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9 Feb, 7 tweets, 2 min read
As a beginner if you are starting to trade stock options selling few important points u can refer.

1. Trade only highly liquid stocks (list i have posted sometime back on my timeline).

2. First understand ur trading phychology and decide trading style (speads or naked)
3. Decide your position size ( for beginner max leverage should not be more than 2.5x would suggest prefer 2x)

Example : Trading with 20L capital

Then keep 50% capital free in begining.

Divide 50% capital into 4/5 stocks.
Divide stocks such that u ll have 20-25% diversification to single sector.

For example :

1 lot AXISBANK (BANKING)
1 lot INFY (IT)
1 lot m&m (Auto)
1 lot RIL (OMC & TELECOM)

This way chances of gaps in all stocks at once will get reduced.
Divide stocks as per 3 categories

Bullish
Bearish
Sideways

If market is bullish then keep 50-75% position bullish and 25-50% position sideways.

If market is sideways then keep 75% position sideways and keep rest 25% free which u can use if market takes directional move.
I personally avoid trading bearish market much as those moves will be very quick and big but bears won't stay for longer duration so in bear market i go on vacation & come back when bulls return😃.
If you follow this things mentioned u will rarely face blackswan events while trading stock options.

One good advice if you are trading non-directional positional then strangle is always better then straddle (easy to adjust).
Increase position size to 4x leverage once u get conviction into ur trading system.

Personally i avoid few sectors PHARMA, TELECOM & OMC (don't tell me RIL is telecom as well as OMC 😜😜).

Hopefully this will help to start as a beginner.

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More from @Pathik_Trader

Pathik Profile picture
7 Feb
Outside followed by inside bar is one of the best pattern to trade.

What does outside bar means?
- Outside bar is when current candle high > previous candle high & current candle low < previous candle high

(1/n)
What does inside bar means?

- Inside bar is when current candle high < previous candle high & current candle low > previous candle low.

(2/n)
What to interpret from outside bar?

- When we get outside bar which means neither buyer nor seller are in control.
- When we get outside bar, we should wait for the follow through/confirmation in next candle.

(3/n)
Read 11 tweets
Pathik Profile picture
21 Jan
Today morning

NF 14700 PE Total OI 69L fresh addition 63L

BNF 32700 PE Total 29L fresh addition 28L

There was hardly any unwinding in either 14700 CE or 32700 Ce throughout day.
In such cases when Underlying makes new low then those late writters feels the heat first and they run to cover their PE shorts asap.

And that huge OI unwinding on those puts leads to sharp falls.
Also whenever their is unusually low premiums and market remains silent for first half that time second half directional move is likely.

So whenever u trade expiry with very low premiums compare to usual at that time always try to close before 1:30-2 PM.
Read 4 tweets
Pathik Profile picture
18 Dec 20
Every year Lacs of people appear for MBBS exam but only 5% gets admission. Out of those 5% hardly 1% becomes expert in their field.

People still never feel that doing MBBS is risky.

Same for engineering or any field there is hardly 5% who achieves something good.

(1/n)
In any business there are thousands of start up businesses are happening but hardly 5-10% runs those businesses successfully.

Still people don't feel starting new business with their own investment is risky.

(2/n)
Trading is no more difference here as well success ratio to achieve something is 5-10% as other businesses.

But Pure Indian mindset still believes that trading is very risky business and it's just gambling. Hardly very few people has financial literacy in INDIA.

(3/n)
Read 4 tweets
Pathik Profile picture
2 Nov 20
Many people feel scalability issue when it comes to trading.

Few steps which can help u to scale with ease.

1. Scale slowly and steadily.

Ex : trading with 20L then gradually increase to 30,40,60,100L.

Don't directly scale from 20L to 2 Cr.
2. Never see ur MTM in absolute terms , always see in Percentage terms.

Ex. : with 20L ur MTM fluctuates within 40k and when u scale to 40L fluctuation will be within 80k counting 2% MTM fluctuation.

See both in same way as 2% don't see it as 40K and 80K.
3. When u are scaling ur capital u need to make sure underlying u trade is highly liquid so that u don't get very high Slippage cost in ur trade.

Ex. Trade nifty, bnf, or highly liquid stocks of nifty. after some level u ll find difficulty in trading midcaps which is less liquid
Read 5 tweets
Pathik Profile picture
31 Oct 20
Some of the myth about naked option selling risk!

"If there will be major gap down/up account will be wiped out!!"- that will happen only when u are over leveraged. I have face 15-18% moves and still losses in trade never went above 6% in a trade.
People argue that with reduced margin requirements we can generate more return and also get ourself protected with hedge!! - To make more return you need to increase qty and indirectly u are risking more with hedge to generate more return with same capital.
People argue mostly about huge gaps but they don't work on their position sizing.

Before punching naked option ask yourself that if stock opens next day at circuit how much i will be losing. Keep ur position size such that even at worst opening of underlying u won't lose > 5-7%
Read 4 tweets
Pathik Profile picture
27 Sep 20
One of the basic theory behind gap days.

When underlying gives gap up above yesterday's range and sustains above that for one hour+ means market participants has accepted the new range and are willing to buy at higher price. So fresh buying and short covering are likely.

(1/n)
If price opens gap up out of PDR but fails to hold on to hourly low which means market participants haven't accepted new range yet.

So in that case it's likely to test PDH first if that also doesn't hold then PDC and even PDC doesn't hold price then likely to test PDL.

(2/n)
Similarly

When underlying gives gap down below yesterday's range and sustains below that for one hour+ means market participants has accepted the new range and are willing to sell at lower price. So fresh selling and long unwinding are likely.

(3/n)
Read 4 tweets

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