Straddle Selling Ke 4 Simple Rules | 45 DTE Monthly Strategy For Beginners (Hindi) | Theta Gainers

Look, in the previous series, the Iron Condor series, we learned how you, as a beginner, can do monthly trading at a very low cost. Alright? But there is a strategy that is used by so many people . Okay? So I want to simplify that strategy as well, first for the beginner level concept, so you know how to use it always, all the time, year after year, consistently. Alright, so first we will create a systematic version of it. Then I will show you that if you get stuck somewhere, if you feel there is something else that should be done, then I will teach you its adjustments. Right? So we will keep this in two ranges and after that, we will move forward to learn more. Okay? So look, first of all, today we are going to talk about the most famous straddle trading. A straddle is basically where we trade at the money. Alright? When we create a spread of at-the-money call and at-the-money put, whether you buy or sell, we call it a straddle. Okay? Now look, people have been using straddles on a daily intraday basis for trading and also on a weekly basis. They have been doing it on a monthly basis too. And you wouldn't believe that people even create straddles for the next year. They even do it in leap years. So look, today I am going to talk about where you can make some money. Right? So as far as intraday is concerned, many of you must have noticed by now that over the last two years, the power of straddles and strangles has gradually been fading away. Volatility increased a bit recently due to the war, so profitability has returned slightly. But whenever IV and VIX are in a low zone, you will find it very difficult to make money in straddles. Alright? So now let's see how you, as a beginner, can trade a straddle in a very perfect and elegant systematic version. Okay? So let's first look at the creation of a straddle, how a straddle is formed. Right? So let's go to the strategy builder. Okay? Now we have gone into the builder. So I am just teaching you directly here right now. Let's assume I wanted to create a trade right now, today itself. So, what would the straddle look like? Look, first of all, what do you need to do to create the trade? Always, when you are doing monthlies, always go for 60 DTE or 45 DTE. Why am I saying this? Because when you are an option seller—we are going to study option selling here. Okay? So, when you are an option seller and you are trading for the first time, I would want you not to do too much firefighting. You would want to feel safer by having as much premium as possible. If you collect the premium in advance, then even if you face some minor issues later, adjustments become easier. But if you don't have the premium, those adjustments will become very tough for you. Because see, if you don't create a straddle 45 to 60 days in advance, you won't get large premiums or a wider range for the straddle; and without that, the closer you get to expiry, your gamma exposure will increase. Delta exposure will increase. Theta power will decrease. So , what we want is for that theta power to build up. And why a straddle specifically? Because the straddle has the highest intrinsic value. Why? Because the straddle's premium is at the money. It has to go to zero eventually, because it will go out of the money on one side or the other. So it will be zero, but it also has the highest premium. So, we need to take advantage of that. Okay? So, for creation, what are the rules? You need to create the straddle 45 days in advance. Okay? So, let's talk about 45 days in advance, let's look at the DTEs here. The October 27th monthly expiry is 54 days away from today. So I'm just showing it as an example. But we will obviously create it at 45 days. So, if I am 54 DTE ahead, we need to create it at 45 from here. Okay? You can create it in the 40 to 50 DTE range. But beyond 50, you've gone into two months. Why keep a trade for two months? We want our rollover to remain consistent. So 45 is the best number. But for example, right now, I don't have any choice. So we are choosing 45 here. So, where is the market standing right now? If we look at the spot, it's around 23,870. Okay? If we look at the futures , it is around 23,970. So basically, the 24,000 area, that is 23,900 and 24,000, will basically be called at-the-money. So if we look here, the premium for 24,000 is 338 and 415 for Nifty. Okay? So if we sell these, sell one side and sell one side. This is a pure naked strangle which is giving me a 56%POP, more than 50%. Net credit of ₹ 49,000, that is 22%of your used margin of 2.14 lakh. Okay? We assume this margin can go up to 2.5 as well because as expiry gets closer, the margin gradually keeps increasing. So if you see, in about 45 to 50 days, you get to see a profit of 22%here. Okay? Now you have created this. After creating it, let me simplify some of its rules. Look, what I am going to tell you in this video today will be a completely systematic straddle trading. Systematic means you have to leave your brain at home and just follow the rules . Okay? So you have created this 45 DTE before. Now, see, you have two things to know here. Remove this POP from here . You don't need to know anything. You only need to know what your max profit is. What is my max profit here? 49,000, that is 22.9%of the whole premium. Okay ? What I want is that if I create it on average at 45 DTE and I get this