14 Wins Out of 16 Trades | Options Strategy Explained | Kundan Prajapati

14 Wins Out of 16 Trades | Options Strategy Explained | Kundan Prajapati - YouTube Transcripts: (00:00) Sir, look, we are living in such a time when if someone tweets, the market is falling. Somewhere a war is going on. Somewhere a war is going on. So the market seems to be falling for a few months. In that kind of market, I want to learn from you today the strategies of put side in negative market. The rule of all brokers, not just one broker, is that if you pledge anything with the pledged margin, you can do option selling and futures trading at 0% interest rate. (00:25) But you cannot do option buying. Alright another day another trading video with Upsurge me Ansh R Hiran and again on your popular demand we have the trading scholar Mr Kundan Prajapati with us thank you so much sir for coming so much Ansh bhai for giving me so much opportunity to teach with the audience of Upsurge so thank you we hardly get your time but whenever we get it we try to get the best content from you and give it to our audience and we come on their demand sir obviously now sir till date we have also discussed option selling strategies. Swing (00:59) trading strategies have also been discussed. But one thing I have noticed is that every time you show either neutral strategies or call side strategies, bullish market strategies. Ok? But sir, see, we are living in such a time when if someone tweets, the market is falling. Correct. Somewhere a war is going on. (01:17) Somewhere a war is going on. So the market seems to be falling for a few months. In that kind of market, I want to learn from you today the strategies of put side in negative market. Ok? Okay, I will try it. It is not totally bearish strategy but sideways to bearish we can say. And the biggest problem is why don't I do put side strategies? The problem that occurs is that if there is a big gap down then there is a loss. (01:41) But because I am here, it will be a little different. So you will remain separate. I know it will be simple. I know there will be no adjustment. End option selling will continue. Yes, now you also understood. So this strategy is such that even if there is a big gap down, you will still make a huge profit. (01:59) Okay and if it is sideways to bullish bearish then money will be made. So it was very easy again, simple saree as you had said. I will not say much. This is the intro, read it. So before reading about the strategy, let's take a look at the evolution of an options trader. He understands. We will come back to the strategy later. Ok? Ok. (02:17) So see, what does the first option that comes do ? Option bank is good because it can be done with less money. Ok? Then they are shown dreams that they can make big money with little money. You can make 50 lakhs from 500. And then after six months, one year to year, I realized that I will not make money from the option bank because Theta is working against me every time. (02:39) Right? Then after that he realizes that my direction is not right every time. I think from here that if the market goes up, it will come down. Then I think that if the market goes down and I sell calls, the market will come up. So what they started they started non- directional option selling. Are we okay? What he starts doing is that now he tells me to trade range trades one by one. (03:01) That the market is here, so I sold the call at the upper distance and sold the put at the lower distance. Stalled, they start selling any previous for ₹8. Now money can be made in that too. In the beginning, we make money for a few days. It takes two-three months. Then some such news comes. One such tweet or the other comes. (03:20) If the market is given, there is a huge gap down. Either there is a huge gap up. And whatever they have earned little by little in four months, all of it is lost in one go. Ok. Then you realize that you will have to learn hedging. Are we okay? That just now, Stedl Stangl won't do. You will have to hedge yourself before going. We end up with Iron Fly Iron Condor and if we start trading with proper hedging strategy, we can make money here too. Money is made here. (03:43) Those who are somewhere around here, please come here quickly. Okay, otherwise you are going to end up here. Ok ? It's a simple thing. Then another thing comes from this. There is another level above this. That is egg trading. What's up now? You tell me Ansh Bhai, what is the probability of predicting the price? Correct. Hardly 40 to 50% of the time you get staked. (04:03) Correct. But when IV has to be predicted, then everyone knows that before the budget IV will increase, correct. After the budget IV will fall, correct. Before the event, everyone knows that before the election results IV will increase, yes it will fall. Everyone knows that if any stock result is coming, IV will increase, everyone knows that after the result IV will crash, everyone knows. (04:23) So, above hedging also there comes a level that is Vega trading, so you do not trade the price, you start trading the