Once again proved writing options is dangerous

[nagendra_gb]

Hi,

i totally agree with you . If you see that friday 60 min flow was in long. i too do option writing, i shorted 4100 puts which are deeply in the money but since it was risky took same amount of 3600 puts. Now since it is a huge gap up al my shorted puts lost 97% of there value so am in good profits. Say for my bad luck if there is a gap down my loss would have been 500 points per lot

 

[nagendra_gb]

one more thing if we remember that time both calls and puts were having huge premium which is like a heaven to an option writer

 

[rajeshn2007]

Couple of days before nifty was at 5000, and many option writers, particularly 5000/4900 puts were written. last 2 days, markets have tanked and put writers are caught on the wrong foot. If they were properly hedged, they would have scraped through.
Well, if this is the case of professionals, think about retail traders who aren't well equipped to handle such situations.
Risk and money management are important before considering such option writing.

 

[AW10]

Absolutely agree with you Rajesh. Options writer without knowledge and discipline to risk mgmt is like a driver driving Ferrari with no breaks.

In my experience, human reaction to emotion of FEAR is stronger then that of to the GREED emotion. That means, mkt falls are steep whereas mkt rise are generally gradual.
(we rarely have events like election days when mkt is frozenn on upper circuit.. but we will find enough examples where mkt was on lower circuit).

That makes, writing PUTs more risky then writing Calls.

While put writers had -ive trades in this expiry week, call writers got the best deals cause calls had very good demand till last thursday/friday and they would have collected real good premium.

Happy Trading

 

[rajeshn2007]

Yes AW10,
there were 4 down freezes in markets, whereas just one upfreeze. put writing is always dangerous than call writing.

 

[rajeshn2007]

Market buzz- many put writers caught on the wrong foot, in writing put options. They had to short nifty futures/ nifty calls to cover their positions.

 

[prasadam]

well said Rajesh.:thumb:

Unless We have a certain opinion of the future we can't make money in options.

 

[krishna23]

sometimes in the lure of getting a small credit inexperienced traders do write options and later learn the lesson the hard way...but i have also seen the same traders treat options like a lottery ticket and buy fancy quantities of far out of the money contracts in the hope of making a fortune to only lose out on the premium they paid...

 

[rajeshn2007]

well said Rajesh.:thumb:

Unless We have a certain opinion of the future we can't make money in options.

yes Prasad, even to that extent, both buying and selling in options along with futures, have the same result.

 

[prasadam]

There is a subtle difference between futures and options. That is time value.

In options, we have to TIME the market also.