My Principles of Option Trading

My principles for option trading 

1. Sell option not buy irrespective of the of the profit potential buy option offers - because I play by probability and not by luck 

2. Always hedge to have piece of mind and not to make losses by wrong trades when the direction of market goes opposite to your trade

3. Square off hedge as soon as it is not required ( when probability of making loss is less than 5% and the expiry is only 2 days away) 

4. Buy hedges that are long lasting than the main trade- which means buy hedges which can be used for multiple trades - which means expiry date of hedge should be long or it should not have expiry date at all 

5. Always take bi-directional view or if you are view sure take Complementary view (Market will not go above this or market will not below this- due to recent run up or correction) 

6. Take calculate risk - "if we keep thinking without action" - we will regret the inaction rather than the regretting the loss by trying out 

7. Keep scouting for new strategies with the above principles - Do spend all the time to calculate risk and simulate / back test the trade - but time bound it and try out pilot as soon as possible to gauge the emotion swings during the trade- Once the pilot is success repeat it and master it

8. Choose strategies which are highly repeatable - low frequency weekly / monthly and on liquid contracts and will have decent return even during low IV (at least 3 % monthly)

9. Choose Passive income strategies which does not involve active monitoring- because active monitoring will make you to lose interest in trading since it affects focusing on mainstream activities   

10. Choose strategy which requires high capital (only for margin purposes) with low profit expectation- because these strategies will have low probability of risk and attract less people