Takeaways from the book "Option strategies for indian markets"

 The key to trading success is emotional discipline. If intelligence were the key, there would be a lot more people making money trading… I know this will sound like a cliché, but the single most important reason that people lose money in the financial markets is that they don’t cut their losses short.

Trading tips for Iron Condor option Strategy: This strategy works best on the stocks which have low  volatility. My advice is to open Iron Condor option strategy on any of the stocks if it fulfills all the below criterion:

1. The stocks which have average daily volatility less than 1.25%
2. The underlying stock price has not crossed any significant level on any side within past 4-5 days.
3. The technical analysis is not showing significant movement on either side.
4. There is no important announcement by the company management in next 10 days
5. Close the trade if you have achieved more than 30% of the maximum profit calculated or before that depending on the situation.

Trading tips for Short-put ladder option strategy: This short put ladder strategy is applicable only when the trader is expecting significant volatility in near term. My advice is to open short put ladder on any of the stocks if it fulfills all the below criterion:-

1. The analysis is predicting more downside movement after breaking of strong support level at downside.
2. The stocks which have daily volatility more than 1.25%
3. Underlying stock price is more than Rs.50
4. The bid-ask spread in option price is in between Rs.0.05 to Rs.0.5.
5. Put price is at higher level or equal to the same strike call price at same level of underlying stock price (although it is always not necessary but it is a better situation) but put price should not be less
6. than the same strike call price at same level .
7. Open trade with options which have more than 10 working days in hand before expiry.
8. Close the trade within 1-4 days after opening the trade.

Trading tips for Bear Call and Bear Put option strategy:

This strategy is suitable when the trader is expecting that market or stock price may go down (moderately bearish) in near term. My advice is to open bear put option strategy when the stocks will fulfill the below criterion:

1. Implied Volatility of option is relatively low than historical
2. annualized volatility
3. The stocks which have daily volatility more than 1%
4. Don’t wait for earning maximum profit
5. Analysis is showing slight negative movement in near future

You can open bear call option strategy when implied volatility is higher than the historical annualized volatility keeping other criterion same as bear put option strategy. My advice is always to open bear call option strategy. But before opening compare both the strategies and open that strategy which has lower possible maximum loss amount.

Trading tips for Bull Call and Bull Put option strategy: This strategy is suitable when the trader is expecting that market or stock price may go upwards (moderately bullish) in near term. My advice is to open bull call option strategy when the stocks fulfill the below criterion:

1. Implied Volatility of option is relatively low than historical annualized volatility
2. The stocks which have daily volatility more than 1%
3. Don’t wait for earning maximum profit
4. Analysis is showing slight positive movement in near future

You can open bull put option strategy when the implied volatility is higher than the historical annualized volatility keeping other criterion same as bull call option strategy. My advice always is to open bull put option strategy. But before opening compare both the strategies and open that strategy which has lower possible maximum loss amount.

Trading Tips for Reverse Iron Condor Strategy: The proper timing of reverse iron condor strategy and long straddle may look same but there are also some differences. In the following cases you can

use this strategy rather than long straddle keeping other parameters same.

1. This strategy can be used on weekly stock or weekly index option.
2. If the position is required to be open for a longer time frame then this strategy is better than long straddle because there will be more risk of losing money in long straddle strategy as that consists
3. only long options.

Use this strategy if risk/loss taking capacity is low

Note: The only problem is that the profit amount is very low compared to

the margin requirement in Indian market than the long straddle option