Non-Directional Hedging Strategy | Market Up Ho Ya Down Profit Kaise Banaye? | Jabalpur Share Bazar

If you look, how much max profit is visible here with one lot? Around 8000. When I created this, I could make a profit of 8000 per lot, and now if you look, I have option selling done with three lots each, so in this hedging, I am set to make at least 16 to 18000 in the next two days. Hello everyone, Jai Siyaram friends! Welcome back to the Jabalpur Share Ba educational channel. Friends, today's video is going to be amazing, it's going to be a learning video. You all have been waiting for a long time, the reason is that you know our August batch practice session is going on. Classes run at both times. Classes run for 2 hours in the morning. Classes run for 2 hours in the evening. That is why videos have not been coming for a long time. Today is Saturday and Sunday, so I am definitely going to make some learning videos for you. So today's topic is going to be the most important one. We are going to learn about strike price selection in the option chain. Friends, I am an option seller. I have learned option selling over the past several years and have been doing it, and I make a very good amount of money from option selling. If you know me, you must know me as an option seller. So in today's video, I am going to teach you how you, too, whenever you want to create a non-directional hedge in intraday— meaning you believe the market will stay in a small range—should decide which strikes to sell and which ones have the most theta decay. So currently , if you look, I have some positions open here. I am going to carry these positions over to Monday. You will see, what have I done? I have sold the 24,300 put option at around 93, and along with that, you will see I have also sold the 24,350 call option. Now, these one, two, three, four positions you see here are called non-directional . So whenever you want to create a non-directional hedge, how should you select the strikes? Right now, you can see that when the market closed, I made a profit of 1600 in this. But I didn't set up this trade for just this 1600. My agenda behind creating this trade is very clear. If you look, how much max profit is visible here with one lot? Around 8000. When I created this, my one lot could yield a profit of 8,000. And if you look now, my option selling is set up with three lots each. So, in this hedging, I am going to make at least 16 to 18,000 profit in the next two days. So, the main thing is that whenever you are creating any non-directional hedging. As you can see now, we call this non-directional. Now, what does non-directional mean? Whenever you feel that Nifty is going to trade in a small range, or Bank Nifty is going to trade in a small range, that is generally when we create non-directional hedging. Now, what happens in non-directional is, for example, assume Nifty is currently trading exactly at this level. So, from where Nifty is trading, what do we need to do? Whatever OTM section is above, we need to do what with its call option ? It needs to be sold. And what do we have to do with the put options below? We have to sell them. This is what a non-directional payoff graph is. Now, if you look at this graph of mine, you can see here that the area visible on the upper side is our profit area. Look , if I zoom in and show you carefully, then whenever the market trades anywhere within this zone, what will we get the most of? We will get profit. And here you can see on the left and right. Where our what is going to happen? It is going to be a loss. So, whenever you are learning option selling or doing option hedging, you must know whether you are doing non-directional or directional. It is very important to have adjustments in every hedging. Whenever my Jabalpur share market classes are held, whether online or offline, I teach adjustments to every student. Keep in mind that only through adjustments will you get benefits. So, here you will see that whenever you have to create a non-directional hedging, the most important requirement we have is the selection of the strike price. So, in today's video, what are we going to learn? How is the strike price selected ? Like this hedging of mine that is currently active. How did I select the strike price for it? All the videos you have been watching before this, one way or another, relate to hedging, and today we will discuss how strike price selection works in that context. So, whenever we select a strike price, I am generally going to give you a great strategy today, which we call the Option Chain. Yes friends, today I am going to teach you about the Option Chain, and if you do non-directional hedging by understanding its data, you will get significant benefits and will also likely make some money. So, it should be clear to you which tools we are going to use for non-directional hedging. We are going to use the Option Chain. I have already prepared many videos for you. The next video will be about how the strike price selection for CE and PE is done. What is the difference between ATM and OTM strike prices? What is the strike for OI volume? These topics will be part of your upcoming syllabus. I will teach you all these topics in the next three to four days. Today's top topic is how to read Option Chain analysis, and whenever you want to do non-directional hedging, the best tool we have is the Option Chain. So, you can create non-directional hedging based on the Option Chain data. So, whenever you want to create a non-directional hedge, what should you do first? Go to the Option Chain. There is an official NSE website, which I am sure you are aware of. As soon as you go to the NSE Option