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Did you know ?
You can earn monthly rental income(between 1%-2%) from share market just like any house owner earns rent.
I have been doing this for last few years.
#OptionsTrading #Optionselling #coveredcallstrategy #stockmarkets #StockMarketindia #Nifty #Banknifty
Read on 👇
You can earn monthly rental income(between 1%-2%) from share market just like any house owner earns rent.
I have been doing this for last few years.
#OptionsTrading #Optionselling #coveredcallstrategy #stockmarkets #StockMarketindia #Nifty #Banknifty
Read on 👇
The strategy is Covered call strategy
Pre-requisites for the covered call strategy
1. You need to own a house. (Let's take #Nifty index for an example)
2. You need to own the complete house.
In our case, we need to own atleast 1 lot of Nifty.
How do we do that ? Read next
Pre-requisites for the covered call strategy
1. You need to own a house. (Let's take #Nifty index for an example)
2. You need to own the complete house.
In our case, we need to own atleast 1 lot of Nifty.
How do we do that ? Read next
3. #Nifty is currently at ~18000 & it has a lot size of 50.
We need to own Nifty ETF worth 18000 * 50 = 9,00,000
Nifty Bees is the most liquid ETF & we get 90% amount after pledging as collateral margin.
So you get 8,00,000 back as collateral as well if you need more margin.
We need to own Nifty ETF worth 18000 * 50 = 9,00,000
Nifty Bees is the most liquid ETF & we get 90% amount after pledging as collateral margin.
So you get 8,00,000 back as collateral as well if you need more margin.
4. Now we need to sell current month's Nifty OTM options.
To sell one lot of Nifty you need around ~80k-100K.
Would recommend keeping 1Lac as cash margin.
To sell one lot of Nifty you need around ~80k-100K.
Would recommend keeping 1Lac as cash margin.
If your expected return is 1% per month, you should earn Rs. 1000 (1,00,000×1%) from selling call options.
To earn Rs. 1000, sell any OTM call option trading between Rs. 20-25 at the start of the month (20×50 qty = Rs. 1000) as shown above 18600CE is trading at 23.25 Rs.
To earn Rs. 1000, sell any OTM call option trading between Rs. 20-25 at the start of the month (20×50 qty = Rs. 1000) as shown above 18600CE is trading at 23.25 Rs.
If the Nifty remains below 18600, the call option will expire worthless & the seller keeps the premium as profit.
If the Nifty rises above the strike price, buy back the option.
The seller will lose money in option selling, but that will be compensated by Nifty Bees profit.
If the Nifty rises above the strike price, buy back the option.
The seller will lose money in option selling, but that will be compensated by Nifty Bees profit.
This strategy can also be used in stocks but stocks are too volatile than index and would recommend people to stick to index if their returns expectations are conservative.
Summary :
A covered call strategy is an options trading strategy in which a stock or other underlying asset is owned & a call option on that asset is sold. The strategy aims to generate income from the option premium.
A covered call strategy is an options trading strategy in which a stock or other underlying asset is owned & a call option on that asset is sold. The strategy aims to generate income from the option premium.
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@THEH0NESTTRADER
to learn trading ideas from an experienced trader. Likes + RT's appreciated📷
@THEH0NESTTRADER
to learn trading ideas from an experienced trader. Likes + RT's appreciated📷
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