IV, right, okay, so right now I will do this little by little. I give results of stocks. So basically these are two such trading styles which are scalable in which money is made and consistently you can make a career as a full time trader. (04:45) Here you can never become a full time trader. Maybe you have become one or two people or maybe it is like this that I don't know. But according to my experience, these are the two things where you actually make money. Ok. Ok? So I keep telling this so that people actually know what other variations there are in the market for trading. (05:04) Ok? Now let's move on to strategy. So now it becomes more unsure as to how much return is made in option selling. I personally target 30% returns if we learn option selling. At the most I will have a drawdown of 5-6% in a year. I don't need more than that. I make my strategy accordingly. I maintain position sizing. (05:23) Ok? What do I do in that now? I have ₹1 lakh, so I will invest ₹1 lakh in G-Sec as government security amount which will give me a fixed return of 7.5%, correct, fixed, okay, and what will I do with it, I will say that I will pledge it to the broker, after pledging it the broker will give me 90% margin for option selling at zero interest, correct, now see one thing here, see how smart the broker is, the collateral margin that you are getting from GCX, right, he only does futures trading and option selling, correct. I do (05:55) n't do it for buying. Why us? Because the broker also knows that I will give him money for buying. He will burn the money. True. Money will not be made in the option bank. Think I have a rule of all the brokers not just one broker but all the brokers that if you pledge anything with the pledged margin you can do option selling and futures trading at 0% interest rate. (06:15) But you cannot do option buying. Right? So that's why? Because everyone knows that if I think about it for option selling, why is the broker doing it? Because he needs brokerage. Ok? If he buys options, he will lose money in 2 days and will get less business. But if I give him option selling , he will survive, he will do it for a year or two. (06:33) He will get more business. We know that too. Ok? So this is the simple thing. If you earn 7.5% from Gx. You have to earn 24% in the whole year sir. Options trading will generate 2% monthly and 5% weekly. You can make big money by making small amounts of money. If you try to make big money, you will lose a lot of money in the market. (06:56) Ok? Look again, I have already discussed many strategies. I have discussed the HAI strategy. Monthly noob nifty discussed. I have now discussed the monthly Batman on the search platform. Correct. So sir, all my baskets are slowly getting finished. [laughs] But still, you said put, so today we're going to discuss a calendar strategy. (07:12) Ok. Ok? This calendar is different from all these. Ok. Ok? These are all variations of call ratios. Some are STBT, some are weekly, some are bi-weekly, some are monthly. But this is the only strategy of the peer. So we will discuss this today. Ok? Let us now come straight to the strategy part. Sure. So see, all my strategies are simple. (07:31) They are rule based. There is no discussion in that. Neither do we have to look at the charts, nor do we have to look at the adjustments. So this will also be a very simple strategy script, it will be nifty. That's why I trade Nifty a lot. However, my other strategy also includes Sussex and Nifty. (07:45) Butt is a little easy for nifty people. Sir, people's favorite is Bank Nifty. Yes, as long as the weekly expiries were correct. Not right now. There is no weekly expiry. So now only Nifty and Sussex are left with us. True. Ok. So the duration of Nifty trade is going to be three days. You will hold this question for only three days. (08:03) The expiry will be weekly and bi- weekly. Why am I saying both weekly and bi-weekly ? Because it's a calendar, we will sell the calendar weekly. Will buy in bi weekly. True. Ok? Then the entry date will be Tuesday, entry will be made every Tuesday and nothing else. No matter where the market is, we have to take entry at 3:16. (08:25) That's it. Ok? The target is that 1% target. There is a stop loss of 1%. When to do end exit? Friday EOD. If we have taken entry on Tuesday. I have to go after completing Friday EOD. no matter what happen. So that is why the direction is visible as three. Ok. Ok? It's simple. You have your rules. Right? The audience should not have any confusion in this because everything is mentioned here. (08:47) Now let's talk about strike selection. Ok? The style section is a bit tricky. I will start here because the put side is the strategy. So let's spot yours for Rs 25,000. Ok? Ok? So what will happen if we are 200 points away from 25,000 ? 