Summary of "This strategy results will shock you | Option Selling with Sanjay Kathuria @Sanjay_Kathuria"
Summary of Financial Strategies, Market Analyses, and Business Trends:
The video features Sanjay Kathuria explaining a simple, low-risk Option Selling strategy focused on ultra large-cap stocks to generate consistent monthly returns with controlled risk and minimal trading effort.
Main Financial Strategies:
- Option Selling on Ultra Large Cap Stocks: Focus exclusively on the largest market-cap stocks (e.g., TCS, Infosys, SBI Card) to reduce volatility and risk.
- Range-Bound Selling (Iron Condor Style): Create a wide price range by selling puts and calls at strike prices approximately two standard deviations away from the current price, with protective bought options further out to limit risk (Iron Condor).
- Premium Management and Adjustments:
- Sell options and buy them back when the premium halves to lock in profits and reset positions.
- Adjust positions dynamically based on stock momentum and market movement to maintain the range and reduce risk.
- Use alerts to monitor price movements and exit or adjust positions when thresholds are breached.
- Risk Control:
- Use stop losses and protective options to avoid unlimited losses.
- Maintain sufficient margin (at least 10% of capital) to manage position requirements and avoid forced liquidation.
- Avoid overtrading and keep strategy simple to minimize transaction costs (transaction costs can consume up to 50% of profits if not managed).
- Profit Expectation and Realistic Goals:
- Target a consistent return of around 6% per month (~20-25% annually after accounting for losing months).
- Accept that losses will occur 3-4 months a year, but aim for higher profits in winning months to offset losses.
Market Analysis Insights:
- Large-cap stocks generally do not move beyond ±9-10% in a month, making range-bound strategies viable.
- Overnight large moves beyond 3% are rare, so stop losses and adjustments can protect against sudden adverse movements.
- Momentum is a key indicator used to decide when to adjust or close positions:
- Flat momentum = ideal for entry
- Upward momentum = push away calls, close puts
- Downward momentum = push away puts, close calls
Step-by-Step Methodology (Simplified):
- Select Ultra Large Cap Stocks: Focus on top market cap stocks only.
- Determine Trading Range: Use historical data and backtesting to set upper and lower strike prices approximately 2 standard deviations away from current price.
- Sell Options: Sell call and put options at these strike prices to create a range-bound position.
- Buy Protective Options: Buy calls and puts beyond the sold strikes to limit risk (Iron Condor).
- Monitor Premiums: When premiums halve, buy back sold options and resell new ones to maintain position.
- Adjust Based on Momentum: Follow stock momentum to adjust or close legs of the position.
- Set Alerts and Stop Losses: Use alerts to monitor price movements and exit or adjust when necessary.
- Manage Margins: Keep sufficient capital to meet margin requirements and avoid forced liquidation.
- Repeat Monthly: Enter new positions each month based on updated ranges and market conditions.
Business Trend:
- Emphasis on passive income generation through disciplined Option Selling rather than speculative trading.
- Focus on minimizing transaction costs and overtrading, which erode profits for most traders.
- Offering an affordable educational course ("Up Surge") to teach this strategy step-by-step with backtesting and tools, making it accessible to salaried professionals and part-time traders.
Presenter/Source:
- Sanjay Kathuria (@Sanjay_Kathuria)
Category
Business and Finance
