rolling options

Aug21-W3: Rolling in put options aggressively makes money

During this week, I felt comfortable with my bias as Nifty kept trending up nicely. This gave me the confidence to sell put options aggressively. Especially on Friday, I sold relatively expensive put options by my standards.

The other thing that helped was that I had no clue about NSE’s holiday on Thursday. My wife told me about it on Wednesday. So, I kept selling with an extra day in ‘days to expiry’ value of my indigenous model. This meant that I was selling extra premium options anyway.

The put options kept giving steady profits. This is the expected behavior. What I mean is that for X% change in price (in favorable direction of option), put options return more profit than call options. I think this is because option sellers already factor the velocity at which market can fall and price put options more expensively anyway.

I was listening to a webinar about option trading. The speaker said that buying call options was the safest bet between the 4 possibilities of option trades (i.e. buy call, buy put, sell call and sell put). He was absolutely against the idea of selling, as is everyone for obvious reasons.

He further said that buying puts might be enticing because if it works, it rewards very handsomely. However, price falls less often as compared to rise in price. Therefore, most of the put options expire worthless.

Based on his above comments, I have a hypothesis. It goes like this

“Between selling of call and put options, selling put options has higher probability of success along with better return on capital”

I wish I could extend the hypothesis to option buying also. But I believe it would become apple to orange comparison.

Anyhow, I have made a note. If market is expected to trend up and if it does so, I am going to sell put options aggressively. It brings good money. There is nothing better in life than a trading strategy that brings good money. Or maybe the best thing in life is good food. Yeah, it’s the latter.

3 thoughts on “Aug21-W3: Rolling in put options aggressively makes money”

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