Options Buying PE VS Options Selling CE !Part-1 - YouTube

Hello friends! Welcome back to my channel. This is Subhashish.

A lot of people ask questions when I give something for options selling on my telegram channel.

If I tell them to short call options, a doubt remains in their mind that why shall we not buy

options premium instead of shorting call options and vice-versa, if the market is going up,

instead of shorting put why shall we not but call.

These questions keep coming to the mind of beginners and traders.

So in this video we will discuss the reason behind it in detail, you will understand the

difference between them by the end of the video and you will be able to decide which is

good and which is bad. I will also tell you if there will be any trade on any stock.

But watch the video till the end so that all these points will be clear to you.

Now I'll tell you the important difference between these, after that you will be able to

identify the actual difference between them and what should you use in which case.

First point, as you know, margine is low in options buying and high in options selling.

This generally happens because here you pay premium,

but here you receive premium. Don't worry I'll tell you both these terms but

did you understand upto this? You buy premium in options and here

sorry here you pay premium and here you receive premium.

Now the most important factor comes next, if we see risk factor, it is undoubtedly low here,

and here the risk factor is high. Why is it so? You might have heard that

there is limited risk when you buy options but when you sell options there are chances

of unlimited losses. I can make a long video in this but we won't go deeper in details.

I'll discuss the actual difference between both of these in the market.

Now if you understood these three points, I'll tell you the next point.

In both of these cases when will you earn money? When PE is bought? It is bought

when there is bearish in the market scenario. When will you sell the options at the

call side? When the scenario is the same this side too. Means you can earn in

options buying when market is going down and when the market will go

down you can earn in options selling. If you look in detail, you will notice that

everything is almost the same except margine. Here the margine is high, so why we will

not buy put when the margine is high. Why we will sell options?

We'll buy put if the market is going down because we are getting money in bearish here

and here also we'll get money in bearish only, we won't be getting money in uptrain.

I would like take you to the next step if you understood till here.

Your answer is in this point that I will tell you in this video in future, don't worry.

For now, let's understand some points about margine which a lot of people are

confused about. Look, margine is low that means you just pay premium, means if a

strike price is Rs.100, if we take example of bank nifty, if the premium of strike price

is Rs.100, into 25, it is the lot size. You can buy this by paying premium.

But in option selling, you need 1.5 lac if you want to keep holding a lot, i.e. 25 quantity.

Now you must be understanding how much difference is there between these two.

But if you are intra-trading you get margine in both of these. You get margine in options

selling also in intra-trading. If you trade in Zerodha you get somewhere around 35k-40k.

But I will recommend you if you are trading for first time or you are a beginner, or if you are

practising options selling, you can open an account in Alice Blue. You can practice one lot in

somewhere around 10k-15k. Gradually when you will become a trader you be able to

trade by utilizing the margine because we will use stop loss in both the cases.

Here we can see the risk is low,

here the risk is high.

But we can manage risk by applying stop loss. This means if you want margine you can

open an account on Alice Blue and short a lot in Rs.15 thousand. Link is in the description.

Now we will discuss the actual meaning of the bearish sign in the market. I will tell you.

Let's go deeper in this concept. Here you will earn money in bearish in options buying,

you can also earn in options selling when bearish will be in trend on the CE side.

Now I will give you some examples, listen to these points carefully, these is very important.

Suppose, the spot price of a stock is 1000, here also it is 1000.

Here, the market has gone down,

here also market has gone down. You shorted CE worth 1000.

Here, let's say, you bought put worth 950. The market is currently running at 900.

Here also the market is running at 900. Now I will ask you a question, after that

pause the video. The question is, will you get money in both the cases?

Keep your answer yes or no in your mind, then I will explain you.

What the question is? Will you get money in both of these cases? Yes or No?

I am going to give you the right answer, listen carefully. In this case,

you sold for 1000 and 900 is running currently so no doubt, you will be getting money.

In this case, you bought put for 950 and 900 is running currently so you will be getting money.

But here, time factor matters that you didn't ask about and it is important to know about it.

Now the scenario will change when I will write here that you sold it on 10th of October

and the current price is the price of 9th November. Here you sold on 10th October

and this is the price of 9th november. Correct? This may be the scenario, it is below 1000,

so your question will be that where it was on the expiry day. If I say that it was on 960 on the

expiry day, and here also the same, it was on 960 on the expiry day, your answer will change now.

