Time Track

Option selling
and Option
Behavior
Advantage of Option Selling

▪ If you sell option of a particular strike price and the

price does not reach that strike price option will
become zero.
▪ After option sell if market does not favour you and
you see notional loss on screen you get worried.
▪ However till the expiry of the sold option if the price
does not reach the strike price it will eventually
become zero only.
 Understanding Option Selling
• In this example the Price of 35000 Call Option
is Rs 150/-
• General Perception is that you will have profit
of just 150 /- but loss will be unlimited.
• And many people stay away from Option
selling.
• However most steady income is generated by
option sellers only.
• The most important thing in option selling is
the strike value and the demand value.
• Suppose bank nifty is at present is @32448.05
• If this goes upto 34000 what will happen. The
Bank nifty April 35000 CE will become say
about 450 Rupees.
• When you sold option at 150 and the price at
34000 strike price is 450 are you really loosing?
 Understanding Loss in Option Selling

• Your actual loss will start after 35000 CE + 150

rupees premium = 35150
• What you see as a loss on the screen is the
present premium and not price.

• This also means if the April expiry will happen

anywhere below 35150 the option you will be
in profit.
• What ever value it goes above 35150 that will
be your loss.
 Pyramiding in Option Selling
• Normally option sellers once define their range sell
option at different strike price.
• In this example they may sell @150 at 35000 Strike
price when present price is 32448
• They may also sell the same strike price @Rs 450
when Nifty bank becomes 34000/- and at 600 ( only
for example) when it becomes 34500/-
• They will do pyramiding in the increasing order.
• Thus the average sale price will become 150+450+
500=1200/3=Rs 400
• In this case you will loose only when the price crosses
35000+ average sale price for 3 lots now 400=35400
• If you have financial ability to do 10 lots of short sell,
do only 4 lots in the first trade.
• We will short sell again when the premium goes
higher.
• We will take our final position in 3 steps.
Hedging in Option Selling

• Once the price reaches your strike price that is 35000 you should buy Next week
Expiry ( compared to the sold expiry week) option and hedge your sold position. We
will buy the same quantity as our sold number of lots.
• If the price Starts moving above more rapidly buy some additional 3-4 lots.

• Or we will short Put of 34000 in this situation.

• So suppose we sold put for 200 rupees, then we will loose only when the market goes
above 35000+400+250=35650 or goes below 34000-400-250=33350

• We should always have a backup plan only when the market moves above our Strike
price of Sold option + the premium received.
• Option selling is very dynamic and you can do adjustments based on situation.
Understanding loss in Put Option Selling

• Suppose you sell option of April 30000 PE for 181

Rupees

• Present market price is 32615

• Now if market goes below 30000-181 = 29819 only

then you will loose money even if market goes to
30010 and premium goes till 400 you will still not
loose any money until 29819.
What happens when you sell both call and put?

• When you sell both call and put you get a premium
of 150 + 181= 331
• So it increases your range of profitability.
• Now you will loose money only above 35000+ 331
or below 30000-331
• In between that range you will be in profit
 Time Track option selling?

Rule of stock market: Invest on stories, Trade the Price

and Sell the time.

➢ Option sellers trade the time, at right time and also

exit at right time and also book the loss on time.
That’s why option sellers are called time traders also.

➢ But there is one more important thing called time

track. It is selling the option at a specific time where
chances of your earning increases a lot.
 What is Time Track option selling?

➢ Any option with monthly expiry will looses its

premium of 20 % in 3-7 trading session from the
beginning of expiry month.
➢ We will short sell the monthly option in two ways:
➢ Either ITM or far OTM
➢ Out of 100 you will make money 98 times.
➢ We will not sell ATM at any cost unless vix comes in
the range of 16
Trading ITM Options on Time Track option selling?

➢ We will sell ITM with 1000 point gap.

➢ ITM option trading in between the ranges looses its
premium faster compared to ATM or OTM.
➢ In this example spot price is 32615
➢ We have taken April expiry 31500 CE (about 1000 point
ITM) and 33500 PE ( about 1000 Point ITM)
➢ Total premium is 1595+ 1395.40=2990.40
➢ In this there is 2000 points of chips ( 1000 points ITM on
each side) and 990 is Hawa which is maximum profit.
➢ When we will make a loss in this situation.
➢ When market moves in between 31500+2290=33790
and 33500-2290 =31210
➢ We get a range of 2580 points.
➢ You have to shortsell this monthly expiry on Thursday
around closing time.
➢ You need to keep 100 point loss SL.
 SL in ITM Options Selling ?

➢ You need to keep 100 point loss SL.

➢ In this case we have sold both sides for Rs 2990.40
➢ If the value of both becomes 3190.40 either on the opening of Friday (
because we took position on Thursday) or anytime during the day then we
have to exit the trade from both legs, you have hit your SL ot it will trap you
➢ As time track selling rules says that if you have sold it on Thursday then by
the opening on Friday it should give you 70-100 point profit, and full day it
will never regain its price and by the closing time it should give you 150-
200 points profit.
➢ This trade will give you profit in 9 out 10 trades and in one your SL will be
hit.
➢ Your SL will be hit only in case of 1000 point gap up or gap down and
vix min 4-5 percent higher on Friday once you have sold on Thursday.

➢ SL will not hit even if there is 1000 point gap up or gap down but vix has
come down.
➢ If you are initiating the trade when vix is above 20 % maintain a gap of 2000
points and to hedge this we can buy weekly expiry far OTM.
 Time Track OTM Options Selling ?

