A story about Call Option Buyers is very interesting. This is the year 2023. Many people still believe that they can earn from the options market easily. But they have no pre-plan before the execution of a trade. A baseless trading method can ruin your pocket very shortly. Everyday maximum Call Option buyers fail to convert the Market-to-Market fund on Green. Why is every option buyer not able to gain at the end of the day? Is there a 100% win rate strategy on the option Market?

We will discuss all the topics in this content and also discuss the pain of a call option buyer. There are a lot of things that need to be understood in trading methodology. No need to complex your mind where your money is involved. Let’s start with PAIN.

When you are an Option Buyer or Trader (The Real Story)

After a fresh life journey, you now invent some suggestions about starting the investment. 1st you opened an account online which is now a day very easy. Then you transfer lumpsum money to start the trading. You start trading as an intraday trader. By luck, you got some best trades and you gradually generate profits. At this time you have to mind a special and most important thing that you never know to use the stop loss or your intention is not to put any stop loss. A few days later you lose some money and simple frustration is now imposed in your mind. Your main account balance is reduced as you lose the trades.

Now, some traders will add more money to recover the lost amount or some traders start options trading because investing a small amount for a big return.

Call Option Buyer Real Story

You started Option trading hearing from some friends who minted lots of money. Let’s say, you start with an amount of Rs. 10,000/- only and your dream is to get 1,00,000/- from the invested amount.

In a few days, you earned Rs. 2000/- which is easy as you are on track and you started calculating on a yearly and monthly basis how much you can earn as per profit ratio.

Then in the next few days, you lose Rs. 1000/- and its okay.

“Market mein aisa hota hein“

Then you earned 2500 again as a call option buyer.

Now you’re on top of the world thinking now you know everything and you are the best as a call option buyer. Suddenly, you took and trade of 10000 and u lost all. Now your target trade is to earn back the lost amount that you earned from your profits. During the trading, you earned some extraordinary confidence levels except profit points. So, you again put in an amount of 10000 and start trading. Now before starting your trading, you thought to use the 50% amount which means you invested 5000 for call option buying. For example….

You buy XXX CE @ 100 and the lot of size is 50. After few times later, it drops from its level of 100 to 80. Now, in your mind, you think this is the proper time to value average the price as it is almost 20% down from the buying level. So, you buy the same qty and the average price goes down from 100 to 90. Now your qty is 100 means 2 lots, and the price going down and down. You still now not used any stop loss order. And at the end of the day, you exit it with a 5000 loss mark. Here, your confidence and over-confidence going down and down. Here, more twists are coming now.

Next day, you saw that the same XXX CE opened at 110+. Now, psychological effects touching in your mind. You thought, if you hold the position then you can recover all losses, and it will convert into profits also. Present day, the same story happened as yesterday, and now you hold the position and carry forward it for the next day as BTST (Buy Today Sell Tomorrow). But, the next day it opened at 50% down from the last closing. This is called a destructive violation of the mind. You lost almost all your money. The story is not ending now. Every time you have some money, you try to recover the last loss amount, but you never can make it possible as a call option buyer.

Where is the Problem as a Call Option Buyer?

Successful call option buyer in India requires proper risk management knowledge. Setting stop-loss orders, and closely monitoring market trends, are crucial. By staying informed, investors can navigate the challenges, turning the potential pitfalls of call options into opportunities for strategic gains in the dynamic Indian market.

Proper Stop Loss

As a Call Option Buyer, you always use a proper Stop Loss to control your emotions. If stop loss hits, then you have saved enough money, and also you have more & more opportunities to trade in the future. Use stop loss as per market trend.

Use Trend

Always use stock or index trends to confirm the direction. Do not track only option value. This can trap your trade.

Best Option Trading Instruments

As far as I know, try to use Index option trading for your safety. There are some major positive points to choosing the Index Option. a) Small money investment, b) Major volatility, c) Weekly closing trade opportunity, d) high volume trading activities and many more.

Value Average

In a practical experience, do not average any option trading value. If it goes down, exit your position or use proper stop loss. Any average can have a big possibility of big losses against your invested money.

Carry Over Trading or BTST trading

This is mostly a dangerous trading method if you are trying to use it. Every call option buyer tried on the negative market to carry the call option for the next days. But if the market opens at a flat position, then your option call will be on negative and if it opens at big positive points then it will be in your favor. Here, the next-day trading session trading value of the call option always depends on the time value of that option’s expiry duration.

GAP Trading

Gap trading means the trading breaks. If you trade daily, then I will suggest you trade less. On 5 trading sessions of a week, you can trade a maximum of 2 sessions to 3 sessions to balance your trading psychology.

Small Profit Booking Strategy

As a Call Option Buyer, you always try to book small points of profit to hedge your fund. Maximum points expectation means you are taking a maximum risk for your fund. By the way, all traders involved in options trading are trying to double their funds in a single trade. LOL !!!

In The Money Option Strike

“In the money” (ITM) is a term used in options trading to describe an option that has intrinsic value. For call options, this means the option’s strike price is below the current market price of the underlying asset. For put options, it means the strike price is above the current market price of the underlying asset.

Time Value Calculation

Time value in options trading refers to the portion of the option’s premium that exceeds its intrinsic value. It represents the potential for additional profit based on the time remaining until the option’s expiration date.

Shortly and simply, on a timely basis, the option premium lost the value weightage against its value. This is the most dangerous for trading. It will affect your intraday trading and also your positional optional trading.

Over Loading Trade

Overloaded trading in the options market, marked by high volumes, can greatly affect both the market and individual traders like you. More trading usually leads to increased volatility, causing quick and unpredictable price changes. This can widen the gap between buy and sell prices as market makers take on more risk. Initially, heavy trading might improve liquidity, but if it becomes too much, it can lead to shortages, making large trades harder to execute without affecting prices.

For traders, the increased volatility can cause stress and lead to irrational decisions. While overloaded trading can offer opportunities, it also brings significant risks and challenges that need careful management.

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