Why? Because you have shortened a thousand calls, and during the period of expiry,

this was 960, you would have undoubtedly earn money. But in this case market bearish is there,

is it or not? Market is below 1000 i.e. 960, but which option did you buy? 950. And it expired

in 960. That means all your money will be lost. Yes or no? Both cases are the same.

Market bearish is there, but what is important here? Expiry. Where expiry is

and what is the timing of its momentum. That means market has to do fast momentum 78 00:06:53,000 --> 00:06:57,000 before expiry to earn money if you are put buying.

In this case, options selling, if the market is closed below your strike price,

doesn't matter if it is Rs.1 or Rs.100. Did you understand this point?

If your strike price closes below, it means it will become OTM.

OTM is always 0 at the time of expiry. All the OTMs will be 0.

Its moneyness will become zero.

Same, here also it became out of the money, you bought options, this became zero.

I guess, you understood this. This is why it is said that you should buy options only

when there is a fast momentum in the market. You can sell options when the market

is flat or going down rapidly, options selling has more chances.

Now your question will arise that what should be the actual scenario to buy or sell?

I will also tell you some examples but first let me explain the concept.

First thing, when may a big momentum come in the market? I guess you must have

understood all these points. Now let's go to the advance level.

When a big momentum will be there in the market? Simple, there is a pattern

which is running in a range or in squeeze. In these scenarios, very high chances of

the market to go in flow after the break-out. But you think yourself,

here price 1000 had come from the market and started falling from 1000 only,

then it rises and touches 1000 again for the first time.

Don't you think when it fell down and touched 1000 again for the first time,

this will act as resistance? In both the cases,

here I am bearish but here my view can turn from sidewards to downwards, it can fall down.

But in this case what will I plan? I will short CE so I will be at the safe side

because here it can restrict it, round level will be there or resistance will be there or

there will be a support if I'm shorting PE. In this cases a range is there, market has to move somewhere.

If there is accumulation in the range or distribution is happening continuously, and it is moving

sidewards continuously, and if it breaks out, there may be a big momentum.

I guess, you must have understood both the cases.

I think video will be a little lengthy. If this video gets 8000 likes I will give you its example

in real charts next week and if we will get trades, because it will be great, next week expiry will

be there, a new month will begin with new expiry. At that time we will identify something for

either selling or for buying, we will check both the cases. I will also provide you if any good

trade will be available. One more point, I have created a new expiry strategy of options buying,

which I will upload by tomorrow morning, and I will message on telegram as soon as I upload it.

It is the most used strategy, I had used the same strategy on last thursday. I am providing you the

same thing. But keep one thing in mind, strategy doesn't make money, money management, mindset,

and your understanding of the concept does. You came to know both of these, this is bearish,

and this is bearish too. We analysed both the cases but in this case, if market doesn't have

fast momentum before expiry you will not get any money, you may suffer in loss.

In this case, if market runs flat, you sell in even 1000 and even market closes at 1000,

still you will get money for your time-value.

In this case, if you buy any premium in 950 and market also closes at 950, you will still incur loss

because you had bought premium. At that time the money factor will be compensated

with the price net-to-net. I guess you are understanding all these points.

If this video gets 8000 likes we see these two scenarios on actual charts in the next part.

Sideways market or accumulation zone or a pattern with big momentum will be there.

I guess you must remember, Tata Motors gave you recently. A triangle like squeeze pattern was

there in Tata Motors that gave break out. A big momentum held.

Same in the case of Bank Nifty, there is a strong resistance at around 30000.

It's running below of it only.

I will discuss both these examples and we will also see some trades if available.

I hope, you understood the video till now, if not, watch the video again. I have explained to you

in a very easy manner. If you don't know what moneyness, strike price, premium, and time decay is,

I will place the playlist of options from episode 1 at the end in the end screen, you can watch it.

It will take 2-4 days to complete all the videos but if you complete it once, no doubt you will have

a better understanding of the concept of how options work, how do I trade options.

If you liked the video don't forget to like and share the video friends.

If this video gets 8000 likes, we will meet in the next part with some trades. That's all for now.