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  • Writer's pictureAvik Chowdhury

Investing in Options: Why we should move to Options selling instead of buying early on.

Updated: Apr 12, 2023

Level of understanding required: Beginner to Intermediate

The first 3 months of Intraday – Futures and Options

After almost twenty years of being an investor (taking long positions in stocks and mutual funds and holding over upto two decades), I decided to dabble with intraday trading and very short term positions.

Primarily the reason was getting additional return on investment (ROI). In long term investing, you can buy first and sell later. For example, you can buy an Apple stock in say 2022 and hold it as long as you want for days, months, years and so on. In intraday trading, you can sell first and buy later. So, if you feel that a stock will decrease in value, you can sell first in the morning (say at $2) and buy later in the day (at say $1) making a profit. Therefore, with intra-day, you can gain from a rising as well as a falling market. Therefore, if you would make an annualized return of say 15% on a rising market, with proper timing may be you can make 5-7% extra when the stock or indices correct. Oh yes, you can do intraday with indices too.

The first 3 months of intraday was a trial by fire.

1. Started with a bang. I bought 1 lot of options for 5000. It went up by 10% within like 10 minutes and I exited with a 500. It was just a wow moment. People struggle to make 10% in a year and here it was.

2. Reality sets in – Tried buying again. Lost 15%+ in both trades. Reality is that this process was just a gamble. There was not an iota of science behind this.

3. Did some tutorials – primarily on YouTube. Started gaining a bit of confidence on science behind the green or red candles in the chart.

4. Tried again to buy. One day I bought options worth a few more lots and made 6000 in a day. This was again 10%.

5. Buoyed by confidence tried doing it again and lost 5X the amount I had made.

This is where I stopped options buying for the moment:

1. In options buying, the candles move in a very volatile manner and mostly we end up hitting the stop loss.

2. There is a theta decay which happens and then if the market is static, you hit the stop loss.

The market in intraday have typically five scenarios

1. Goes up fast

2. Goes down fast

3. Goes up slow

4. Goes down slow

5. Hovers in one place

If you buy options CE, you will make money only in case 1 and lose in 2 to 4. However, if you sell PE for a rising market, you will most likely make profit in cases 1,3, 4, 5 and lose only in case 2.

Therefore, to conclude, I would highly recommend you try and do options selling to start with. You will gain grip on the charts and entry / exit points. Options buying can be tried later where you would have better control over the movements of the market.

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