Market Update

Thursday 20 September 2018

Share tips -How you can use options to make profit during festival season

Share tips -How you can use options to make profit during festival season

With more trading holidays the risk of getting brutally hurt by wild movements while writing options reduces as ever-shrinking time value takes part of the blow


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Option writing is a trade that requires both vigilance and diligence. We will discuss today how to embed option writing to your trade when it is compulsive to write options. This discussion becomes all the more important as we enter the season of festivals. 
With more trading holidays the risk of getting brutally hurt by wild movements while writing options reduces as ever-shrinking time value takes part of the blow.
Considering, sometimes when more than one trading holidays occur especially in the second half of the week, option writing becomes a compulsive trade.Let me take the example of three kinds of traders and understand how embedding option writing in this environment would help.
If one is trading only in futures, option writing can be added to the trade by selling higher call against bought future or selling lower put against sold future.What this goes to do it restrict the profit up to the strike of option sold but in return futures buyer/seller gets compensated by a take-home premium. source- www.moneycontrol.com
Ideally, while trading, this may not be a good idea because if the stock were to move in the direction of choice too soon option sold may eat away more profit than expected from the premium received. But, in case we have a situation where next 10 calendar days have just 5-6 trading sessions, the premium decay would make sure that expected benefit from the option sold would be greater (in case of the adverse move) than expected loss (in case of the favourable move).
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