Option Nerd

After reading notes from John Summa of Option Nerd, his book Options on Futures and a research paper from dough,Inc I came to a conclusion there is no way one make more money in equities than in options.

Never buy Options

There is a time decay in options. Option contracts decelerates towards losing value at the time of its expiry.  

If you are thinking to buy Put options; sell the Call options.

If you are thinking to buy Call options; sell the Put options.

Faster Settlement

Options has faster settlement ratio of T+1 than equities T+2.

Expiry Week

Options expires Thursday of the last week of the trading month. You must not buy a call option and it is advised to close your call position at the time when the last week kicks in irrespective of any market movement cause the time decay accelerates steeply.

Or, if there is necessity of buying a call options then buy next month’s contract.

Risk Appetite

Most people recommend not to risk more than 1% of the account value in a single trade but it depends on your risk appetite and the nature of trade. But do not speculate; make calculative decision.

With a capital of 1 Lakh, you should not risk more than 1,000 INR in a single trade. Your stop loss is at most 1,000 INR. However, my average risk profile ranges between 3-5%.