profit every time, then if I happen to lose this much in any month, it means I will earn it back next time in one go. A person should always keep their SL only as much as they can earn later. Okay? So now look, my SL will never increase the credit. So basically, my credit is my SL. Okay? And what will my TP be called? If at any point I am making 50% of this 49,000, I will exit my trade at that time. Otherwise, you must remember my previous rule. Otherwise, you will exit your straddle at 21 DTE, meaning 21 days before expiry. I know you all will go crazy hearing this, that there are only 25 days in a month for expiry. You are exiting 21 days before. Do you understand what I'm saying? You are exiting 21 days before, so what will you even get? But let me tell you a reality, and many research papers state that the mid-area of any options contract is where linear decay happens. Let me explain the meaning of linear decay to you. If you don't understand, where should I explain? I'll explain it here. What is linear decay? See, our theta decay chart is something like this. Right? It goes like this, and like this, and then it drops sharply here. Consider this 60 DTE, this middle part 30 DTE, and consider this 0 DTE expiry date. Right? Now look closely. In the beginning days, nothing happens here. But this area, from here to here, is where you will see linear decay. And this is a proven chart. This is the theta chart. So, linear decay means that if the market isn't moving too much against your taken position. Right ? It means you will keep getting linear decay on a day-by-day basis. And this is the perfect timing where only theta dominates. Gamma has no role here. There is delta. Obviously delta, because there will be movement, but in this area, gamma—meaning an extra fighter—is not there. Meaning your army is fighting one-on-one. Here, it's not like you have one soldier and the opponent has two. Here, one soldier is fighting one soldier. Theta is fighting delta. But in this area, theta is fighting both delta and gamma. So, basically, in a 1: 2 situation, the chances of us losing are higher. And you will see that on expiry days, you have to keep shifting and adjusting the straddle, and in the end, perhaps nothing remains; this has happened many times recently. Right? That's why we chose 45 and 21. When I show you these things live in the future, you will probably understand these things better . Right? So for now, I have explained to you why we took it. Now here it is. Now let's try this out to see how it works. I won't open any charts at all. Right? So now let's go to analytics and let's go to the simulator. Right. We go to the date. What is going on right now ? It's September. What was our last expiry? August. It's Nifty, right? Our expiry was on August 25th. Okay? So if we go 45 DTE from here, about a month prior, let's just guess around the 14th ; do we get 45 DTE? We are getting 42 DTE, roughly, for August 25th. Okay? Let's make it more precise. We'll set it to Friday the 10th. Now we will get 45-46 DTE, that is perfect. The timing should be around 3:15, or 3:10, or 3: 16—essentially after 3:00 PM. Now let's select our chain for 46 DTE here. Now look, you’ve set it on July 10th for August 25th. Okay? You have 46 days . As soon as you have 21 days left, either your SL (stop loss) will hit or your TP (take profit) will hit. This is purely for beginners who can do this systematically. I’m telling you this is purely for beginners, and you can do it, so let's try it out. I will explain its risk management and money management later. So watch the video until the end because that is the most important part. Executing this is not the most important part. Patience and how much capital you’ve deployed is the main task. Okay? So now, let’s deploy it. See, it is 24,200. I sold this here and sold this on this side. Look, what credit did I get this time? 24%, too good. Okay? And only 2.18 was required as margin. Margin keeps fluctuating. Now look, we have three things here. Either my SL of ₹ 52,000 hits, or I gain ₹ 26,000, or there are 21 DTE left. If any of these three happen, I will exit here. Other than that, I don't have to do anything here. Okay? I won’t do anything. So let's go day by day. Did anything happen? No, no, no, just profit and loss. The profit and loss is moving. Look, we have reached a profit of ₹ 11,000. 12 , 13,000. As the days pass, it becomes easier to hold. Okay? That’s a great thing about a straddle. Let me check once. Okay, we have reached 14 DTE. Sorry, 15, 18, 19, 20, 21 DTE—there we go, we have reached 21 DTE. And the money our straddle has given us is ₹ 18,160, okay? Which is 5.4%on your margin. On your margin. Understand this carefully. Okay? So we have earned ₹ 12,000. The fees we would have paid here is almost negligible. Because you only placed two orders. Both orders were closed, that too within a month. Okay? So, this is my first example. I am not even looking at the chart. I will show you the charts continuously to hell with it. I won't do anything in it. Okay? Now it's August. When was our July expiry? On the 28th. Okay? So now, we are placing the July trade on June 15th. Let's look at the 17th, how many DTE? 41 DTE will work. I'm okay with that, I am clearing these. What have we done again at 41 DTE? Is 2400 running? Look at the future, because premiums are a bit different based on futures. It is 24180, so 2400 is fine. Sell and sell, again 36 is running. Nothing