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Asked a question 2 months ago

How do I do options trading with minimal loss?

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It is glad that u want to do option trading with minimal loss, go with hedged strategies like debit spread and credit spread which caps the max loss . Or place a stop loss in ur option trading.Use opstra or option desk which is der in fyers before placing trade. U can control what is in ur hand that is only loss from ur trade ,market will take care of profit.All the best.

 

If you are trading in Options that means you are already in with RISK. But Still, you can minimize your loss by placing STOP-LOSS. Now, How do you do that? Place STOP-LOSS according to the risk you can take in a single trade. 

For example, You have 1,00,000 in your Demat account and you take a risk of 1,000 - 2,000 per trade. That means in Options you are taking 30 - 40 points as a risk in Bank nifty and 15 - 20 Points as a risk in Nifty. Once you know how many points your Stop loss is, you can decide on the strike price and place an order. Remember this needs to be done quickly. 

Now, you can slowly trail your stop loss or add more qualities once the position is going with you. It depends on the individual how they trade. I personally, add quantity and trail my stop loss to my entry price. Now, you got this right. You will automatically reduce your risk and increase your Reward. 

Remember, do not overtrade if your stop loss is hit. Enter only according to your Strategy. Overtrading is where most traders lose their money. 

Happy trading :)

Minimizing loss is nothing but placing your Stop loss. If you place it right then you will automatically minimize the loss!

Before explaining about minimize of losses, I would like to explain how to plan your trade. Here are some rules that I do prefer to follow.

  1. Follow maximum any 2 strategy for 1 month daily, like: Morning 5 minute candle breakout, Trendline breakout and retest, or 15 minute inside candle breakout or support resistance, Super Trend signals like this as per your choice.
  2. Before entry plan your SL based on spot price of any index and exit for sure, no re-entry till next 10 minutes.
  3. Take daily Maximum 2 trades in a day.
  4. After 1 trade completed, next trade give some break means take at least after 30 minutes or leave your chair for few minutes to avoid over trading.
  5. Also trade always same quantity, either Monday or Thursday.
  6. In index nifty or banknifty buy or sell within 100 points strike prices.

These points are actually helpful for me, if like it like and can follow me as well in telegram32

Several strategies exist that reduce risk while increasing return. Traders can learn how to benefit from the flexibility and power that stock options can offer with a little effort. The following options strategies are fundamental knowledge for all investors.

1. Options are inherently riskier than stocks.

2. If you are successful trading stocks, consider trading options.

3. Immediately after placing an order, place a stop loss.

4. Practice using the right RRR (Risk To Reward Ratio).

5. The psychology in options is significant. So put some effort into psychology so you can avoid overtrading and minimize losses!

6. Always expose 1 to 5 percent of your total investment to risk!

7. Avoid trading too much. No matter, you're out of luck. Refrain from taking the opposite side. Still, yes! Those who are sellers can hedge their positions. Do not, however, take a counterposition as a buyer!

Start with Debit spread & Credit spread

For Example: Buy ATM and Sell OTM 

Loss is Capped from the trades begin

 I m use these tricks for bank nifty ( 1lot =600/loss).daily 1200 loss. After that close laptop!

In the world of trading be it options, stocks, currency or commodities the most important thing is to minimize the losses. 

1. To minimize the losses one should follow strict stop-loss and once the stop-loss is triggered one should exit the positions. There are different methods of keeping a stop-loss .Like Point-based, Technical stop-loss, Percent stop-loss, Volatility stop-loss and time based stop-loss.

To know more about them click on the below mention link.

https://fyers.in/school-of-stocks/chapter/risk-and-money-management/stop-losses-their-types-and-leverage-in-trading.html27

2. Don't get your emotions in between the trades when stop-loss is hit.

3. Position -sizing 

Besides , this some of the important points one should keep while trading in options and which can help in reducing the losses are

  1. Put Call Ratio. (PCR)
  2. Volatility Index (VI)

To know more on PCR and VI you can click on the below mentioned link.

https://fyers.in/school-of-stocks/chapter/options/_miscellaneous.html#Volatility-Index24

The only way to truly minimize loss is through Options and not stocks. The caveat here is you need to use defined risk option strategies to make things work.

Trade with Options if you are profitable in Stocks.

Make sure to buy options when they are cheap, and sell them when they are expensive.

Spreads are just combos where you need to do the above analysis for all legs.

With every online investment, there is fear of loss. So, whether it’s options trading or anything else make sure that you are investing only 2 to 3% of your income.

Many retail traders go with a flow and witness heavy loss. It is better to control your greed and imagine a bigger picture.

If you invest only 2 to 3%, obviously you’ll face minimal loss.

A way of putting stop loss is based on the time factor. Important price behaviors may be observed by any price action trader. Some traders prefer to base their trades according to the world clock of the trading day. One can set a strict watch schedule and determine what choices are to be made. The US market open hours and UK market Open hours can have a significant nudge on the Forex markets. It is important to consider price analysis during such key moments. As one can see important price fluctuations can be used to decide on whether or not to go ahead with a trade. The sudden movements in the market can completely shift the trends in a matter of a few minutes. This allows one to ride or leave the trend. Many traders would close their position basis the clock as there could be significant exposure to the change of polarity, beyond a certain timeframe.  

Check out some other ideas on how to put SL correctly here15

 

Don't do positional trading. You can do either option buying/selling on intraday basis, where you have more control on the Target and Stop loss as it completely removes the overnight risk. The downside is that you may lose on the theta decay if market does not gap up/down significantly. But your edge in this case would be more of technical understanding rather than a guess work. 

Concentrate and work hard you will learn one day.