how to long Options to maximize profit

Its common notion that option buyers won’t make money due to time decay, while its conceptually may seem correct but options buy trades can not over looked

Why options buy trades?

Loss is capped to the premium paid so risk is minimum when compared to the profit potential theoretically

You can use it for trend  and directional trades put options when bearish and call options when bullish on the particular scrip

Options can be held for a month so if your right side, and stock you have choosen moved in your way for month your will end making huge profit

The major reason for option buyers loss are below:

Poor risk management :

No one can maintain 100 % success rate ,as per my experience hitting above 60 %  success rate is legitimate expectation so one needs to plan what if your trade fail, Below are the possibilities

You can use stop loss to restrict loss and should have enough capital to carry out 10 to 15 trades without looking at profit and loss

Ensure that all your capital should not be tied in single trade

Trade holding period:

Index options are subject to time decay since it will move less so carrying index options over night may not work out in long run

Holding a nifty options for a month won’t work out since nifty will move 2 percent in either direction so premium will be eaten by time decay

Wrong instrument choice:

Buying low volatile index options will become zero most of the time due to time decay

Mid cap stocks are volatile and move 10 to 20 percent on monthly basis hence high volatile stocks should be used for option buy trades

Basic rules for picking up script for long options trades:

The script should be super volatile so that you can make money when moves in your favor

Out of money options should be used to reduce loss and risk

Sample options trade:

As per my research I am very bullish on pidilite industries due to following reasons

Untitled 1

From the above chart you can understand stock is very bullish mode so I would like make use of the bullish sentiment

Stocks fundamental is very strong with quarterly  growth momentum with 50 % increase in the latest result announced

Strike chosen: I have chosen 7% out of money options will come around 1240 call since spot is trading at 1170

Pidilite 1170 call has been bought for june expiry with 10 rs premium ..plan is to  hold till end of month…will post the trade results by end of month

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