- Trading in options is not an easy task.
- Every trader is supposed to have some sort of skill for the options trading.
- Futures and options trading, especially options trading, are two of the most favorite topics of all the traders.
- Everyone wishes to trade in the F&O segment and generate maximum returns.
- However, trading in F&O is not child's play.
- Trading in F&O is far more difficult than trading in any other instruments.
- Many new traders are getting confused about option buying and option selling.
- Some of the traders think that only the option buying is the best way to trade, whereas some of the traders think that money can be easily made with the help of option selling.
Skills required for option buying
- Options buying is one of the most popular styles amongst all the traders.
- Everyone is planning to do option buying and wishes to make real quick money.
- But this is simply not an easy task.
- In order to be able to make money in option buying, one will need strong technical analysis skills as well as the risk management principles.
- One of the hardest realities of option buying is that you cannot make money every day because the market will not give you the move daily.
- But when the market will give you the move, you will have to make sure that you need to win big in order to be able to compensate for the small losses and also come out profitable.
- Also, whenever the market is not in your favor, you will have to cut your losses short.
- Often many of the new option traders try to average their losing trades, and they will end up losing their capital.
- Cutting all your losses short is a must for any of the options buyers.
- Without this, you will not be able to make profits.
- Options buyers are supposed to have the courage to hold their position and book big profits instead of booking small profits.
- Your edge as an option buyer will come from holding your winning trades long and cutting down all of your losing trades because most of the time the market will trend sideways.
- So when the market will give you the move, you have to make sure to encash it.
Skills required for option selling
- Option buying and option selling are totally opposite things.
- Due to this, the skills required for both of the trading styles are also totally different.
- As an option seller, you will win most of the time and will also lose sometimes.
- The reason for the same is that the market trades sideways, but whenever you lose, you have to make sure that you don’t lose more than what you can afford to lose.
- Generally, an option seller will make 7-8 times out of 10, but when they lose, they may lose big if they do not exit it at the right time.
- As an option seller, you should keep a stop loss in your system, or you should also always hedge your position to eliminate the possibility of unlimited losses.
- In this way, you will be able to make consistent profits from option selling.
Conclusion
Skills for options trading are required to make good money, although you have a good trading strategy.
Frequently Asked Questions (FAQs)
Q1) What options trade is most profitable?
Selling covered calls is the most profitable options trade.
Q2) Which strategy is best for option trading?
Protective puts, covered calls, and collars are the best strategies for option trading.
Q3) How to build the right mindset for trading?
By understanding and managing emotions, avoiding common pitfalls, and embracing individual strengths and weaknesses, we can build the right mindset.
Q4) Who is the most successful option trader?
Edward Thorp is the most successful option trader.
Q5) What percentage of the option traders are successful?
Only 10% of the option traders are successful, and the remaining 90% are losing money.
About Us
Nifty Trading Academy is our academy where we teach you about the stock market as well as technical analysis. We also provide live trading sessions and upload blogs for the same.