➢ ON the monthly expiry at closing time if we short sell at around 3 PM OTM

of value less than 200 points both call and put ( it will be around 2000
points above or below call and put OTM) then on the Friday opening itself
it will give you 50-60 points profit.
➢ This will not give you loss even if market takes a wild move of upto 600-700
points.
➢ Here also SL is just 100 point loss.
➢ Very rarely SL can hit only due to some extreme situation.
 Wednesday 1-2 ka 4 Time Track selling?

➢ Any far of 600 strike price far OTM on Wednesday morning we sell 4 lots
and buy 1 lot. This option looses its premium even if there is a movement of
300-400 points in the direction of the OTM. Premium of this OTM should
be about 80 rupees.
➢ Future price is 32615
➢ We sell 4 lots of Thursday expiry on Wednesday for the strike price about
600 points OTM with a premium of about 80 rupees.
➢ We buy Single lot OTM of 300 points for next week expiry.
➢ We have to get more than 70 % of buying premium from selling
➢ This means that if market moves even 500 points in our direction we will be
in profit and if we go 1000 point backwards still we will be in profit.
➢ We use 10 min Bollinger band as SL.
➢ If Bollinger band blast happens on a 10 min chart then it is deemed as SL
hit, exit the trade.
 Type 2 Wednesday Time Track selling?

➢ On Wednesday at the closing time Short sell any far

OTM of a value of 60-70 points,
➢ Next day if it opens in the range its premium will be
down.
➢ So on Wednesday buy the next week expiry and
short sell this week expiry.
 Expiry day Time Track selling?

• Suppose on expiry day spot price is 32448 say

32450
• Then we will sell 150 Point ITM 32300 CE and below
PE 32600 next week expiry.
• We will do this sell between 9.30 to 9.40 am
• If the gap of 300 points is not broken it will keep
giving profit by loosing its premium.
• Our loss area is 32300- 32600 but we don’t have to
book the loss, we have to counter it. Meaning we will
exit from one position and sell another closer ATM.
• We will learn how to counter in the live class.
 Bank nifty afternoon Time Track selling?

• At 2.30 if bank nifty 100 point ITM is short sold

• In 30 mins it gives minimum of 20 point profit.
• We need to exit this trade by 3 pm.
• SL is per lot 10-15 points only.
• We should never do this trade on higher Vix is on its
band blast on higher side or if there is a band blast
of bank nifty on a 5 min chart.
• If vix band blast is on lower side then we can take
this trade.
• This can be done in Nifty also.
• This can be done in ITM ITM, ATM ITM or OTM OTM.
• On Friday also if you short sell at 1.40 and hold it
till 3 pm you will make money.
 Very important point for a 5 week expiry.

➢ On a month where there is 5 week expiry time track

starts from 2nd week and not from first week itself.
➢ Monthly expiry of such premium does not go in the
first week at all.
➢ Wait for a week before you sell.
➢ Stock options try to loose their premium after 15th
of a month.
 Tips for Short selling and days of a week? When to sell which expiry?.

➢ Whenever you are doing short selling on Friday,

Wednesday and Thursday do it in same weekly option.
➢ If you are doing it on Monday and Tuesday do it for
next week expiry.

➢ On Thursday never ever short sell same week expiry after

12 noon. Till 12 noon from opening of market its ok on
intraday basis.
➢ But on Thursday when you short sell next week expiry
buy current week far OTM
➢ Whenever you sell option try to sell at 9.45 am as when
the market opens the premium already comes down and
at around 9.45 pm premium is added.
 Vix and Short Selling.

➢ Never short sell on a rising vix on a 30 min chart.

➢ Always short sell in a downward vix.
➢ SL will be 30 points loss.
 Vix and Short Selling.

➢ Whenever vix is making a BB trap on a weekly chart

➢ Its once in a life time opportunity.
➢ It erodes the premium and big premiums become
zero in days to come. It is alike a jackpot
➢ Weekly resistance of Vix also gives very good
returns.
➢ Never short sell on the weekly support.
➢ In one side itself you have a premium of upto 3000
rupees and you can earn one lakh rupees per lot.
➢ At weekly support you should only think of
buying option.
 Knowing levels for Exit and Averaging and Hedging

▪ Suppose we sold 35000 CE for Rs 150 when the present

market is 32448/- ( 10th April 2021)
▪ It may happen that market will start moving like a rocket.
▪ If the market is down , one a daily chart define a SL
Areas.
▪ It can be 20 SMA, or you can also have a pivot area of
34235/-
▪ If market goes above this price and closes the value of
150 rupees would have become 400 rupees. You should
buy equal quantity of monthly at this time.
▪ When the price will reach 35000 its value of sold CE will
be 500 Rupees. But the bought CE at the Pivot would
have become 1000
▪ It will give you no profit no loss or you have minor loss
in this area we can sell extra lots to cover the small loss.
▪ Now if the market moves even 800 points higher the
35000 CE monthly bought will grow rapidly compared
to 35000 CE weekly as it will increase loosing its
premium.
▪ Now if the market expires at 35150 then we will have no
profit in selling but we will have profit of 400 points in
our monthly buy position.
▪ If the market closes say @35500 we will loose 350 points
in the sell position but we will gain minimum 600 points
in the buy position.
▪ You can also sell put of lower levels.
▪ We need to define this Zone to activate our back up
If the market goes above the pivot it means
plan of action. trend has reversed.