Chain, you will see the best Option Chain data there. Every broker shows different Option Chain data. But the data from the NSE is the most primary one. So, if you want to do option selling or option hedging in Nifty, what should you do? Go to the official NSE website or simply type "Nifty Option Chain." As soon as you go to Google and type "Nifty Option Chain," what will we get directly here? The Option Chain. Or you can search for NSE . As you can see here, the second option you will see is for the Option Chain. So, both are ways to access the Option Chain. You can go ahead and take a look at the Option Chain. The benefit we get from the option chain is that we find out the call writer and put writer data, where positions are being built in the market, and up to what point we will be safe in the market. So that is why I am showing you the Nifty option chain here. And with the Nifty option chain, today I am going to create a setup for you so that whenever you are creating a non-directional hedging in intraday, weekly, or BTST, you should know up to where you will be safe and which premium you should sell and when. Okay? I am making a detailed video on this, so the video will be long, but you will definitely get to learn something. So first of all, look at the fact that Nifty is currently trading at 24,250. Okay? This is the spot price. The spot price means where Nifty is currently standing. So I will also show you the Nifty chart once so that you understand and the strategy I am teaching you is also understood by you in the right way. So here you are seeing that our Nifty chart is up, and the Nifty chart shows the market is trading around 24,250. This is the spot price. The spot price means where the market closed in Friday's trading session. So you will see that in Friday's trading session, Nifty closed around 24,250. So now what we have to do is, like my belief is that the market is going to be sideways now. For example, I believe that I want to create a non-directional hedging now. So whenever I create a non-directional hedging, which premium should I sell and which strikes should I sell? This is exactly what I am going to do here today. I am going to teach you. So first of all, let's pull up the Nifty chart so you get an idea of what strategy we are talking about. So for now, I have pulled up the Nifty chart here. This is a one-day time frame. So we will put it on a smaller time frame. What we do is? We put it on 5 minutes so that you understand how we will do things here according to 5 minutes. We will study the topic. So now you will see that this is the market's Friday trading session. Okay? Suppose you assume that you want to find out that sir, the market has closed here. You need to use these things when the market is live. Right? What will the data be in a closed market? It will look exactly the same as what we are seeing. But if we want to do it in a live market, you need to keep in mind how we plan the trade. Okay? So for now , I will try to teach you quickly so that your main agenda—that is, sir, whenever we want to create a non-directional hedging, what are the requirements for that—I will teach you everything. So first of all, keep in mind that whenever you create a non-directional hedging, you have to look at what your spot price is. For example, if you look here, the market is showing slightly higher due to the cash market running right here. So the market is trading at 24,250. For example, the market closed right here. Now, I feel like the market might go a little higher from here. It might go a little lower. It might be slightly sideways. You will have to form your own view on whether you feel the market is bullish, bearish, or sideways. For instance, whenever Friday comes, all my students who know me know that I always tell them not to trade too much on Fridays because when do you face the most losses? On Friday. Because Friday is the day with the most volatility. The market moves up and down, and by the end of the day, you will see all the premiums become what? Zero, and you get theta decay quite rapidly. So I am going to show you how you can enjoy non-directional hedging and perform it. So, simply keep in mind that whenever you trade, the first thing you need to see is where the market is trading. So here, you will first see that the market is trading at 24,250. So what have we seen? What price of the market is this 24,250? Spot price. Now, where do we have to go from here? We have already seen the spot price. Now we have to come to the option chain and see where the call writers and put writers are sitting the most in the market. You have to go there and do what? Punch in the trade. First of all, see that since the market just closed, the closing data will be different. But the live market data will be something else. Still, you all should try to learn a little so you can get an idea. So here we see that the market closed at 24,250. So, this 24,250—this is your spot price, the market's main price. Now from here, look carefully; you have to come here to the column for OI, which we call weekly OI. Okay? If I am doing non-directional trading, then always remember that in non-directional , you need to keep an eye on the weekly OI. Changing OI is monitored intraday for directional trading. If you are doing directional hedging, then which OI should you definitely use? Changing OI. But I use Changing OI for directional hedging, but if you are doing non-directional hedging, then in non-directional, you must always use the OI, which one? The weekly one. Now look carefully, what did you see? That sir, this is the spot price and our market is currently trading at 24,250, this is your spot