HOW TO TRADE With VWAP Indicator & RSI To Sell Weekly Options – English


– [Trade With Trend] Welcome to the video
on Intraday Option selling strategy where I will discuss
how to sell Weekly options on expiry sessions. So today was also RBI policy.
And I’ll be showing you how I analyze price action and why
I sold calls after the policy got over. So lets get started. So today was a session where
volatility was high and it was expected because RBI policy
was due and today was also Options Expiry. That is
Thursday. So let us first look at trend and volume and then we
will move to the subsequent sections within the framework
that we discussed last week. In case some of you have missed
that video, I will link it up here after this video ends,
you can watch that video as well. So let us first analyze what
happened on December fourth. So on December fourth for
the majority of period VWAP indicator was below the MVWAP
indicator and towards the late afternoon session, we did see
price moving with momentum. So this was a good structure
that was forming. If you look at volume as well, volume
did expand as price started moving higher. So this is one
of the first things that I like to see as market opened
as market opened today. This was the opening candle for
the day. I wanted to check for prior trend and I also wanted
to check whether good volume expansion had happened as price
moved higher. So this volume that you see, this is actually
distorted the entire volume chart here. Otherwise, the
volume spike that you see here and in this case was also relevant. So as market opened I was positioning myself to either buy calls or write put options. But the thing that made me change my mind, was how the market opened today. So initially,
price did move higher and it managed to close just about
at where it closed yesterday, so we got this long wick here. Due recollect the previous
videos that I’ve done, when you spot long wick, that
means there is some supply ahead in the market. So the
RBI policy got announced somewhere at 11:40, 11:45am
and that is when you see this long Bearish candle forming.
But prior to this, look at how many times
candles had long wick. So this was a clear sign that
strong sellers were present in the market, and those
who were inclined towards buying calls should have been careful. Do take note on one more
thing, that if you look at this place that I’m marking
out with the cursor. There is not one single
bullish candle that is present. If you consider this candle as bullish, you should look at the long wick here. I would certainly not classify
this as a bullish candle. So as we were approaching
the policy, I did realize that there are some strong
sellers present in the market and hence I did not go
ahead and buy call options. Moreover, you have to remember
one thing, that whenever you have sessions like RBI
policy or some other major economic announcement, do not trade until that event is over. So even if I would have spotted
a lot of bullish candles here, or a lot of bearish
candles, that is before the policy I wouldn’t have traded for the day. Because I want more clarity
in terms of what happens after the event and then I
want to position myself with respect to whether I
want to take a long trade or a short trade. So this is one of the most
important points that I want you to remember. That
whenever an event day is due, only trade in the market
once event is over. Too many traders commit to
the mistake by trading in this region and most likely
they do take losses. So once this bearish candle
had formed after the RBI event, look at the volume here. There is clear strong volume
expansion that has happened as price has moved lower. Now when I spot such wide
range candle on the chart, there are two things that
come to my mind. Number one, demand has to be
exceptionally strong for the price to move above this level and number two, look at
how many bullish candles this single candle has engulfed. So this clearly means
that there are some strong sellers who have entered in the market and it is better to wait for
more clarity to emerge. So after this candle
was formed, that is this bearish candle, I did not initiate a trade somewhere here. Now with the help of VWAP indicator and the relative strength
indicator (RSI Indicator) logic that I shared last week. Now I will show you how
I did that precisely. But before moving to that section, in case you find such wide-range candles forming on intraday basis
there is absolutely no need for you to go on and initiate trades immediately. You should wait for some more clarity to emerge. I
hope this aspect is clear. Now as price did have some
retracement from the low point of the day look at the volume activity here. There is hardly any volume
expansion that is seen as price has started moving up again. Now do take a note that
previous two instances here as price moved above on
both instances, there was some sort of volume
spike that was visible. But in this case as price
moved from 31,700 to about 32,000, there is no substantial
volume activity that has happened on the upside. So this was one more data
point that I considered when I decided to sell
call options at this level. So I saw 31,900 call option
at 22 and later covered it at 7.5. So the first two trades
that you see in this order book snapshot that is actually trade for
next week that I have done. I have sold into a straddle
that is 31,900 call option and put option straddle. so coming back to this
trade, I decided to exit this trade at 7.57 Rupees
because there is no point carrying this trade further
