HOW To Sell WEEKLY OPTIONS In INTRADAY Trading.


– [Narrator] Welcome to the
video on intraday option selling strategy where I will discuss how to sell weekly options
on expiry sessions. So before we move
forward in the video, let me tell you that writing
options is not at all easy and you do require some
amount of experience in order to do so. I hope you understand the
risk of writing options. In case you’re a
beginner in the market I would strictly advise
against writing options. So in this video, I’m gonna
show you one of my trades that I did yesterday that
was in the expiring session where I sold put options and I later covered them
during end of the day. So I’ll be explaining
a couple of things about trend, about RSI
indicator, about VWAP indicator and how you should be combining
volume in all of these. Towards the end of the video I again make an appearance and I’ll give you about
two pressure points that you need to
be careful about when you are trading
on an intraday basis and you’re looking
to sell options. So one of the first
things that I look for when I’m trying to
sell either call option or put option is the
general bias of trend and volume activity. So if you look at the
chart in front of you I sold put options at this level and before that when I
looked at the bias of trend, path of least resistance
was clearly on the upside. Now do take a look
at volume activity, all these volume spikes that
you’re seeing on the chart, just focus on my cursor here. Now look at the corresponding
candles of volume spikes that are happening on the chart. Now these are the candles where
volume activity is spiking. And if you look at
majority of these candles these are on the upside. So what this tells me is
that underlying demand in the market is
much more strong and volumes are coming in as price is attempting
to move higher. So this is one of the
first steps I undertake. Now many of you would
be having a question as to why I did not buy
call option on November 28th because on expiry
session price move from 31900 to about 32,200. So had I bought at
the money call option I would have still made
some money in the market. So to understand as to why
I did not buy call options now look at the same
wide range candles which took the price higher. Now these are mostly
the wide range candles that have taken price higher and look at what is
the most common element that you can find in all
these wide range candles in this chart. So if you look at all
these wide range candles look at the long wick
of these candles. Now based on the previous
videos that I’ve done in intraday trading and I’ll
leave a link for that video towards top right
hand of the screen. I had mentioned that
whenever wide range candle is accompanied with a long wick then this actually represents
selling in the market or presence of some
sellers in the market. So this is the main reason why I did not attempt
to buy call options because I was seeing all
these long wicks here and I did anticipate some sort
of pause in the market ahead. So if you find a
chart that is based on what you’re seeing today,
you can expect some sort of retracement happening
because strong buyers are not present in the market. Now on the flip side, I like
to mention one more thing. Look at all these
down candles here. So there is no evidence of
any strong seller present yet. Now since we have some
sort of congestion here, if tomorrow that is on Friday
price starts moving below 32,000 then you will see some
retracement happening towards 31,800 or those sort of level. But again, you will have to
check for volume activity and trend activity in case
you’re looking to sell options. So the second thing I want
to see is what RSI suggests in terms of who
remains in control. Now RSI bullish bearish
range is a concept that was introduced
by Andrew Cardwell and I did do a video on this and in case you have
missed the video on RSI bullish bearish range I will link it up in
the comment section and description box below. So based on that concept
when RSI is between 40 and 80 that represents strong
buyers in the market and when RSI is between 60
and 20 that is 60-20 range that represents presence of
strong sellers in the market. So I decided to sell put
options at this level and let me show you how
RSI helped me do that. So before selling put options I wanna check what
is the range of RSI. Now on November 27th, RSI came
very close to the 40 level and then it started
moving higher. It easily crossed
the 80 level here. So between November
27th and November 28th, underlying momentum
was reasonably strong as RSI moved from
40 to 80 range. So up to this point, it was very clear that there
were strong participants present in the market. Now for the time being ignored all these long wicks here because this is
something we checked on concept with respect
to trend analysis and volume analysis. So look at what happened
on November 28th. As price largely remained
flat in this region, RSI started heading lower. And look at the point where
I decided to sell options that is at this area here and look at the RSI reading