24,800 correct. But now here we have to follow a rule that we should have a minimum of ₹ 200 points away. (09:08) Ok. Suppose on any day you come on Tuesday at 36, then if there is not even a premium of ₹50 for 200 points then the trade will not be taken. Ok. Ok? We require a minimum premium of ₹50. Minimum, right? Yes, minimum. If it is more then it is more than this. Suppose here I am getting ₹70 for 200 points. So I'll go 300 points away. (09:28) I will trade whatever is around 50 at 300 points. Suppose there is ₹100 on 300. If it is ₹0 on 300 then I will go 400 points away and sell the closest premium of ₹50 on the round figure strike of 100. So don't do it on strikes of 50. Correct? Ok? So I hope it is clear. We have to sell for minimum 50. (09:49) If it is more than 50, we will go further away and sell it for 50 only. 50 strikes are not to be taken. Only strikes of 100 have to be taken. What is the logic behind this? Sir, look what you are selling at a premium of ₹50. So you have a credit. Decent is credit. If you assume that sometimes the price is very low then you will get ₹20 for 200 points. (10:06) Correct. Now sir, what will you eat for ₹20? But what is the problem if it is 70? So if it is 70 then it means that IV is high. Ok. So the premium is high right now. We are more like IVs. It means that volatility is high. So you go a little further. Then you will be more safe. If the IV is high then it is very easy to fall by 200 points. (10:25) 50 Sweet spot here. Sweet Spot: Eating here comfortably will give you money, fill your stomach and you will not have any heart problems. Got it. Digestion will not be affected, base only. Ok? So that is why we have to follow this system. Now this ₹50 did not come randomly. (10:41) How much back testing have I done for this? We thought that when I was getting less than Rs 50, I was incurring losses. If I am taking a trade of more than 50 points and doing it at only 200 points in 70, then also I am incurring losses. But if I am doing ₹50 then I am getting maximum profit. Got it? So strategy is not made just like that, friends. It takes a lot of hard work. (10:57) A lot of backtesting has to be done and you guys got a strategy on such an opportunity in half an hour. Years of hard work is behind this. Got it. Ok. So these are our rules. Yes, okay. Well, all such research based strategies of ours are available in more detail in your own course on upsearch or is this all? Yes, I have a small course on Upsearch in which I have explained everything from basics to Greeks etc. (11:18) Two or three strategies have been explained. I explained the risk in a proper structured way. Ok. And the best part is that it is cheaper than the price of a pizza. So you explained it in more detail there? Yes, obviously it was. Here we have less time on YouTube. What happens there is that you have all the time. (11:33) So obviously I have explained things in more detail there. So for serious traders, you can go there and learn more strategies in detail. Yes. Plus I also keep taking webinars along with your search. So if you buy that course, you get access to it also. So to solve all the doubts. With live mentorship. Got it. (11:50) Let's come bum bum bum bum bum bum bum bum bum to the strategy sir. Sir, absolutely. So yes, what did we do? We have decided what to sell. We have to sell ourselves for a premium of ₹50. But the current expiry is there. Correct. Ok? Now what to do after that? You have sold yourself for Rs 50, right? We sold it for ₹50 from Let's. So we will go to the next expiry. (12:08) I will go to Buy Weekly and buy two lots of ₹25 each, half of ₹50. So there will be a lot of OTM. Yes. We will still say goodbye to him. So the nearby sale we have made is for the current expiry. OK this is weekly sorry. So we have to sell this weekly and whatever we have to buy, we have to sell it weekly. So yes, it is 25, so it will be bye after going a little distance. (12:35) And the second one is that it is for next week also and will already be a little more expensive. It wo n't be expensive, right? That's why we are buying only for ₹25. We are giving debit equal to the credit we have taken. Right? We received a credit of ₹50 by selling an option and bought two rods of ₹25 each, hence we are giving a debit of ₹50. (12:57) Okay, so if the credit and debit are equal but the buying leg is more then IV will increase or if the market ever crashes very badly, then I will show you an example of that right now that how it is going to benefit us and what is the reason for buying. Ok? So see here also I have written buy options worth half of the selling premium. (13:14) Correct. So there, if you have bought ₹55 from 60 lets at the closest round strike, then you will try to buy ₹26-₹27 for the next week. Next week's O lot. Ok? Got it. So these are the rules of our strategy sir. Ok. So this is its paragraph sir. Ok? Don't be afraid to see this. First he told us this is fine. (13:37) I know everyone thinks hey this is in the centre. This is something like this stock move. So look here this is your spot 24588 okay? That is, around ₹4600, we sold one lot, 200 points away, ₹2400, with a premium of ₹6. Correct, you can see its expiry, 9th September, right now it is 56. So, the next one I bought was 24.2, almost half. Okay, this is what we bought, half. We had to buy two lots. (14:06) The expiry