPTION WRITERS-SELLERS must use deep Otm options.KNOW THE STATE-CONTEXT of the market-if short covering is on, buy options.probability must be evaluated before jumping in. buy options as secondary action after selling to hedge your trade and to reduce capital requirements. selling naked options is a gambling. option sellers if smart are like a casino owner-but casino needs gamblers to make it run.

  7. All thanks to Mr Frank Robert, who has changed my life with his amazing strategy, trading with him has brought a great joy in my family now we no longer depend on our monthly salary. Mr Frank is the best account manager i have ever seen when it comes to trading forex/binary options that is why i call him a trade master.

  8. Option buying is not lottery ticket, Opinion selling is not for retail traders. It should be for dip pocket HNI traders.

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