Thread by @insights_yogi

Selling options can be a powerful way to generate income and manage risk in your portfolio. However, it's important to avoid common mistakes that beginner option sellers often make. Here are a few to watch out for:

#StockMarketindia #Optionselling

Not Enough Premium in sale - Options prices are heavily influenced by the volatility of the underlying security. Selling an option when the Implied volatility is too low is setting up for failure.

Wrong strike selection - Selling an option too close to the ATM strike will reduce your probability of profit due to significant delta. It will give you more anxiety if you select strike closer to ATM and it's equivalent to trading futures.

Trading too big in one trade - Don't put all your eggs in one basket. Don’t put all the money in one trade, it will reduce your potential to trade more and put more risk on overall portfolio.

Trading in an illiquid stock - Lesser liquidity would cause option prices not be priced proportionally to the stock price. Avoid trading in illiquid stocks/strikes. Managing winning trades at ~60 % profits is statically better than not managing positions.

Not having an exit plan - It's important to have a plan in place for what you will do if the trade doesn't go as expected. Will you sell the option back, roll it over to a different expiration date, or hold onto it in the hope that it will eventually become profitable?

This is a starting post on options and markets. I will try to cover all these sub tweets in detail in individual tweets for more clarity.

I use @BeSensibull for my Option Selling.

Not actively managing winners - When managing winners is more important that loosing trades. Do not turn winning trades into loosing by not doing anything.

Managing winning trades at ~60 % profits is statically better than not managing positions.