I have been wanting to write about this for last 3 months but I refrained because I wanted to test more in real-time. I wanted more data to really trust that method indeed works in all market situations. And I believe that I have enough data now to write about this method.
99% Option buyers lose money
This absolutely true. 99% option buyers trade on hope and not on setup. There are fraudsters providing expiry special, Hero or Zero and result special option trades. They try to sell such services because they themselves are not making money from such trades. Their income is from subscribers who get in with a hope of making some bounty. Eventually, everyone lose money.
Option buyers lose money because of many things –
- Inability to understand how options premiums erode over time
- Buying too far OTM calls/puts just because premium is less so max loss is a few thousands. Eventually, these few thousands when put together leads to loss of complete capital
- Carrying options over weekends/long weekends
- Buying expensive options without understanding where we are in the monthly expiry
- Buying calls/puts for next month expiry
- Buying options too early or at the start of the expiry
- Trading without a setup & risk management framework – Most Important
These are only a few reasons because of which almost every option buyer lose money.
But 1% still make money
Yeah, this is what I too thought whenever people told me that 99% option buyers lose money. And I thought there has to be some way/method through which 1% still make consistent money from options buying and I was extremely inquisitive to dig more on this. and this Alpha Options Strategy is an outcome of this.
1% make money because they have all of the following:
- Clear understanding on how option pricing works & how premiums erode based on where we are in the expiry (Start/mid/end)
- Clear goal on how much they want to make per trade & no outrageous expectations from trades
- Know when to avoid buying options – at the start of expiry or buying expensive options
- Never trade on hope/revenge or by looking at cheap premium
- Clear definition of what is risk and knowing how to mitigate that
- A strong & tested setup that works in all market situations
- Strong grasp on both technical & intangible aspects of market
- Strong hold on both daily & intra charts and a custom setup that gives an edge over retail option buyers
So what is Alpha Options Strategy?
I have developed a method which does options buying at specific time in trading day – 2 times a day at specific times and on a specific method. I have been testing this method with just 50,000/- in trading account from June 2020. The method is as below: No setup details are disclosed*
- I have built a scanner based on my trade setup which gives me signal 2 times in a day. Not disclosing that time right now but it is based on my experience of when biggies really get active during the day and my signal come just a few minutes before
- Once stocks are shown on scanner, I further filter based on my ATMP methods and pick ONE
- I buy ATM options mostly or just OTM
- I don’t look at OI at all. I don’t care really because method doesn’t need OI understanding
- Based on what time I have entered, I exit in 30-60 mins
- Lowest average ROI is 6% and best is 90%. That means from any trade I have made 6% minimum to 90% max. Setup has gone to give much more but I book because I am not buying options for the sake of it. I am just exploiting certain market conditions
- In October, win ratio is 100%. Not a single day of loss
- I don’t trade unless scanner gives signal. I have gone without a trade literally for weeks just because scanner did not give any signal
- Win-loss has improved exponentially as strategy matures. The ratio for last 2 months stand at 80%. I am still improving this method
- I haven’t disclosed method yet to anyone as I am still testing it. But it is certainly amazing to see how can you buy options and yet make consistent money. If you have right tools/setup, you can make money even being a buyer.
Take a look at my P&L matrix below:
- Total profitable trades: 27
- Total loss making trades: 9
- No loss day in October
I am not selling this method or it is not available for subscriptions. I am doing this for my own trades and have no intention of starting a paid service in future. The intention of this post and sharing these details is to prove that if you have a mindset, setup, and risk management, you can be consistently profitable and be part of that 1% people who make money from options buying.
Now comes the question – Can anyone replicate this method?
The answer is NO. It is not possible even if I disclose setup. The success of this method is not TA. It is deep understanding of market macro/micros, execution & mindset, and then TA.
People, generally, say F&O segment is weapon of mass destruction and sure shot way to wealth destruction. But isn’t that true with everything we do in life? Can you drive a Royal Enfield without learning to ride a bicycle? Some will say yes, but risk is huge in that case. Basically, anything that we do in life – be it from learn to walk, run, drive, risk is always there. Some risks are inherent, some are external. But someone who is diligent to create setup, manage risk, build methods and test rigorously can definitely emerge victorious.
I am open to answer questions, if any.
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