{The basic idea of this post came from a comment on another post by Prveen —

Praveen June 27, 2020 at 11:28 am

I always used to wonder, is this so complicated

One Analysis is are we getting money from Sold Options or Bought Put. Which one is giving more Profits.

And I tried to back test , only buying.

Check the details here – https://youtu.be/E99-7lfS0XM }

Our option buying trades are not doing well currently. That becomes a cause for concern. It is not easy to sustain losses if you have not taken profits earlier. And profit through option buying is never consistent.

That is why most of the traders look for strategies to deliver consistent returns. Strategies cost more because multiple trades are involved and the profit as a percentage of the capital deployed is just about enough to keep one happy. Strategies are apparently comfortable and traders like to operate in their comfort zones.

They try to avoid big losses through strategies and as a result avoid big profits too.

On this blog we have a series going on — Money In The Bank — which has done well and delivered a profit of Rs. 204384 over a period of 8 months since November 2019.

The strategy involves buying 3 contracts and selling 3 contracts. Sometime 2 or even 3 set ups have been done in the same series. But at least 6 contracts are surely traded every month.


Let us work out if we had just bought BANKNIFTY CALLS and PUTS.

This detail is for the 6 month period from January 2020 to June 2020.

The trades are initiated on the expiry day for the next series. The trades are taken close to the end of day. For the purpose of calculation, the LAST TRADED PRICE has been considered.

The CALL and PUT is bought slightly OTM and for the rounded strike prices like 22000/21500/20000 and not like 20200/20300/20400 etc. Staying with the rounded strikes ensures liquidity, not that it is going to matter much for our 1 contract trades.

We stay with the trades till the expiry day and take whatever profit or loss comes out of it.

The wait is the most difficult part of it but that is what makes it worthwhile.

We do not know when the big moves happen. This year the real big move happened in March 2020 series. That was the time to cash it big. ( We did it in our option buying series and are surviving today because of the profit in March series )

Let us see how buying BANKNIFTY CALL and PUT performed in the year 2020:

Just buying 2 options in a month would have given a profit of Rs. 149778.

Surely there would have been a setback in the first two months but then where is a trader who does not lose.

Life is simple, we bring complications into it.

Before we say it is just one off profit because of March series, I shall be working out for 2019 also which did not see any move similar to March 2020. Let us see what 2019 tells us.

Wait for that post tomorrow.

Enjoy the holiday.

Disclaimer: This post and examples are for teaching purpose only and are not meant as advice/suggestion to trade in these stocks. Trading in Futures and Options can lead to big losses and should be done with appropriate knowledge and advice only. Mentioning the stocks here does not imply that I have a trading position or likely to take a trade in these stocks.