date was for the next week. Right, the one we are selling is for the nearby expiry. The one we buy is for the far expiry. There is a difference of 500 points, almost, almost. That is why you are getting this pond area in the middle. Okay, but now you must be thinking that friend, if the gap goes down, then you will incur this loss. Sir, there will be this much loss in expiry. (14:29) Now understand one thing, when the market goes down, what happens, the IV increases. Correct, what do you have due to increase in IV? The buying premium is high, sorry, more buying lots. If it is true then this pay off graph improves. Ok? Who wants to understand the calendar or does not know the calendar. (14:48) The pay-off graph of the calendar is dynamic. Meaning that if IV increases then the pay off graph will improve. Are we okay? These losses will reduce, shrink and these profits will increase. Ok? And if IV decreases then these losses will increase and the profit will shrink. Ok? Ok? So this is a dynamic pay off graph. But because we do not have any debit, if you look at the trade even then we are in credit, so even if IV decreases, because we have credit we will earn that money. (15:18) Right? Ok? Now the one who is thinking that Sir, what will happen if the gap goes down now? So, I want to tell you or the audience that I know that your question will be that if there is a big gap down then there will be huge loss, this will happen, that will happen. So let me explain it to you with an example. (15:36) Look sir, on April 7th, when Trump tweeted about tariffs for the first time. Ok? So there was a lower circuit of 5% in the market. Right? Ok? So look it's Friday, April 4th at 36 pm. Ok ? We made an entry. What all has he sold ? ₹57 is it ok? This is what was available at a strike price of 100. And half of that around 26*52. (15:58) Look, we have sold 14 lots in one lot. We bought 28 lots. 1 2 is ours. You can also check the expiry date, it is 9th April and bye is next week. Got it. what would happen? You should understand that this huge loss which you are seeing on the down side, when the market would have taken a lower circuit, then what can happen with this trade, tell me, where it is on the down side, the loss on the down side is showing 2. (16:24) 5 lakhs, yes, then what would have happened the next day, then I will show you, the gap down would have increased further, that means the gap down would have happened and because of the gap down, the IV would have increased, due to the increase in IV, our option premium would have increased and because of its increase, because our buying side is more, we have lots. (16:40) Yes and because he is of far expiry. Their price must have increased a lot. It may have been reduced to a lesser extent. You tell me what will happen to me? That's what I feel. I mean that's what I feel that its price might have reduced a little because it is a weekly so its price will also increase. It is not that it will not increase. (16:55) Correct. This will also increase. But because we have more buying. Yes, the quantity of buying premium is high. Is too much. Yes. So we benefited more from that. The loss in this has reduced. Let's see. I guess yes you are right. This is the profit at 920 next day on 7th April, yes next day and look at the pay off, the loss is over, right, so what we were seeing here was like this, now see what was our spot, our spot was at 22897, our spot was at 22900, tell me what is the next day, ₹1890, there is a gap down of (17:32) 1000 points, we made ₹1.5 lakh on a deployed capital of around 10 lakh, here the margin also increased because of IV spike correct. But you made money, your money did not go out of your pocket. So this is the beauty of this strategy that if it goes up, money will be made, if it goes sideways, money will be made and sometimes if there is a huge gap down, then more money will be made. (17:53) Now tell me when will there be losses in cap in plus ? When the gap up gets bigger. Otherwise, now we are not taking any debit card with us. If you understand then it was sold for Rs 57. If the market goes up then this will be zero. Ok? How much is 26 * 2? 52 We are ₹53, so this is going to be zero next week, so this will give us profit. (18:15) Even if it goes up, there is profit. Even if it is sideways, there is profit. Even if there is a big gap down, there is still profit. You asked when will the loss occur? So when the market gradually comes down by 200-300 points, we will incur loss. That today I placed a trade and tomorrow I will incur a loss of 300 points. (18:29) But today I placed a trade and it came up a little , it is sideways. Going up, going down, huge gap down. He makes profit for himself in all those cases. But again it might be coming to your mind that Sir, how can we trade it like this? So I always talk about back test report. Ok? Your backtesting gives you the confidence to trade any strategy. (18:47) If in the back test it is saying that no friend this strategy is profitable then we can do it. Right? So let me show you the back test. Then you might get