to do. Again, rules are the same, again we are getting 52,000, and firstly, 52,000 is a very big amount. IV is at 14-15 right now. We call this IV highly elevated. But it's very good for option sellers. I will explain the IV game in this as well. Okay? So, let's go again. Either we have a 52,000 loss, or we get 26,000, or only 21 DTE remain. Okay? We will keep seeing linear decay in this. 25 DTE, 22 DTE, and 21 DTE; we reached 21 DTE again. And this time we have booked 14,000 rupees, which is 6%on the margin. Understand what I am saying. See, the thing is we need to keep trading very simplified. Do you understand simplified? Completely simple. Trading without using your brain. This is called "no-brainer" trading. You just have to keep doing it calmly. In this, money management will play the biggest role. The biggest role . Now look, I will keep showing this continuously so that you understand. Now our July is done. Now we have to catch the June 30th expiry. So our May I will clear this. 49 DTE. So let's take Friday the 15th, what do we get? We have a clean 46 DTE. Again, we have nothing to do. Sell and sell, this time you can see we are getting 31.9%. 31.9% . Okay? It's too much. Okay? But again, what do we have to do with it? Okay? We already have a 5%break-even. Okay? But it's very good if we can hold this for a long time. Come on, let's go. Look, let me tell you, there is one special thing about selling straddles. If you sold it a bit late or a bit early. You have such a large premium that a 1%or 1.5%move doesn't even shake it. Meaning , it doesn't take you into a loss. Right? Whether it's a straddle, strangle, or iron condor. Let me give you a tip. Right? I am giving you a tip in the middle of the video that any option selling strategy is already proven to make you money in the future. Because their history is very old. The special thing about them is that the more you meddle with them and try to move with the market, the more you move towards losses. Adjustments are just to reduce the losses, not to promote the profits. You cannot increase profits through adjustments. You only make adjustments when you want to reduce your losses. If you can get this lesson into your head, it will be very important if you want to become an option seller. Here, the less you meddle, the better, because I could make a lot of rules here. If you are a beginner, please try to ensure that you don't lose 2%of your capital, maybe you'll gain 3%. You are earning that much too. So if you have the capacity to earn that much, then have the capacity to lose that much as well. If you don't give the market that gap and that buffer to align with your strategy , you will never win. The more you roll it and do all that fuss, the more the game will get spoiled. Right? Let's move on. Where did our DT go? 35 DT is still left. Wow, maybe a good profit will be made this time. Oh sorry, maybe our target has been hit. Not yet. Right ? No, the target is big this time. The target is about 35,000 to 36,000. 28 DT , 27 DT, 26 DT, 25 DT, 22, and 21 DT. Right? We have returned to 21 DT. Look here carefully. Our days have passed. From 46 days down to 21 days. We held this trade for about 20-22 days and what we got is ₹ 960. ₹ 950, that is 12.8%of your margin. It's clear, right? Come on, I have shown you three in a row. I am not even looking at the chart. Let's take a look at what has actually happened in these days. Remove everything. Okay? And let's set the chart to a daily basis. Let's see. This was ours. We haven't taken September. Right now, this August was a bit sideways for us. This June was down and up, then up. May was down and then up. Okay. Now let's move forward a bit. Now we will find out the real truth. Okay? So which one is this for us? We sold May for the June expiry. Now let's move to May and we will sell in April. Let's choose February 17th. April 17th, 39 DTE, let's take this earlier. Maybe let's choose the 13th. 43 DTE, that is fine. Let's clear this. And let's choose the at-the-money from here. Okay ? 23800 is fine. We are not liquid. Let's change the timing a bit. Okay. I got 23,900 liquid. Sell and sell. This time you have a profit of 80,000. Okay? You have to book at 400. Book at a loss of 10,000 or when 21 DTE is left. So let's go ahead and done, 21 DTE has passed and we have booked about 27,000 again. Okay? 27, 30, 14, 12, we have booked these in the last four consecutive months. So, I just want to showcase to you that if you keep your rules defined. If you keep your rules clearly defined, you can trade this very comfortably. Tell me, where will the mess-up happen? The mess-up will happen when you trade with a huge quantity beyond your capital's capacity , then the game will get spoiled. So I will just tell you a calculation. Assume you have 5 lakh rupees. Okay? Let's assume you have 5 lakh rupees. So how much money do you want to earn in a year? You tell me, how much money do you want to earn in a year? So if I think in terms of 5 lakh rupees, if I get 25%, I am more than happy, 25 to 30 %. So if I take 30%of 5 lakhs at the highest tier, then basically that is 1.5 lakh rupees. Okay? So do I need to put three lots each to earn 1.5 lakh rupees? I am showing you here with one lot and we are already nearly 60, 70, 80 thousand up. Understand my point, 30 , 30, 60, 10, 70, 80, we are already over 80 thousand plus. I mean, we have already achieved the 15-16%target here in 4 months. So, with 5 lakhs, you could