Nifty Options

Welcome to Nifty Options Trading page. This page has lots of valuable information and trading strategies for Nifty Options, on India’s major stock market index. The lessons shared on this page have been learned from thousands of Nifty options trades with total value of over Rs 100 cr.

The NIFTY options trading involves all the risks and rewards associated with options trading in any index. Unlike a stock option the index option has lower volatility and hence much more suited for regular options traders. In addition NIFTY options trading is very useful for any trader because there is very high trading volume on NIFTY options.

For example, today we have about 50-60% of daily trading volume on the Indian stock market happening in NIFTY options alone. So this is the fastest growing trading segment in the Indian stock market and this is where we have every large financial player is trading, which also should tell us that NIFTY options trading is not for everyone.

Option trading has risks, and in addition to that the fact that we have very sophisticated financial players coming to trade options we must understand that not a single rupee will come easy in the NIFTY options trading. Every rupee has to be fought and earned.

There is a lot of capital here but nothing will come easy because they are very smart and very sophisticated traders involved in options and if you have traded NIFTY options for any duration you will realize the various factors that come into play while trading options on the index. These are factors which are related to liquidity, factors related to market’s position at a given time, whether it is overbought or oversold, factors like overseas condition like how the market and economy is behaving in the US, Europe, Japan, China etc. all these factors come into play after the Indian market closes every day and the next day morning the market starts by absorbing all the news that has occurred overnight.

So there are different strategies for trading NIFTY options. The intraday trading strategies are totally different from longer-term NIFTY options trading which involve one week duration of trading or when you want to trade NIFTY options for one month or longer.

We have gained experience in Nifty options trading, and we have learned that we can never truly master options trading, nor can we never truly predict the market, because the market is the collective intelligence of all investors, which includes us, so it is very difficult to stay ahead or beat the market all the times.

However, if we take the same amount of capital and trade carefully with even 60% success rate, and we exit the trade every time we have our predefined target or stop loss position gets hit then it will minimize the loss of capital and maximize the gain on capital. This is the most important lesson we have learned regarding Nifty options trading, and we want to share it with everyone who visits our website.

In our experience, Nifty options (Calls and Puts) of current month or next month priced between Rs 100 and 200 are ideal for trading. Options below Rs 50 must be avoided for trading. Options below Rs 20 must be used only for hedging.

Example: A typical Nifty options trade could be something like this:
Buy Nifty Call @ 120, Target 160, Stop Loss: 100

The lesson is that we must have a very clearly defined stop loss, when we will exit the option trade and we must also have a very clearly defined profit exit position, when we will exit the trade, no matter what. So by controlling the greed and by controlling the fear, we can become much more profitable.

Typically, we have a stop loss at around 10% of our entry price and typically we have a profit booking exit position between 25-50% of our entry price. Any gain after 25% starts becoming attractive given the way NIFTY functions because it is an index and it can continuously fluctuate, unlike a stock which if it takes a direction it can continue to maintain that direction even for 4-5 days in a line while it’s difficult for an index to maintain a single direction for a long duration and it does maintains for several days and weeks at times and when we have those kind of positions where the market is trending upwards or trending downwards, those are extremely good positions to trade NIFTY options, either on the calls or on the puts.

There are times often when market is undecided and it is not going strongly in either direction – up or down, and in those cases we would have to trade options with a much longer expiry timeframe so that the erosion of time does not hurt us.

We also believe that it is not for everyone to sell options. Selling Call Options against Nifty Futures long position is a good strategy. However, we don’t suggest option selling to others, because it is complex and has to be managed actively. Nifty Put Option selling is profitable during bullish markets but it must be hedged with a Long Put position (buying lower level Puts) so that any sudden significant negative news (“long tail event”) like terrorist attacks, nuclear accident, earthquake, etc does not cause major loss. Overall, of all the stocks/indices, Nifty is ideal for option selling.

We know many people who make a living out of selling options because by selling options you can benefit from the time involved in it but we have our strategies which are different by involving options that are two and three months long where we really minimize the impact of time erosion as a strategy.

We want to trade Nifty options with significant time value, i.e., which are of next month, or the month after next month. This gives sufficient time value in the option, which ensures that the options do not decay rapidly, and with that kind of an option in hand we can take a call on the long side or the short side and make a trade.

