Can I earn regular monthly income from Option Trading?
Being an Equity analyst (Especially option Strategy analyst), I regularly face a question that –“Mam, is it possible to earn regular monthly income from option trading?” Today I thought to answer this question in details.
But before that let’s have a quick look on the basics of options strategy trading. Of course, I’ll not start here from the definition of call and put; because a person, who is thinking to earn from option trading, should have clear knowledge on the basics of call and put. Those who don’t have please launch a google search for the same.
Let me start with option strategy trading. Normally option strategy indicates the combination of different option positions i.e. buying or selling call or put options of same security or same index at different strike prices. There are numerous standard option strategies in the market and these option strategies can be classified into three broad categories with respect to trader’s view on future movement of stock or index, namely – Neutral strategies, Bullish Strategies and Bearish Strategies.
One can easily understand that Neutral strategies should be applied when the trader has neutral view on the movement of the security or the index. Bullish strategies should be applied when there is bullish view and bearish strategies for having bearish views.
These option strategies can also be classified into two categories depending on average historical volatility of the stocks i.e. strategy for stocks with low volatility and for stocks with high volatility. Both the parameters i.e. historical volatility of the stocks and the predicted future movement of the stocks are the primary parameters to select an option strategy. There are other parameters also, like-political and economic conditions of the country, special news of the stock or the index, etc.
All of these parameters are to be considered while selecting the right strategy for trading. I know it seems very cumbersome and hard to follow. But the fact is that one need not to know all of the strategies in detail. The person having clear knowledge on 5/6 good option strategies can manage to earn handsome regular income from his/her trading capital.
Now the questions come into the mind that:-
“what are those good strategies and how much one can manage to earn from this field on regular basis?”
The answer of the first question is that it is very difficult for a beginner to identify the correct strategy for trading depending on stock market trading pattern of that economy. For this respect he needs to take guidance from any professional of this field. Yes, it is time consuming and the trader will require to pay high fees to the professional.
However, one can get knowledge from good books and self-learning video courses. Recently I’ve written a book on this area based on Indian Market.
This Kindle book “Best Option Trading Strategies for Indian Market” will be published on all amazon websites as on 21st June’2018.
However, one can pre-order it using the following link:-
In this book, I have discussed 10 option strategies in detail. All of these option strategies are explained in a practical manner with case studies and practical examples. I’ve also shared some highly useful tips or tricky information based on my decade’s experiences. One can use this information to choose the right strategy depending on the security type, % of implied volatility, market condition, etc.
Although I have used the practical examples from Indian stock market only and the tips are also based on Indian option market but anyone from any country can use the basic tips in their stock market also. Basically, the Indian option traders can use these tips just like screeners for selecting the right option strategy.
Yes, if the trader succeeded to choose the right strategy for his trading then he can manage to earn 10-15% average monthly return on his trading capital from option trading.
The minimum trading capital requirement is around Rs.100,000. Choosing “right option strategy” is very important because using right option strategy at right time can get money while using wrong option strategy can wash away whole money of the trader.
For example, Iron Condor option strategy is profitable when it is used on the stocks having low volatility. If one used it on bank nifty then more than 90% of time, he/she will incur loss. On the other hand, one trader may earn regular profit on weekly bank-nifty options by using some specific option strategy.
In my book, I’ve clearly discussed all of these techniques with names of the specific stocks and indices. Of course, all of these stocks and indices are from Indian stock market only but traders from other countries can use the specific data and find out the stocks of their stock market to use these strategies for trading in their option market.
Lastly, I’ll like to say that the option trader requires to have little bit of knowledge on technical analysis. Technical analysis helps the trader to predict the stock prices and market direction beforehand. There are some option strategies which require these types of predictions and offer good return in exchange.
Learning technical analysis is not so hard. One can learn it from home also. I have two self-learning video courses on Technical analysis. Here are the discounted links of my basic technical analysis and advance technical analysis courses:-
The original price of Basic Technical Analysis is $49.99 but you’ll get this course at $10.99 only by using the above link.
The original price of this Advance Technical Analysis course is same as the above but you’ll get this course at $14.99 only through the above link.
I hope most of you will manage to get good regular return on your trading capital by doing option trading. There are many people in this field whose primary profession is option trading and believe me their life style is envious to any high profile serviceman.
Wish all of you best of luck! If you have any question, please feel free to comment here. It will be my pleasure to answer your questions.