even deploy two lots here. I can even give you many tricks on how you can deploy all five lots. There are many things here, margin benefits can be utilized. Everything can be taken. But what will happen on the day you lose? Try to understand my point. Sometimes it is possible that the market opens beyond your 5%range. Many things can happen. Right? So you actually have to be ready for any time that a big move comes in the market, a gap up or a gap down. Do you know how Gujarati traders manage this? They manage it through money management. Do you think if you go to a Gujarati guy sitting in Surat and tell him to create an iron fly and buy a hedge? No, he won't do it. He has been in the habit of selling naked strangles and straddles for the last 10 years because he has made money for years. But obviously, the risk is also high. So what do they do? To manage that, they keep their position size small. By keeping the position size small, look, obviously you are selling straddles. You have a lot to earn. Right? So even if you keep the position size small, with your large capital, even on that response, you will make a very large amount that will meet your expectations at your capital level. But if you think that my capital is 10 crores, so I will put straddles worth 10 crores, then the day you have a loss, it will take everything away. It will wipe out 5-6 months of profit. Because many times it will happen that the 80,000 SL we thought of here, and we are booking a profit of 40,000 on it. So ultimately, one day it's not necessary that it stops at 80,000. It's possible your loss is 120 directly. Then what will you do? That's why you have to keep your lot size and money management very much under control. Only then can this work. Right? Now let's see further. I want to show you the day when things can go wrong. So let's trade for April now. 10 11 Let's look at the clear expiry. 48 DTE, that is fine. Where is the future? It is standing at 24,000. Okay? Sell and sell. Again we are getting a very good amount. Okay? So let's see what happens next. Look here, the loss has started directly on the second day. Look, let me show you the move. Look where we are standing. 23790 , meaning we are standing at 23800. Look where you are standing the next day. Straight to 22800, 1000 points down, and your loss is around ₹ 4000. You might think that it's down 1000 points. I am telling you the truth, when you keep it live and see that it is going to open 1000 points down. You can imagine, in the pre-market you will always be terrified thinking, what do I do now? But actually, the straddle has so much premium, such a high premium on the other side, that it saves you. Look here, the one at 600 has reached 1100 and the one at 700 has also reached 300 . So you would be earning here and your loss is only 3000. Okay? Now let's move forward. Where are we? Keep checking the expiry too. 39 days are still left. Directly a loss of 28,000 is happening. We can't do anything. Our rules say, We are going directly to 33 and have reached 29 DTE. 26 DTE. 22 DTE and 21 DTE, we have reached 21 DTE again. And we are good to go. We have booked 10,000 again. So here I am telling you, this month, look, this April 7, meaning from February to April. If you see this chart, I mean if you have the courage, then show me by trading it. Look here, Here it is from February to April, can you see this? And if you measure the reference of the move, look here, 14%, 3500 points down in Nifty, and this is no ordinary thing. We endured this and got through it, endured it and if I show you examples from before this... All the months will be profitable. Look carefully. Look at January, look at December, look at November, even look at October, September, August. If you go by looking at the whole month-wise, then it is almost profitable. And you can go and test it. How much is just the rule? It has to be placed 45, 46 days in advance. It has to be placed less than 50 days in advance. The credit you receive is what you must keep as your SL. It will be a very rare version where the SL gets hit on a single lot. Because the market would have to move up or down by at least 10% . Only then will you face that loss at once. If it gave you time, then the same thing will happen to you as what just happened. Okay? And your homework is that you have to create a trade with 45 DTE. You have to keep it at a 100%SL . Keep it at a 50%target and an exit at 21 DTE. Okay? And as far as I have shown you until April, you have to go back further and back-test the last 10 more months. Do it exactly like this, click by click, and after doing it, put it in the comments what you got. And after this video, in the next video, which will be part of this straddle series, I will teach you different adjustments. Okay? So if you liked this video, found it good, and feel that your old confidence has returned, then definitely like this video. I want to bring back that motivation within me so that I can teach you from the ground up . In this space of option selling, where you might have come out of greed or anything else, however you came. I want you to leave having learned something. Okay? So keep the likes coming, keep the comments coming, and share the videos. Don't forget to subscribe if you are watching for the first time. Okay? Let's meet in the next video where we will learn different kinds of adjustments for this straddle. Okay? See you in the next video. Tata, bye-bye, thank you.