This. Usually when it comes ITM you feel it will go even lower. And then u will just book loss and wait for lower levels. If I have decided I am addition nifty at this level, then am adding irrespective of what the news is. I don’t see technicals or news. I think like an investor. You might even get to see a loss of 40 percent of your capital.
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What is the rationale behind this then? There has to be a logic behind choosing something. Investors belonging to whichever group have a reason for buying, so what is the reason for choosing a level for you, or for anybody, if no technical or news are followed?
With what logic do people buy nifty bees? nifty will always see higher levels. May take some time. Some years or a decade. But it will see those levels again. And by the time it comes back to those levels you would have eaten up enough premium.
Please don’t quote Japan example now. 
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Sounds alright to me.
So can you tell the worst that could happen, worst possible scenario, and the worst you have seen with the strategy?
Watch this , you will understand how premiums in options are why they are . He has explained perfectly the analogy with the housing loan. There are many flavors or it. This videos explains from yearly ( long term perspective). You have to use excel you understand the calculations.
You can even do cash secured put with buying Calls as well each month( as i said there are many flavors of these strategies-coverd calls,cash secured puts, collar , leaps selling, fut -options , endless…). All your answer lies in details of why-what options premiums . Downside /Pros and cons are very personal in nature depends upon Psychology, Money , patience ,fundamentals etc. There is no holy grail here everything is dynamic.
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That is the basis of “cash secured put”. Did you think the “cash secure” part is just being able to payup losses ?!? 
The idea is that even if you have to book loss in Options, you are buying equity at lower levels (with expectation of it rising) - and if the price doesn’t fall, you get regular income from option premiums.
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If nifty falls 50 percent from the highest level my portfolio will be down 40 percent. Because I sell puts of lower levels. That’s for now the max I can see. Again as I have mentioned earlier don’t do this if you capital is below 1cr. You can hardly see returns in absolute terms.
Like if you doing it with 30 lakhs even if you generate 30 percent, it comes down to 9lakhs. So absolute value wise it’s not great for smaller capital.
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I actually think ~20 lakh is a good number to start with cash secured put, for a learner.
@GB26 If you are an investor, just to get a hang of Options, sell put of a stock you want to buy(anyway) and take physical delivery if you have to. Do this a few times to get the hang of basics.
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U can do it only with 2lots then. And if nifty falls 10 percent then you can’t add it at lower levels. If you do it with minimum 1cr then you can take nearly 12 lots. So you can add at lower levels also. Like if you start when nifty is at 17k, I would first sell 16500pe. When nifty comes closer to 16500pe I sell 16000pe and so on. If it goes up then I can double the position at 16500pe. I make a lot of adjustments.
In one of the above post I said I have taken long position yesterday. But if you see the contract size on my capital it’s only 35percent. I have kept my capital for lower levels too.
If it’s just for learning then may be you can try with 20 lakhs. Also why I prefer bigger capital is because once I have taken delivery I pledge them and sell ultra deep OTMs on expiry day. Even if I get 2 points on each side I can collect 4 points weekly. And this I do with max possible lot size and multiples there off. With smaller capital brokerage will eat off your profits.
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Thank you @AlgoEye @Jason_Castelino @VijayNair 
I know that there are N number of ways to make money in the markets, each way may have its own disadvantages, pitfalls, risks or limitations, along with the potential. I’m just trying to find those ways, and choose the ways which I can use.
Yet to settle down with the couple of things that I could do for a couple of decades, so all this curiosity, enthusiasm, desire and search 
Along with chasing momentum, also searching if any segments, instruments exist, however less profitable they are, which I can work on.
Stones to someone could be diamonds to me, garbage to someone could be manure to me 
Thank you again.
The only issue I find with cash secured puts and covered calls, is that it’s highly dependent on the underlying moving in the anticipated direction.
In your example, the put writer is assuming that BN will eventually fall (and go below the Put’s strike). It’s quite likely that BN will never drop below that. Same with covered calls. What if the underlying rallies another 100% from the Call’s strike price? It will be quite painful to watch that rally from the sidelines.
Having said that, I must admit that these are good options to generate regular income with justifiable risk exposure, as long as you can make peace with the above scenarios.
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Pain in the market, in its general sense, is losing money, but in the example, he did not mention about any loss, sounded more like a win-win to me. I guess I wouldn’t have thought if it was not the case.
Also, the writer in the example is an experienced trader, a cautious one, so I looked at this.
Pain not only when losing money but when market rally and everyone get money you are sitting in CASH.
And once market crash and you take delivery of stocks, then what are you going to do? Sell covered calls ? or BUY and Hold ?
Main problem is your strategy is not capital efficient.
Please do in paper and see.
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@abcd5662 You can drift your short puts up, you can make fresh short puts every month/week, you can invest part of the capital in liquid funds etc
It’s always a very personal topic, but for me, it’s painful if I see people with passive strategies making more (A LOT more in this example)
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Personally, as I am trying my hand also at momentum, I wont feel left out from the rally, and as far as taking delivery is concerned, is it not logical to take delivery of such instruments which are bound to go up with time, index or stocks like ITC, Reliance etc.? I have some investing knowledge which I guess I could put to use in this context.
That’s right, but in CSP, the strike is always the price at which the seller is willing to take delivery. What if the underlying goes up, but not my view on the price at which I’m willing to take delivery?
Nevertheless, I myself use both CC and CSP to earn a regular income (on index only). My point was the strategies are not arbitrage opportunities, as touted by many.
Can you elaborate?
You didn’t get the point. I am saying what if ITC never hits the strike price of the CSP? You’ll never take delivery but watch it rallying from the sidelines
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There should be no fixed view imo. With cash secured puts of index to make regular income, one should be prepared to drift up and down. And with stocks if one goes up and you are nor prepared to buy, then dont buy - look elsewhere.
Theres no free lunch though ofcourse.
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