Except in rare cases, like extremely oversold markets, we never buy current month options. And even when then, we buy in-money options because they give more gains. We mostly deal in options that are priced between Rs 100 and 250. We will never deal in options that are less than Rs 50, which is speculative. Such options are being used by the Sellers of Futures as a hedge for their dominant position, which means the chances of making profits on a Rs 50 option are less, especially if less than 15 days are remaining for expiry.

Typically, we are buyers of options. We will either buy a call or we will buy a put or we will buy both, with a very limited timeframe on how long we will hold them, typically we will hold options for five days and within the five days if the desired outcome is not coming then we will sell the option.

Trading with next month options limits option price erosion from time decay.

We do not suggest Nifty option selling for new traders because the risk is high. If the market takes a turn which is unfavorable, the losses can be high and therefore it is not advisable, except for professional, sophisticated financial traders and if you are here on this site you probably don’t want that kind of overnight risk in your trading. If you want to sell Nifty options, we can help you on case by case basis once you have gained confidence with Nifty Futures trading.

Our goal is to help our members and trading customers to have safe profits, not unsafe profit at higher risk. So we will only recommend buying options with time value, which means buying puts and buying call options on NIFTY and we will not recommend selling options unless you are an experienced trader.

There are multiple strategies on options. There is no shortage on options trading strategies. If you see the internet you will find that dozens of strategies which involve combinations of buying calls and puts and selling calls and puts, but they all ultimately come down to two things – one is taking a direction on where the market is going, a call on the direction of the market, and second is trying to eat and profit from the time erosion.

We make it simple by removing the time factor from the option trading. We do that by having options which have expiry far away from current state and that just brings down the variables to one and that variable is the market direction and which is much more easier to predict and trade once we have a shorter term view of one week or one day and that’s how we trade options.

We also have the ability for some certain types of options traders to help them in buying longer range options for a two-month or a three-month period. These could be very profitable options trading strategies but they can only be done with trading capital that is 100% risk, which means that if you are going to aim for 200 or 300% gains with your options trading then you must be willing to lose 100% on your options’ capital because that is the only way you can aim for the bigger returns.

However, what we find is it’s much more profitable to trade options on a day-to-day basis, like buying today and selling tomorrow or buying and selling intraday and smaller amount of profits which are like 10, 15, 20, 25% profits, and doing the trade several times which can result in much better options profits.

The other options trading strategy we use is to take a market direction call at the start of every day. We have been doing this profitably for a long time now where the market opening and the first 20 to 30 minutes give us an idea of where the market can go that day and based on that we buy the in-money option or near-to-money option of the current month for typically a 10 rupee gain.

These options which are in the current month at money will invariably be around rupees 100/-. They may be 90, 95, 100 or 110 – that will be the price per option lot of 50 and we would sell them for Rs. 10/- gain which typically translates about ten percent gain and this is a trade that we do most often.

We will be able to offer this service to limited set of customers who have the understanding of options trading and the risks involved because the percentage of success we have achieved in this trading strategy has been around 80% and one has to be able to square off the trade if it is going against the direction. However, it is a regular income-earning strategy and current month options has very high volumes so you can trade technically with any amount of capital in these options and you can make that ten percent gain per day but it’s not going to happen every day. But at the same time it’s also the most reliable method of options trading we have been doing where we buy options at the start of the day and sell it off, auto square it off at a fixed Rs. 10/- gain from our buying price.

In addition to that we have also been developing a NIFTY options trading software. So this NIFTY options trading software is different from our NIFTY options trading tips because the options trading software is not looking at any global factors that occur in the night after the market closure.

The options trading software uses number of NIFTY and the various technical parameters that are happening in the NIFTY market like volume, momentum, trend, direction and various other technical factors and the output of that is available to us within two hours of the NIFTY closure because it also uses the data on daily equity market purchases or cash market purchases from the financial institutions, both foreign institutions and domestic institutions, and this data is posted on the NSE website after about one hour of market closure or one and a half hours.

Therefore this software takes the data from there also along with many other parameters on the market and it produces an output after about two hours of NIFTY market closure, and this NIFTY options trading software will give a call for the next day and the call will be either to buy a put option or to buy a call option and whatever option it suggests, will be for a Rs. 10/- profit. So for example, if the NIFTY options trading software suggests that tomorrow we should buy a put option then it should be a put option of the current month which is in the money or at money, at around Rs. 100/- price per lot, which can be bought around that price, market price – 100/- and sold for 110/-.

