Options Selling Episode - Markets with Madan

Options Selling Episode – 17th Jan 2020 to 21st May 2020

1. Went from 15.5L to 26L in 4 months,
     Winrate = 51%,
     RR = 2.13 ,
     Option points made = 626

2. As MM plan changed quite a bit based on options selling margin requirements, I had to start with 30 lots.

Went from 30 to 40 lots before bringing it down back to 30 lots due to increased margin requirement by the broker (please note than even options buying MM plan would have gone for a toss as premiums were north of 600-700 points in ATM monthly options in that period)

3. If the average number of hours in a trade is more than 2-3 hours, then options selling seems to be a bit beneficial in the long run. In my opinion, options buying or selling should be based on this # of hours in the trade.

4. Selling monthly NF options (intraday) for trend following is better than weekly options as the premiums are good in monthly. If one is hellbent on weekly options, then strike rotation is necessary and it seems to be a big pain as it needs constant monitoring (unless one creates algo for it)

5. I moved to options selling on Jan 16, 2020, when VIX was around 15. Murphy’s law is like gravity – you cannot escape. Guess what – VIX moved all the way up to 86 and eventually cooled off to 35 when I moved onto Synthetic futures. Had I stayed back in options buying instead of options selling, I think 15.5 to 26L would have happened in 2 months 🙂 Hindsight analysis is such a beauty, isnt it? I wish i knew that VIX would move to 86 🙂

6. Generally speaking, it seems to be a good idea to do options buying when VIX moves up and options selling when VIX cools off. Problem is i dont know when that happens until it has already happened (again, hindsight analysis is such a bliss)

7. But this episode gave me a clear understanding of how option prices move and that experiential learning is priceless , according to me. Intraday margins were increased 2-4 times, and I was forced to reduce my size. This size reduction was not based on my MM plan but it was forced by the broker 🙂

8. As I wanted to pursue intraday trading in a professional way, i was hoping to try even synthetic futures, and that leads us to the ‘Synthetic Futures’ episode.