an idea. So look. So this is the back test report. Here also it has been taken from September only. Why again? Because what are we doing here? We are taking entries on Tuesday. (19:04) We are taking exit on Friday. We're not coming for the weekend. Correct. If we go before September, entry was on Thursday. Ok? And then the weekend was coming two days in two days. Sometimes there is a 300 point gap down, sometimes a 400 point gap down, so there will be a loss there. Because of this we are not taking the risk of the weekend. (19:21) And that's why I've been backtesting it since September. Again, do not trade blindly by trusting anyone. You have to do the backtest yourself. Have to do the forward test myself. Then you have to go slowly. Look here sir, you see the returns, in 4 months it is 12.8%, we have almost 3% per month return. Correct. (19:38) Ok? Max Loss: If you look at your average profit and average loss, it is almost 1/1. Are we okay? If you look at the drawdown, almost it is 1.5%. Correct. Ok? You should see the accuracy. 88% of the time out of 16 trades 14 trades are profitable for you. There is loss in only two trades. Without doing anything, without making any adjustments. (20:02) And when should you use this strategy? When you expect IV to form. Yes, my question was what should be the market scenarios for deploying the strategy. I have to discuss all the remaining strategies with you. I have done it. The only thing in it is that you have to avoid the event. So this strategy is going to be deployed at the time of the event. (20:19) So when you are not doing that, do this. Do this because whenever an event comes, IV increases and this strategy favors IV. Hmm so if your expectation is that IV is going to increase there is an event coming up that is going to spike. You can deploy this strategy. Now how is this better than normal option selling? When the IV spikes. (20:38) That's when you sell the top. And then its value decreases. Be it a call or a put. Hmm. So look, now there are two types of trades. One is that you are trading IV Spike. One is you after even IV crush to trade crush. So when you want to trade IB Crush, your strategy selection should be that it should be short Vega trades. (20:57) We call it Iron Fly Iron Condor Ratios. But when trading for IB spikes, they should be long Vega trades which only the calendar provides you. Ok? So this strategy is for those where the IB is going to rise or you have a slightly sideways to bullish view and this strategy gives you a gap down protection. (21:17) It is a sideways to bullish strategy but gives you protection against gap downs. Okay all right ? Got it. So if I sum it up once and for all, whenever you feel like the market, Vega is going to increase. Volatility in the market is going to increase. That's when you deploy this. Yes. What you have to do in that is that you have to schedule your trades on Tuesday, yes and that trade will run till Friday correct. (21:40) On Tuesday evening, you have to come and sell one lot of Nifty OTMs at a premium of around ₹50. And after that, in the next week's expiry, two lots have to be bought at the strike price with a premium of around Rs 25. Correct. Right? Now if in that case if it goes up slowly, that is when you make profit sideways, that is when you make profit, if there is an immediate gap down then there will be a loss, if there is a small gap down then there will be a loss, if there is a very big gap down then there will be a (22:12) profit, a big gap down in which the IV increases, there will be a spike in the IV, it will obviously happen, you think, if there is a lower surge then the IV will burst, correct, in such a gap down in which the IV bursts, you will make a profit, yes and rest again in sideways you will definitely get returns, yes yes yes got it. (22:29) So this actually sums up the entire strategy. Yes exactly. Am I wrong about this ? No sir, you have briefed it very well. perfect. So great sir. Meaning, there was a blank space left for swing trading strategies, option selling strategies and strategies after the event where you are not trading. (22:48) The only blank left was what to do at the event. So I think this sums up that part. A thank you so much for that. And how did you like the entire strategy? Let us know in the comment section below. Again I know it is option selling and there are so many legs and after that the pay off chart which comes, I also think it is confusing and you too might find it confusing. (23:05) So whatever questions you have, whatever doubts you have, let us know in the comment section below and sir will help us to answer all of them. And by the way, this was the event specific and event days strategy. If you need a strategy for option selling for regular trading, you will get Sir's strategies somewhere here right now. (23:21) And Hit The Like Button If You Like This Video. Share this with all your trader friends. And we'll see you with the next infatuation content like this. Till then keep learning, keep trading, keep option selling now on the events as well with upsearch.