I have 25L and want to create a consistent monthly income on the same. Can I use options selling to generate this?
Options trading is something which everyone deems as risky and already make up their mind that this is not an avenue to make consistent money.
But I will prove that this notion is wrong and how I have been making consistent profits from option selling for years now.
Let’s take an example of 2 individuals, Rahul and Raj.
Rahul brings 1 Lakh to trade. His only objective is to make Rs 10,000-20,000 from the market and he starts taking his trades. He has no action plan or target in case of loss. Hence he trades randomly.
Raj also brings 1 Lakh to trade. He primary objective is to save his capital first. He has set a risk appetite of not more than Rs 5,000, which means his max loss that he can take would be Rs 5,000. He also has a target of Rs 10,000.
Now, ideally in Raj’s case he has a risk to reward ratio of 1:2 (risking 5k to make a profit for 10k). But Rahul on the other hand has no such system.
Let’s say they take 10 trades each, and have an accuracy of 50%(they are right in half the trades and wrong in the other half). Let’s say a brokerage cost of Rs 1000 for each.
As you can see, because Raj has a disciplined approach, he is able to make Rs 24,000 even being right only 50% of the time. This is how only 4-5% of the people trade.
But Rahul on the other hand, trades randomly. He has no targets for losses and hence he let’s his losses run big. So although he makes a profit like Rs 10,000 and Rs 12,000, he also makes big losses like Rs 27,000, so he ends up losing Rs 15,500 overall. This is how 90% of people trade.
Still do you think it’s the person or the instrument (which is options) that is at fault?
I have created a disciplined system for myself where I trade only 2 days in a week, and am able to churn out a decent return regularly thus create a secondary income for myself on a 7 figure capital.
Have been doing that since last 3 years. My one and only mantra is risk management and zero tolerance there.
There is a system I follow where I deploy safe Option Strategies to take advantage of Theta Decay or Vega Shorting or Gamma Spikes to generate consistent Monthly income in a conservative manner.
Here’s the passive income you can make according to capital invested:
I base my system on 5 major pointers:
1. Candlestick Pattern
After doing strict backtesting for last 17 years of data for Nifty and Bank Nifty, have come up with 12 patterns, which I use to take a trade. Only when any of these 12 patterns are formed, then a trade decision is taken.
2. Domestic news with DI Position
DO NOT trade into domestic news of any kind. Whether any announcement from Fed in US, or FM in India or RBI meet (as per SEBI mandate before such meetings/press releases, a disclosure needs to be made, so it’s known in advance) we are strictly out of markets in all these cases. Also monitor any huge block domestic buying via institutions like mutual funds and HNIs
3. Foreign news with Foreign Position
DO NOT not trade into foreign news of any kind. Whether any announcement from Fed in US, inflation numbers announcements, or any other global event . Also monitor global buying via institutions like FII and hedge funds.
4. OI Chain & Money Flow
Observe OI of various strike price and generally a trade that’s taken is usually for a strike price that’s about 800-1000 points away from the spot, which means a very small but sure premium capture.
5. Statistical Distribution Curve Model
This is more a technical aspect which draws a probability bell curve of events that are unlikely to happen in the market. So a trade is taken not on the basis of what will happen in the market, but what is most unlikely to happen. Eg bank Nifty falling 2000 points in a day, Nifty falling 1000 points on expiry. Both these events may happen, but the chances of them not happening are extremely high.
So I only take a trade when all these 5 parameters are strictly satisfied. As a result, hardly trade 1-2 days in a week and probably 7-9 days in a month, but ensure the trades thus taken are highly accurate with a winning probability of more than 95%. (Have data for this in case anyone wants to analyze)
The risk is quite low logically because I am out of the market 70-80% of the time, just observing.
This is a system that works for me.
Here is proof of that: (last year PL)
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