We have been using this software and it has been showing around 80% accuracy, which is quite good for a software. However, it is less than the human accuracy which we are able to achieve, which is over 90%. But the fact is that the NIFTY options trading software can be used by anyone because the call is very simple and it just tells the direction of the market without any consideration for how many points it will move, and usually it’s possible to achieve a five to ten percent gain and this is something, and because it’s a software output we are able to offer this service at a much lower subscription fee than our real human trader guidance on options trading which involves more effort. It factors global technical factors, end of the day, and hence it’s more of a complex scenario and hence we have a higher subscription price for the human trader guidance that we provide.

We provide all our tips by email, which means that we are not able to send any of our tips by phone or by SMS. All our subscription information and tips for the trading will come by emails. If you have subscribed to the NIFTY Options Trading Software tips then they will be available after two to three hours of market closure every day. And if you have subscribed for the Professional Trader tips then those will be available either in the night or just before the market opening, about five to ten minutes before the market opening, and this is how we are able to service the members who have subscribed for our NIFTY options trading services.

There is a demand for free NIFTY options trading tips. Well for this our simple answer is that there are very few free tips out there that really work for any long duration. However, there is one general tip which we would like to share with you as a reader on the website, and this tip is a trading strategy which you can use in any market condition and the strategy is as follows:

Buy a call option which is 200 points ahead from current price of NIFTY. So for example, if NIFTY is at 5400 buy 5600 call of next month. So if today we are on August 30, buy the October NIFTY call for 5600 and also buy the put, which is 200 points behind. So if we are at 5400 or near 5400 buy the 5200 put on NIFTY for October.

So you basically buy a call and a put which are 200 points away from you, from the current NIFTY position and these are the options of the next month, not the current month. So they have sufficient time in them. Now what you would do is that these will be available for about Rs. 100/- or so each. Sometimes they are available for less but assuming for example purpose that both are available for Rs. 100/- each, so your purchase price for the call and the put will together be Rs. 200/- for this pair of call and put options.

So Rs. 200/- per option is your price of purchase and what we will observe is that you can hold this for any duration between one to five days. So you can buy this on let’s say a Monday, and you can hold it till Friday, or you can buy any time during the week but surely traded off by Friday. Don’t hold it over the weekend.

Now what will happen is that if the market moves in either direction that option will start gaining value rapidly whereas the other option which is going against the market will still not erode significantly because it is having a lot of time value in it and because we are still within the week most options lose value rapidly over the weekend if the market goes against them because time and direction both, if they are acting against the option then the value can rapidly go away. So that’s why we urge you to square this on Friday before closure of the market.

So what will happen in such scenario often is that if the market were to go, let’s say go down from 5400 to let’s say 5350 or 5320 during the week, you would have a strong gain on your put option but you would not have that strong a loss on your call option, and vice-versa.

So we have observed that very often for a purchase price of Rs. 200.00 per pair we are able to sell the pair for around 220.00, which means a 10% profit was made with very basic level of market volatility, and we have made 10% profit without exposing any front because we both have the call and the put so market can go anywhere and we will still make money. We would not lose that direction.

At the same time we have avoided the time erosion by buying and selling it within the week by not holding it over the weekend. Most option sellers are selling options because they want to profit from time, because they want to profit from the lack of market movement in any given direction but if you told them that the market will move in one way then they will probably not sell options because if the volatility is going to be higher, then selling options is a risky strategy.

Therefore, once again as you have read on other parts of this website we do not recommend selling options unless you are an extremely sophisticated options trader and in which case you will probably be experienced in working with large financial houses in some way and you would have significant options trading capital with you because selling options can be very risky and there is enough room to make a regular profit in options trading without taking that higher risk, and this free tip on NIFTY Options Trading that we have shared works very regularly and we use it every week with 80 to 90% accuracy.

In addition to that if you would like to benefit from our NIFTY Options Trading strategies and guidance and tips then you can subscribe to our service and we will be able to share our NIFTY Options Trading Tips with you over email as per the subscription packages. Thank you.

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