#optionselling - We know #StockMarket always moves up in longer run, what if we short the Put options every month, can we make money in the longer run, as it would expire worthless as market move up? So, I tested this logic with last 11 years data, including 2008 bear market.
I do not want to short deep OTM options, since premiums are too low in it, so i took OTM options which are just 2% away from Spot price. I enter the trade on expiry day and exit on next month expiry day. Monthly expiry,not weekly.
I did a scatter plot to find what's the close price of all trades from 2008 to 2019. As you can see, out of 140 expiry, almost 100 expiry, all put options expired worthless. near zero ,however there are certain days, where market tanked, and PUT options expired deep ITM
Did Naked Put #optionselling testing, Short 2% OTM expiry strikes and close it at the end of expiry day. No Stop loss. This is how the cumulative returns are, made 1269 points from 140 expiry, for last 11 years, with avg profit per expiry of just 9 points.
Obviously the draw down is higher and at times, for months to years, equity is under water, takes more time to recover when market tanks.
Here's the yearly profits for naked put writing strategy, year 2008 is the worst period.
With Stop Loss: Since naked put involves high risk, i wanted to come up with #riskmanagement to control the loss when market tanks. I do not want to keep checking markets and do adjustments, so how do i exit the position when market keeps dropping?
Keep a stop loss of Entry price*2. If your entry price is Rs.100, stop loss is Rs.200. We give enough room for the markets to fluctuate, if it goes beyond this level, we book loss and exit the position. If not, we close it by end of expiry. Here;s the result, made 3000 points.
With implementing stop loss, parameter, we not only more than doubled the profits, we also reduced the draw down to a greater extent, even it takes lesser time to recover, since risk is limited in this strategy.
Short & Long: Now I got an another idea, i see that when market tanks, it drops big, so what if I not only close my position, if i also go long in put option when stop loss hits, what would be my profits?
So entry at 100, stop loss hits at 200, exited shorts with loss -100, now go long at 200, so that if market keeps dropping I make higher returns with my long put options. And this has resulted in even higher profits than the last two strategy, yielding 5000 points profits.
Though Drawdown is higher, its because after market dropping and triggering long trades, it can bounce back up and make put option expire worthless, there by losing trades in both long and short position. But we have got much higher returns than naked put writing.
Yearly performance of both Short only and Short/long strategy. After analyzing the 11 years, data sets, I can very well say, there is a trading edge in this strategy, where people can implement their own risk management rules to control the risk even further.
The complete blog post is here squareoff.in/single-post/Ni… Please RT and tag option experts to get their views and make the strategy even more robust.
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Ever wondered how to combine the power of equities and gold to boost your returns while cutting down risk? I backtested a Dual Momentum Strategy using ChatGPT that returned 1221.50% over the last 14 years! Here's how you can do it too—no coding required. 🧵👇
As we know Equity and Gold are two completely uncorrelated instruments. Compared to Gold, Equity is highly volatile and prone to huge drawdowns. Mostly Gold price tend to go up when Equity corrects since investors move to safer asset like Gold.
💡 Here's the idea:
We combine Niftybees and Goldbees ETFs to create a dual momentum strategy. Simple rules:
1️⃣ Compare last 3-month returns of both ETFs.
2️⃣ If Niftybees outperforms, we invest in Niftybees.
3️⃣ If Goldbees takes the lead, we switch to Goldbees.
4️⃣ Every quarter, recheck and rebalance if needed."
One day, my 10-year-old kid asked me, "What do you really do?" He was curious, seeing me either watching Netflix or reading books most of the time, and rarely working on my laptop. "I want to understand what kind of work you do," he said.
I explained to him the basics of investing—how you invest in companies, wait for them to grow, and as they succeed, your shares increase in value, helping you build wealth over time.
Without missing a beat, he asked, "Can I invest in Roblox?" I told him, "Yes, Roblox is listed in the US markets." To make it more fun, I suggested, "Let’s create a demo account on Investopedia. You can pick 10 companies you know, and we’ll invest in them.
SEBI has released a 18 pages consultation paper related to F&O Trading, more than 78 lacs traders lost close to 50k crores in FY24, this is the major reason for SEBI's action, here's the short summary what it means and how it can impact active traders,especially Option Traders🧵
Here's the proposal from SEBI regarding index derivatives.
1. Limiting the no of strikes upto 4% with regular intervals, after increase the width of the strikes interval. Say Nifty is at 25,000, 4% of underlying is 1000, Nifty strikes will be between 24000 to 26000 - 50 interval
At the max Index can have 50 strikes only, in the above example we have close to 40 strikes, so remaining 10 strikes can be added, 5 in put and 5 in call. So below 24000 and above 26000, strike intervals will not be in 50s, it could be in 100s or 200s or 500s.
I went on a ten days family trip to Ladakh, what was suppose to be an adventure trip turned into a nightmare. If you are planning a Ladakh travel, this thread might help you in what you should expect once you land in Leh. 🧵
Many people have Ladakh trip in their bucket list mainly because of the picturesque landscape, high altitude motorable passes for bike ride. But we always wanted to go there because of low light pollution that lets you do star gazing where even Milky Way is clearly visible with naked eye.
Before we started our travel, we did a complete research about the places we wanted to cover. Nubra Valley, Pangong Lake, Tsomoriri lake, Lamayuru, Hanle. It’s hard to cover all these places in short span of time, you need minimum ten days to explore the landscapes of these places.
1 Lac invested in this stock has become 1.5 Crores in less than one year. Upon further research found a pattern in all such stocks which made a phenomenal move within short span of time, here's the detailed report 🧵
SABTNL is one such stock where stock price gained more than 20500% in less than a year. Inspite of having poor fundamentals the stock price has sky rocketed.
Fishy part is promoters have increased their stake from 22% to 60% in just one quarter. Public holdings and DII holdings decreased during the same period. Looks like an organised pump and dump play going on.
I have made close to 90 lacs profits in the last 267 trading days with my trading system. In the last 6 months made 50% net returns. Not even a single day I have interfered manually. I was in a dilemma, should I withdraw profits or continue to compound? I decided to …🧵
I decided to withdraw profits to buy a flat. If you check all my old tweets, I would have tweeted always against buying a property. What changed my mind to buy a flat instead of compounding my capital. Let me explain that.
Trading is a tough profession, market doesn’t care how intelligent you sound, end of the day if you are not disciplined enough to follow your trading system, it kicks you out. It’s not a question of does option buying works or option selling works or Greeks works?