as market was about to end in the next 25-30 minutes. Now this option eventually went to zero, so I could have held on to it but the thing is during
the last 20 25 minutes, volatility at times is
so high that option goes from Rs. 2-3 to some thing like 200 even 100. So just to get about 3 to 4
Rupees more per lot as profit, it makes limited sense to
hold on to a trade that has already given you over 75% return. And this is one more crucial
point that you have to keep in mind. Whether it is expiry session
or a normal intraday session in case you’re getting 30 40%
or even 25 30% on an options trade, that is when you’re
selling options, you should think about exiting that trade. Too many traders commit a
mistake of holding on to the trade thinking that they
want more profit from the trade that is terms of 70%,
80% and more often than not that trade does not work in their favor. So therefore, it is always
better to have a fixed exit percentage in mind when
you are writing options. Now the second data point
that helped me sell options at this level was RSI Indicator. Now last week I did receive
a lot of queries about using RSI indicator for selling options. Some of you had also emailed
me and there was certainly some amount of confusion that was there, and hence pay attention to
what I’m going to explain now. So let us first analyze
December 4 session. and then we will move
to December 5th session. So as for what I showed
you last week, RSI Indicator has two main range where it uptick.
The first range is 40 80 range. This is the two green lines that you see. And the second range is the 60 20 range. When RSI indicator is between
40 and 80, that is considered as bullish and when RSI
indicator is between 60 and 20 that is considered as bearish. So on December 4th as market
opened and price moved higher, RSI was actually coming
from a range of 60 20. So RSI was at this level
by the time price opened and it was about 10:00am. RSI
had reached about 70 level. Now in the afternoon session
around 1:00 pay attention here, RSI retraced back to the 20 level. So when RSI moved from 20
to 70, it did not reach the 80 mark. Which meant the range that
RSI was trading at before December 4th, until about 1:00pm RSI was still in that range. Now look at what happened after 1:30pm. As price skyrocketed higher, RSI eventually shifted
it’s range from 20 to 80. Now at this level, RSI has
almost touched the 80 mark. So when the market opened
today, I was more inclined towards going long, because
I was seeing that RSI had eventually moved out from
the 60 20 range towards the 80 40 range. So had price after RBI
policy retraced somewhere and RSI would have come close to 40 level, that is when I would have gone and either written puts or bought calls. Now if you remember my last weeks video, I had precisely written Puts when RSI had reached the 40 mark. So now look at what happened after RBI announced it’s policy. As price moved lower, RSI
moved from 80 to 20 range. That is the range shifted
from 80 40 to 60 20. Now again, risk reward at this level is not suitable for
writing calls and therefore I waited for retracement in price. Now if you look at previous
chart where I showed you that as price moved higher,
there was no amount of volume expansion visible. Look at what happened when
this bearish candle was formed. If you look at the RSI level, it has started reversing
exactly from the 60 mark. So my reading here here
about RSI shifting again from at 80 40 range to a
60 20 range was validated at this point. I know many of you got confused last week, but I hope this explanation
has cleared most of the doubts you had. So at this point there were
two data points that were in my favor. Number one, volume expansion
was visible on the downside and toward the retracement
there were no significant volumes that were present and number two, and at this point when I
wanted to short-sell options, that is right options, RSI
was reversing from the 60 mark here. So let me now take you to
the third data point, which is my number data point
when it comes to initiating trade from day trading or
short-term trading perspective. So look at how VWAP indicator
shaped for this trade. Now when the market opened
I felt VWAP’s structure was really good and even
based on VWAP’s structure I was positioning myself to either sell, put options or buy call options. That is after the RBI event. Now when the RBI event
happened and when the price retraced back at this particular region where this bearish candle was forming, this was also a place
where RSI was 60 level and there were no significant
volume expansion that was visible. So by this time look at what
VWAP indicator had done. VWAP indicator had clearly
moved below the MVWAP indicator signaling that strong
participants in the market were clearly not
anticipating any up movement for the day. So when you combine what VWAP
indicator was suggesting, what price action was suggesting,
and what RSI indicator and volume was suggesting, this trade was not that
difficult to execute. Now again, this will
come down to execution because it ultimately depends
on how much you practice, and how much skill you
develop to analyze market in real time. Now this is a concept that is
not spoken about that often but developing the right
set of skills as market is progressing is equally important. So let us now come to the
4th data point that is open interest buildup. So when I decided to sell
call option that is of 31,900 strike price,
that is this call option. Price was trading somewhere
at 31,830, if I’m not wrong. Now the reason I decided
to sell 31,900 call options was because of the amount of
call open interest buildup that was happening at 32,000,
