Options

Options : Trading Instruments

Call Option Put Option

Up Down

Buy Call Option Buy Put Option

Stock Option : SBIN , TCS , RELIANCE

Index Option : NIFTY, BANKNIFTY

Buyer of Option : Those who Buy Option

Seller/writer Of Option : Those who Sell Option

Option Premium : Price which option buyer pays to option seller

Expiration Date : Date Specified in Option Contract

Strike Price : Price Specified in Option Contract

 25100
Calls

25100 In the money call option

25300

BANKNIFTY
25400 At the money call option
Spot Price
25400

25500

25600 Out of the money call option

25700
 PROFIT LOSS
400

300
Buying Option Unlimited Limited

200

Call Option
100
Premium

Selling Option Limited Unlimited

0
 Rs. 100

Rs. 10
 T

RB

RB
T
 Breakout
Trade

Break

Price Rhythm
 Respect

Reversal
Trade

Price Rhythm
Price moving Up

Buy Order Flow

Candle Structure

Candle Size

Price moving Down Order Flow

Sell Order Flow
Hammer
Bullish Engulfing
Piercing Pattern
Morning Star
Shooting Star
Bearish Engufing
Dark Cloud Cover
Evening Star
How to find swing high
How to find swing low
Target = 1. Backside
2. Nearest SH

SH = Target

Eve. Star
Risk = Buy Price minus Stop Loss Price

200 Buy Price

3 = Risk Risk
197 Stop Loss
Reward = Target minus Buy Price

SH = Target = 215
Reward
Buy Price = 200 = 15
SL = 197
Risk = 3

Risk : Reward
3 : 15
1:5
 Risk to reward ratio criteria

• It must be greater than 1:3

 Option Trading Strategy

Higher Time Frame Imp Psychological Level

Weekly, Daily, Hourly, 30 min, 15 min

Lower Time Frame BreakOut Trade / Reversal Trade

3 min
Before market starts….
9:15 …Market open…
Wait till breakout of that level
Breakout happens…
Buy = Few Points above High of Breakout candle
Stop Loss = Few Points below Horizontal Level

Buy = 200.05 OR 200.10

200 = H

197 = HL SL = 196.95 OR 196.9

Trailing Stop
Price Momentum

Partial Profit Booking Your Risk Appetite

Evening Start
 Profit
Book

Breakout
Piercing Pattern
Breakout
Profit Booked
Gap
 Resistance

Support
Bearish
Engulfing
Resistance

Support
 Money Management
• Which type of trader you are :
• Low risk trader : less than 0.5% risk per trade
• Moderate risk trader : upto 1 % risk per trade
• High risk trader : More than 1% upto 2%

DON’T GO BEYOND 2% RISK PER TRADE….

 Lot size /Quantity calculation
• Suppose your portfolio is of 100K
• Risk per trade is 1%
• Means risk per trade is 1000
• Quantity is = risk per trade divide by stop loss
points
• Suppose your stop loss is of rs.2 then quantity
is 1000/2 = 500
 Backtesting
• 20 trade sample size exercise
• Total exercises = 5
• Without money…Just like paper trading…
• You will get clear idea how strategy is
performing….this will help to improve your
confidence…
 Forward testing
• 20 trade sample size exercise
• Total exercises = 5
• With money….Risk per trade start with
Rs.1000…Go on increasing as and when your
confidence increase…
 When not to trade
• When market(Spot Nifty) open with more than
2.5% gap
• Union budget day
• Central Govt. election declaration day
• When banking holiday / bank strike / only trading
day but clearing holiday
• RBI credit policy day…upto 15 minutes after RBI
credit policy….
Company Resul…