price, and from here, look slowly that the data for call writers and put writers seen here is 14,000; so now what you have to do is go about five strikes up from here and five strikes down from here. Look carefully, I am explaining the math in Nifty. It’s the Nifty math, right? Remember, what you have to do is leave the spot price alone. Like, which spot price has come up now? 24,200, this is locked. Right? This has become your ATM . Suppose, let's assume. Now we have to go five strikes up from here. Look, 1, 2, 3, 4, 5, okay? We went five steps up . Now go down from here. Five. 1, 2, 3, 4, 5, so what do we have to do? In Nifty, simply whenever you want to create a non-directional hedge intraday , keep in mind what the math is. Simply find the spot price. Go five steps above the spot price. Go five steps below the spot price. Okay? What was the first task? To go five strikes away . 1, 2, 3, 4, 5, 1, 2, 3, 4, 5, okay? Found the ATM. Went five strikes ahead from the ATM. Went five strikes up from the ATM. Look carefully. Which strike has come up now? Look carefully. Remember. Our fifth strike now is 24,500. Look carefully, remember which is the fifth strike? 24,500 and the fifth strike from here is which one? Around 24,000. So this is the five-step strike. What did you do? You went five steps up from the ATM. You went five steps down from the ATM. Now what will be your job? After these five strikes, sell the one with the highest open interest, meaning the one with the highest weekly OI. Sell it without any worry. You will have no tension. Simply , you will see that 24,500 is our fifth strike. Okay? Now you must not touch these five strikes because you are a non-directional trader, so what do we need in non-directional? A payoff graph should be created where we have a wider range and the market decays theta here. So my plan is to leave the five strikes above the ATM. Leave the five strikes below the ATM. And I don't have to look at any open interest in these five strikes. When should I look at the open interest? The strike after the fifth one. Look carefully. Now what did I do? Locked 24,500. Locked the 24,000 one. Okay? Now all the strikes in between are of no use to us because they will work for intraday. Now we have to see here who has the highest open interest. Okay? Now look here, at 24,600, look carefully. It is around 13,300. I am scrolling down a bit. Right? So this is our fifth strike. Okay? And this is the fifth strike here. Look carefully. Right? We need to go below 500 now. So below 500, let's see whose open interest is higher. So 500 was our fifth strike. These five strikes are locked for us. Now after this, whose weekly open interest is higher? Look carefully. This is locked. We won't touch this. Okay? Now where do we see the highest open interest below this? We have to sell that. So look here, it is 130,000. How much is it here? 14,000 , 10,000 and here look at 180, look carefully. Now this is 180,000 but its premium is very low. So what will we do ? After the fifth one, we will sell the one right above it which has a more expensive OI. So what did I select here ? You can see here that the strike price I have selected is 24,600. So friends, what you will do with 24,600 is go ahead and...sell it. This entire premium will become what? It will become zero. Now look, the same math applies here. Right? Now you will see here what position is forming and how we will trade. So, we went up to 24,000 . 24,000 is locked for us. Right? Look, we went from here, where did 24,000 go? 24,000 was our fifth strike. Right? See , the fifth strike was 24,000. Right? We went into the money on the put side. So, this is the put side. This premium of ours was locked. The fifth strike. Now, after this, whichever strike has the higher premium. Watch carefully. Let's go here now, and you will see that this was the fifth strike. After the fifth strike, which one has higher open interest? This one. You have to sell this one at 5.90. Now you might ask, why are these premiums so cheap? I will tell you the reason, because how many days are left for expiry? 2 days. So, this premium seems small and low to you right now. But like you do in Bank Nifty, Sensex, or if you do this right after expiry on Wednesday or Thursday, you get much larger premiums. So, did you understand what the strategy is? Whenever you want to create a non-directional hedging. Rule number one, first of all, what do we need to look at? We need to look at the spot price. Now you have found the spot price. From the spot price, you need to go up. How many steps do you need to go ? Five steps. Go down five steps. And whichever has the higher open interest, we have to create a non-directional hedge in that. So now, let me show you how to do it in Bank Nifty, because Bank Nifty is the most fun, as this one has the weekly expiry tension. But in Bank Nifty, you only get one expiry, the monthly expiry. So, non-directional hedging is the most fun in Bank Nifty. Because whenever you do non-directional hedging, you get the most money in intraday in Bank Nifty. Because here, the market is usually range-bound. So, we are going to deploy these hedging strategies in Bank Nifty. Non-directional hedging, which we call the method of finding it according to the option chain. So we will look at the option chain and play a non-directional hedging strategy along with it. Come on friends, we are going to use the exact same strategy in Bank Nifty, and today we will see what our payoff graph looks like and how we can enjoy this hedging in Bank Nifty. First of all, you learned Rule Number 1 that whenever you want to create a non-directional hedge, you can do it at 10:00 AM, 12:00 PM, or 