32,100 and 32,200 call option. Now do take a look here
that I decided to short-sell 31,900 call option at
somewhere at this particular point where my cursor is. So that was already about 1:50pm. So there was just about
1.5 hours left for the market to end and the
question that I asked myself was that what are the odds
of open interest reducing at these strike prices and
for price to head higher that is above 31,900, 32,000, and 32,100. Because when this happens, this is when an option goes
from 15 16 rupees to something like even 400 500 Rupees. So this is the scenario
that you have to avoid and you have to include
as many data points as possible in order to
analyze how safe it is to write options at that level. So when price was at 31,8030, I did spot significant
open interest buildup at 32,000, 32,100, and 32,200 call option. So this was one more reason
that I decided to sell call option because I did
feel that there was just one, one and a half hours left
for the market to close, and odds of open interest reducing
at these strike prices and price eventually crossing
31,900 was indeed limited. Now in my own trading,
open interest is actually a supplemental data point. This is not the main data
point that I refer to. My number one data point
is structure structure of VWAP indicator. This is the number
one thing that is see, and I also lay a lot of emphasis on how RSI is structured and what
trend and volume tell me about the overall price
structure in the market. Now you have to understand that every trader is different in the market. And these 4 data points
may not be the data points that you consider while writing options, but these are something
that you need to look into so that you can improve
your technique further. So let me now give the 3
main mistakes I’ve seen traders making when they
are selling options. So the number one mistake
that I have seen traders making is that they don’t
understand how much money they can lose when it comes to writing options. So unless you have about 3
to 5 years of experience, I will advise you against writing options. The second mistake that
I’ve seen traders making is that they don’t align
with the underlying trend. Now analysis of trend
is absolutely crucial and in case you did not
recognize the underlying trend, then there are
high odds that you would lose money when it comes
to writing options. One more point that I
want to make is about selection of your broker. Now I have seen many
beginners gravitating towards low-cost brokers and they do not look into full service brokers
before they are opening their account. Now I am not against low-cost brokers, but the thing is during
the expiry session or event-heavy days, it is not
uncommon to see terminals not opening up and even
there is a lag between how price is quoting at a NEST
terminal and their own WEB terminal. So when it comes to selecting a broker, have a balance between cost and quality. This is also a very crucial
point that many traders fail to realize. Now my main account is
with a full service broker. But that does not mean I
do not have account with a low-cost broker. I do have a small practice account with the low-cost broker but all my main positions with respect to
futures equities and options is with a full-service broker. Now the Third mistake that
I want to focus upon is more common in social media. Now most of the beginners in the market get very impressed when
people post their profit and loss statements and then
they think they can replicate that in their own account. So the easiest way to
choose is to go and join the course of the individual
who’s posting his profit and loss account and then
expect the same results in their own account. Now don’t get me wrong
here, I am not against anyone selling courses on
internet that is something that even I do. I sell a course on VWAP indicator that is with respect to day-trading
and short-term trading but what I’m advising against
is that you don’t have to look at profit and loss
statements of other people and then get influenced by them. Now even I share my trades
on something like twitter, on YouTube community even on telegram. But you will never find
me sharing profit and loss for that particular trade. The main reason for this
is because I don’t want your focus to shift away
from learning towards profit and loss. Choose the right reasons
to learn from some one and that has to be to
attain the same level of knowledge, to attain the
same amount of discipline, and perfection when it comes
to executing a strategy. Now when it comes to
posting profit and loss statement that is completely one’s own choice. But the thing is, what
some people don’t realize is that when they are
posting their profit and loss statements they are unknowingly
affecting so may people who are focused on money rather than acquiring the skills to
get better at market. So if you’re a beginner at market, the single biggest advice
that I can give you is that stop focusing on profit and loss, and start focusing on method. This is something that
is going to help you in the long run. And the sooner you realize
this, the better it is going to be for you in terms of your
own learning in the market. And in case you want to
learn how to sell options, I would first suggest you to try something like a covered call
strategy where you have existing long term position
in futures and then you sell higher strike
prices call options. Now this way your risks will be limited and you will get
experience when it comes to writing options. And as you get better
with respect to analyzing market structure you can
then consider selling options without having a hedge.