it is exactly at the 40 mark. So what this suggests
is that at 2 p.m I did check for RSI reading which was exactly at 40 level and the prior range was 80-40 which meant there are
reasonably strong bias present in the market. So when I saw this pattern
forming on the chart, this is a long tail you can also call it
a variation of hammer. It was very clear then
that this was a safe point to enter in terms of
selling put option. Now I also used pivot
points and VWAP indicator to confirm this and let me show you that
in the subsequent slides. But I hope you do
get the concept of RSI 40-80 and 60-20 because
this is a beautiful concept and you should look into this. So the third point
I like to check is what pivot points
are telling me about what is happening in the market. So let us now come to
the yesterday’s session that is Wednesday. So during this entire session the markings that
you see on the chart the green line markings
are resistance, r one resistance r two,
the blue line that you see is the standard pivot point and the red line that
you see is support one and support two. So I use the
standard pivot points I don’t use the variations
that is Campbell pivot or any other pivot out there. But all pivot points work well so you can just
choose any of these and just be consistent with it. So on Wednesday if you see
price was clearly below the resistance one level and two times we
got this wick here that is long week at
resistance two level resistance one level and price
was unable to cross this. So this was the backdrop of
what happened on Wednesday now On Thursday if you see that is today
price initially crossed the resistance r one level and took support here at
about 10:30 a.m in the morning price then moved above r two and again retraced back. Now look at where this
long tail is forming it is between r one and r two and it is very close
to the r one level. So this was one more sign
based on pivot points analysis that on the previous
session price was finding it extremely difficult to
cross the r one level. But in the current session,
that is today’s session price was actually
taking support at r one. So this was one more data
point that helped me decide that there was some sort of
demand present in the market and price would eventually
move higher for the day. Now this was around 2 p.m. So there was just one
and half hours left for the market to end. So the important call that
I had to take at this moment was whether price would
continue to move lower or price would move in the
direction of the trend. So I hope you’ve got
a fair idea about how to use trend, volume,
pivot points and RSI indicator. Let us now move to the
most important aspect of VWAP indicator. Now all of you know that
I use VWAP indicator when it comes to day trading and short term trading and this remains my
favorite indicator when it comes to
intraday trading. And also you can see a swing
trading short term trading. Now I’ll just tell you
the reason for this as to how VWAP indicator
helped me selling options here. So with the backdrop of what
I got from trend analysis section, volume analysis,
RSI indicator analysis and pivot point analysis look what I saw on the chart. So on November 27th,
these were the two places where price attempted to
move below the VWAP indicator but then deviated away
from it on the upside. So this represented some
momentum on the upside for the market. Now look at what
happened on November 28th price initially opened here and then moved higher. This long hammer candle
that you see with long tail, it’s again forming near the
VWAP indicator couple of hours later you again get
this long tail here. So these are not
hammer candles exactly, it’s just a variation of it you need to look at the
psychological aspect of it and not textbook definition. So again price took support here and started moving higher. And then I saw
retracement happening
back to VWAP indicator. Look at what both
of these candles did so in this candle price
initially moved lower and then managed to close
above the VWAP indicator. Look at the long tail
that is forming here. So long tail is forming
at the VWAP indicator and the MVWAP indicator. So in case you don’t know
about the VWAP, MVWAP I’ll just leave a
link to the video here I’ve got series of
videos on VWAP indicator and MVWAP indicator. So do check out those videos. So this is basically
suggesting you that price wants to move higher. So as this long tail was forming I decided to sell put options. So this is not based
on one indicator alone but it is a confluence
of trend analysis, volume analysis of
what pivot points what telling me and what RSI indicator
was suggesting. And once I had that
information in hand I then used VWAP indicator to identify a low
risk opportunity. Now couple of minutes later you again get a candle tail here which is exactly
a VWAP indicator and again, around
3 p.m, a long tail which is again near
the VWAP indicator and then price
started moving higher. And I eventually covered my
position somewhere at 3:20 p.m. Now I know this won’t look