2:00 PM. I am telling you these three timings. In these three timings, the market is mostly sideways. Don't try to create this at 9:15 because the volatility is very high at 9:15. So what we do is, as I mentioned, you can create it at 10:00 AM, 12:00 PM, or 2:00 PM. You can create it anytime during these three timings. Now, for example, assume it is 10:00 AM. Now, at 10:00 AM, I want to deploy a non-directional hedge in Bank Nifty here. And which one? Intraday. You don't have to carry this as a positional trade. Okay? It has to be created intraday. You have to close it out within the day. So what will be your plan? First of all, as I told you, where the market is currently standing is called the spot price. So what is the market currently trading at? 57,800 . So what do we do? We will go to the option chain. First, we will find the strike where the market is currently trading. So the market is standing around 57,800. So 57,800 will become our...ATM. Now, as I taught you, you have to find the strike where the market is currently standing. So, this becomes your ATM. You must already understand ATM. If you don't understand ATM or Out of the Money, then check out the video I uploaded before this. Now we have found the ATM strike. What was Rule Number 2? That you have to go five strikes ahead. This is one. This is two , three, four, five. You must not touch these five strikes. Okay? Like, since this is the call side, you always have to stay in OTM on the call side. Now you will ask, "Sir, can't I go In-the-Money?" You absolutely must not go In-the-Money because you are an option seller here, so whenever a seller creates a non-directional trade, they will create it on which side? The OTM side. So remember, don't even try to enter In-The-Money. You will incur a loss in In-The-Money, right? So where should you head? Towards OTM. So here you can see these are the Out-Of-The-Money premiums. So what did we do? We skipped five strikes entirely because we won't make money on those five strikes. What did I tell you? You have to skip five strikes. Now, after five strikes, you look at which one is the fifth strike. It's 58,300, right? This is my fifth strike. Now, whatever premium is expensive after this, what will I do? I will sell it. So right now , I am just checking which one has the highest open interest after 300. So this strike of mine is locked. Now I am looking here to see which one has higher open interest. So here you can see, roughly it looks like 400 rupees. So 400 rupees, meaning its premium is trading around 28,300. So what will I do with this, friends? I will sell it. Remember the strike, I am selling the 58,500 call option. Okay? Now, for example, it is 10:00 AM and I want to use this intraday non-directional strategy. So what did I do? I sold the 58,500 call option. Okay? Now what am I going to do? I will find the put option as well. So how to find the put option? What was the math for the put option? First of all, keep the ATM in mind. This is your ATM. Now, take five steps above the ATM. 1, 2, 3, 4, 5, don't even touch these five steps. Because this is where the most SL will hit and you will face the most loss here. So you must not touch those five steps at all. Now look, which was the fifth strike? 57,300, now we moved above this . We moved above this, so where will it go? Look, the highest was at 300. Now, whatever premium you find above this with the highest open interest, look, the highest open interest is here. Remember the strike, we have to sell the 57,000 call option. Now, why did I choose this 57,000 only? Let me tell you the reason. First of all, look here , the open interest here is very low, and where the OI is the highest, that is where we play our non-directional hedging. So now remember, we selected the 57,000 put option to sell, and what did we sell on the other side? 57 and remember a little bit, we sold this below 300, uh, roughly yes, 400. So, we had two strikes come up in intraday. One was the 57,000 strike itself. I selected the 57,000 put option to sell and the 58,500 call option to sell. Let's deploy this hedging now, and I will tell you what our risk-reward could be and how we can trade it. Let's have a quick discussion about all these things right away. And currently, the last and final closing is underway. So, you watch the video very carefully. And if you want to learn option selling and hedging, let me update you that our new batch is starting from September 1st. Many people are coming offline. Many people are also going to join online. If you are interested in learning option selling and option hedging. Even if you have low capital of ₹ 6,000, you still want to make good money through hedging. Then definitely contact us on the given number so you can get full details about the new batch and work with us at a high level. So, if you want to make an inquiry now, you can do so. Our batch will start from September 1st. For now, let's look at deploying the hedging that I told you about. Just consider this a demo I am showing you so you get an idea of how to create a non-directional hedge in intraday. Now look carefully, suppose I believe I am trading in Bank Nifty today, so I selected Bank Nifty. Now, what have I told you? Whenever you create a non-directional hedge, remember the times: 10:00 AM, 12:00 PM, or 2:00 PM. You have to create a non-directional hedge only during these three timings. There is no need for you to create it outside of these. So, I went to Bank Nifty and decided that it is 10:00 AM right now. For example, what time is it? 10. So I went and selected the date here. This is the AlgoTest platform. Whenever you join me and take my hedging classes, I will teach