How to Get 25X to 30X ROI on Option Buying
Option buying can be a great way to generate high returns on your investment. However, it is important to do your research and understand the risks involved. In this blog post, we will discuss the selection criteria for option buying that can help you achieve better ROI.
1. Select Bank Nifty instead of Nifty
Bank Nifty is a more volatile index than Nifty, which means that it has the potential to generate higher returns. However, it is also more risky, so it is important to be aware of the risks before you start trading.
2. Wait for Bank Nifty to consolidate
Before you buy options, you want to make sure that the market is in a trading range. This will help to reduce your risk and increase your chances of making a profit.
3. Select option premiums in the range of 30-40
The option premium is the price you pay to buy an option. The lower the premium, the lower your risk. However, you also need to make sure that the premium is high enough to generate a profit.
4. Use Fibonacci retracement levels to place your sell orders
Fibonacci retracement levels are a great way to identify potential support and resistance levels. This can help you to place your sell orders at levels where there is a high likelihood of the market reversing.
5. Check the India VIX and make sure it is trading lower
The India VIX is a measure of market volatility. If the VIX is trading lower, it means that the market is less volatile. This is a good sign for option buyers, as it means that there is a lower risk of the market moving against you.
6. Place GTT orders to protect your capital
GTT orders are guaranteed-stop-loss orders. This means that your trade will be closed at a predetermined price, even if the market moves against you. This can help to protect your capital and limit your losses.
7. Only trade 3 or 4 lots
It is important to start small when you are first starting out with option trading. This will help you to manage your risk and avoid losing too much money.
8. Always trade the next week expiry contract
The next week expiry contract has the least amount of time decay. This means that you will lose less money as the option approaches expiration.
9. Expect good volatility around monthly contract expiry and the next week to expiry
Monthly contract expiry and the next week to expiry are typically times of high volatility. This is because there are a lot of traders who are looking to close out their positions before the contract expires. This can create opportunities for option buyers to generate high returns.
By following these selection criteria, you can increase your chances of achieving high returns on your option buying trades. However, it is important to remember that option trading is a risky activity, so you should always do your research and understand the risks involved before you start trading.
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