easy because it’s not easy. It takes a lot of amount of time and people often ignore that. So just be practical keep
revising your concepts there are some wonderful
YouTube channels you can refer to them as well. All of those are
wonderful teachers and you should take all
the concepts that suit you. Put it in a framework and then keep practicing
those frameworks. So it does take little bit
of time to get a hang of this but it is not that difficult. Like any other
profession in life trading also requires
patience and practice. So one Important point
that you might be thinking, is it possible to sell options on an expiry session
with limited risk? So, let me just explain
how you can write options on an expiring session
with limited risk. So, let us get today’s
position as an example. So, let’s assume I have
32,000 I had short positions and bank 50 and over
the next one month I am expecting price to
head to 31,000 level. Now this is just an example. So when I look at the trend
analysis segment VWAP indicator, RSI and pivot points I do get a sense
that for the day price would move higher and later on over the next few
sessions it will move lower sort of capitalize
on this movement. What I can do is I can
sell 32,200 put options because as price starts
moving towards it, the value of that put
option will decrease and I would pocket some
income in the market. Now if the opposite what will happen? That is if at 32,000 I
have futures position and price immediately
starts to move lower, I would start taking losses
on my written options position because I’ve sold it and the value of that
option would go up. In that case, my
risk would be limited because I would be making
money on my futures position. I hope you’re getting it. So when you have
long futures position and you are willing
to sell some calls that is called
covered call strategy. So this is exactly the same but it is for the put option. So there are two main aspects that you need to be careful of when you’re selling options. Number one, your strike price
selection has to be right and number two, you
need to be aware of how much risk you can take. Now let me come to
strike price first. Now the mistake that I’ve
seen people committing is that let’s say Bank 50 is
trading at 30,000 today, in order to get some
premiums out of options what they do is they’ll go and sell something like
a 29,000 put option or let’s say 29,500 put option. Now as a strategy that may be okay. But the day market starts
moving against you. That is when that put option
will rise from let’s say, two to three rupees to
something like 300 or 400. And this does happen
on expiry sessions. Therefore please be careful. The second place where I’ve
found many traders commit mistake is that they
don’t understand the risk they are undertaking. Now what I mean by this is that they lot size the amount
of lots they are selling, they don’t understand if market
starts going against them how much money they
can lose in a matter of short period of time. So in case you’re not
a professional trader when it comes to selling options keep your lot sizes
extremely small. In case you’re not
profitable for now you have to be careful because this means whatever
you’re doing up till now is not working. And therefore it
makes no sense for you to write 10, 20, 30 lots. So just be careful about that. And out of the many indicators
that I’ve shown you here whether it is RSI,
whether it is VWAP or just simple price analysis, you need to pick on what suits you best and then you need to
master that further. If you are watching
my videos recently, I’ve been focusing a
lot on VWAP indicator. And that is mainly because
of the feedback I received from all of you. I was sharing a lot of videos in terms of various strategies. But the feedback that I was
getting was you guys wanted me to focus on one
indicator one setup and then go deep in that and that is what I’m trying
to do with VWAP indicator. And now as a strategy VWAP
indicator is more suitable towards let’s say
something like day trading or even short term trading. And when it comes to
positional trading I’ll be taking up a whole
another set of tools and I will go further
deep into that as well as a subject and same applies for
long term investment. So while different videos
will continue to come out on the channel, based
on your feedback, I am moving into
one more direction where focus is my main concern. So for day trading I will be focusing on
something like VWAP indicator that is for day
and swing Trading. And for positional
trading and investment I will be releasing more videos. So the pointing finger series
that is going to come out in January 2020
that is more focused towards positional trading. So when it comes
to selling options I have actually narrowed
down my strategy to something like
VWAP indicator. I do look at RSI ranges. I also look at price action. Now you have to see what
suits you best in terms of what I’ve shown you here and then you need
to go deep in that.

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