you how to run algorithms and everything else. What can you do with this? You can backtest or forward test any of your strategies. You will get a very good benefit from this. So, just like I decided that my time is around 10:00 AM. I went at 10:00 AM and decided that I need to build a non-directional hedging strategy. So, for building a non-directional hedge, what was the first thing I had to do? Watch carefully, it's 10:00 AM, and our view around 10:00 AM is that I need to create a non-directional hedge. So, what was the ATM at 10:00 AM? 57800, so we have to go five strikes from here. 1 , 2, 3, 4, 5—you must not touch these five strikes at all because these five strikes have the highest IV and the highest OI. In the market, the premiums here will rise, fall, rise, fall, and your stop-loss will be hit due to volatility. So, what calculation have I kept? That I will not even touch those five strikes. Right? Now, whenever I need to create a non-directional hedge, it means selling both calls and puts. So, from here, I won't touch these five —1, 2, 3, 4, 5. Now, where was the highest open interest after that? It was here. If you look, the premium trading at ₹ 41 was where our......OI was. Right? Of 58,000. What did I do with it? I sold it. Now friends, I sold it here. Okay? So, this is my strike selection for the call side. Now, the same thing for the put side. 1, 2, 3, 4 , 5—you must not touch these five strikes at all. As I said, stay away from these five strikes. Okay? The most stop-losses will be hit in these five strikes. Leave these five strikes alone . Now, what to do? Who had the highest open interest? When we were trading or looking, the market is closed now. That's what it is showing. But when we were trading, it was somewhere here when I was non-directional in the morning, so 57100 premium will come. Right? Right now the market is closed, so when is the option chain data showing? At 3:30. But when you look at the 10:00 AM data, the situation there will be slightly different. So, I am telling you based on the 10:00 AM data. So, what I have to do here is, you can see right now that I will sell this premium. I will sell the premium of ₹ 63. Now you will see here that the payoff graph that has been created will help you understand one thing. What a payoff graph means is, look here, this yellow line moving is your spot price. Spot means the market's main price. Now the market's main price is running, and from here, what we have to do is, you sold it and it will go up from here. This entire space you see, what is going to be created here for us? Profit will be made. When will there be a loss ? When the market becomes too trending, then there will be a loss. But in this hedging, what have I taught you? Brother, you have to go five strikes up . You have to go five strikes up. In intraday, the market will not cross five strikes. So be rest assured, it is a very interesting strategy. So the simple math is that you have to go five strikes up. You have to go five strikes down. Here you can see, how much profit is it showing? Around 3000. And here, what loss is it showing you right now? It is showing unlimited loss. We call this unlimited because what have you done here? You haven't hedged the option. You haven't done any hedging. What have you done here only and only? Naked option selling. Naked option selling means you have sold it without hedging. But when you saw my account, there were four positions of mine here. So in these four positions, what had I done? I had also created a hedge. So hedging means buying an out-of-the-money premium. So along with these premiums, you can buy a premium of ₹ 1 or ₹ 2. What will happen with this is, the margin of ₹ 2 lakh being used here will decrease, and this hedge will be created between just ₹ 80,000 or ₹ 1 lakh. Okay? You try doing this and see. If you don't understand, write in the comment box. In the next video, I will show you how to do this as well. For now, you have made it simple. Now, after creating it, what do you have to do? You don't have to make any adjustments. You don't have to move an inch. You placed it at 10:00 or 12:00. You can keep it until 3:00 or 3:30. You can easily hold it until 3:00 PM or 3:15 PM. You will easily get a 1% to 1.5%return for the day. So now you will see that I created this at 10:00 AM. All right? I check it at 11:00 AM. So around 11:00 AM, how much profit am I getting? I am getting a small profit because the premiums are small. Now notice that by 11:00 AM, the premiums have settled a bit. If you look around 12:00 PM, how much is our profit? Around 300. All right? Now let's check the status around 1:00 PM. So around 1:00 PM, where is our profit? Around 400. All right? Then let's see where the profit is around 2:00 PM. So around 2:00 PM, where is our profit? Around ₹ 500. All right? And let's see, as I told you, by 3:00 PM or 3:30 PM, you should exit and be done. So you will see that by 3:00 PM, we got a profit of ₹ 500 to ₹ 600 here. As you go further, what will we get in our premiums? Time decay, theta decay. You will see that today you got less benefit from time decay and theta decay because the expiry is very close. So right now, the premiums are very small. So whenever you want to use such a trick or hedging in intraday where you have zero loss and don't need to make any adjustments, I have given you this simple strategy. Backtest this strategy repeatedly by going forward and backward. You are going to get the results. You just need to backtest it honestly, and if you want to learn option selling and hedging, then definitely subscribe to this channel because I am going to bring even better strategies for you in the next video.