44 thoughts on “HOW TO TRADE With VWAP Indicator & RSI To Sell Weekly Options – English

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  2. Hats off Man, the way you share all info here with each and every video. A trader can easily understand the concept. Even a few copy paster YouTubers are started copying your content for their online courses. πŸ˜†

  3. Excellent ! Sir, do you suggest to use BankNifty future chart for volume ? as we don't get volume for Banknifty index

  4. DA thnx for video, learning new things every day… DA 1video on candles pattern which u find more useful while trading, I found
    LONGWICKS/ENGULFING, any other as per you DA

  5. Excellent video as usual. Sir can you elaborate on VWAP structure, bcos we will see whether VWAP is above or below MVWAP. I use MACD along with VWAP to enter the trade. But I have one doubt that whether MACD works well with 5 min time frame. Please clarify.

  6. Ranauk Sir, This video is one of the best.. Lot of my doubts cleared. Particularly this day. i unable to get a clear picture of the market.. so didn't trade.. Thanks once again for this learning video.

  7. Dono why someone dislikes your video ST..i think option Buyers disliked it….:P
    Good one..one doubt ST,I know you are sharing concept on option selling…just a thought, could one had taken buying PE at the fall after RBI announcement, using IV factor and open interest build up…just for quick scalp?

  8. why you chose this domain, and before what profession you are doing, and what your biggest tough time in trading experience, please make this video i want know more about my guruji.

  9. Sir can excerse option writting
    In normal days like we do in expiry day.
    Like eg:-selling call/put option in Monday 10am and excersise the position on 3:00
    Is it possible in option seeling

  10. Hello brother, I have many questions sorry to bother you.

    1. On Dec4, if you see at the start of the market banknifty future was trading @31500 and rsi was at around @20, In the afternoon banknifty future was at 31650 and rsi was near to the same 20 level.

    My questions are:

    Is this hidden positive divergence as you can see banknifty future rose from there till 32200 level?

    Is RSI indicating at this point that it has no further strength to move down? Can we take a risk at that point of time to buy call option as rsi was same but banknifty future prices were different, if yes what should be the stoploss?

    2. On Dec5, same scenario repeated but this time on sell side on which you took the trade. If you notice as pointed out by you @11.40 banknifty future was @32200 and rsi was @60 and @ 1.50 pm rsi was @60 and banknifty future was at 32000.

    My questions are:

    Is this hidden negative divergence as you can see banknifty future went down from 32000 till 31700 level?

    Also, does this mean that rsi has no further strength to go up?

    3. Can you please tell me from where I can get this graphical representation of OI which you have shown and how much accurate it is during the live markets?
    Thanks 😊

  11. Amazing and informative video as always … Thanks for sharing.. Can you please let me know if RSI is relevant for a 5 minute time frame chart as well? Aren't the chances of false signals more?? Can we assume if RSI is beyond 80-85 , it might correct further??

  12. Respected Sir,
    i have seen a youtuber , who just trade using heikin ashi candles with 1 min chart and high leverage, he doesn't use any indicator According to him , all technical analysis is useless and it doesn't work …. Can you plz shed some light on it ….? I will be very thankful if you could provide some useful information.

  13. hello sir i have some trouble in plotting vwap and mvwap in amibroker for nifty and bank nifty, can i know how to do that ?

  14. Very right information that you shared in the last part of the video about focusing on knowledge, not on profit. Thanks, Big Brother.

  15. Hello Sir,
    do you have a video on super trend indicator? if yes then please reply with link and if not please make a video on it .

  16. Eg:-monday i do call writting at 12100 premium i collect is 10.05
    And market trades around 11950
    And exit position at 3:00pm
    Is it possible in option writting

  17. Thanks Sir for such a video
    Please also tell me where should I get option chain combined/cumulative open interest graph or chart like you have shown in open interest series, in my fno option chane open interest graphs are coming but not coming as cumulative/combined.

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