Hi traders, i want to sell far out of the money options for both call and put on expiry far otm means 1500 points both sides in case of BN. I want to know what is the risk and worst case scenario.
While this strategy might work out on 95+ days out of 100, One bad day will wipe out year’s of profits.
If at all, you wanna do it. Please have a risk management framework in place with required hedges. Spreads are a nice way to mitigate your risk.
@Jason_Castelino and other option sellers here can share their insights.
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This is exactly my experience too. I traded MidCap, Finnifty, Bank, and Nifty options on expiry days consistently for about 2-3 months. Typically, I handled around 50 lots at 1-2 Rs, bringing in an average daily profit of 3000 Rs.
But then came a day when the unexpected hit—out of nowhere, big players (or aliens from the other side of the Atlantic) started buying options aggressively on an expiry day, sending the market into a frenzy. That one chaotic session wiped out close to a lakh, erasing months of steady gains in just hours.
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It’s just around 3 percent on banknifty. If it’s one day to expiry then it’s fine. Otherwise it is very risky.
I am more comfy to selling deep OTMs on nifty. Doing it from past 5 years and I have an XIRR around 35 percent.
I lose in around 10 sessions out of total of 250 sessions in the year. And those 10 sessions will take away 2 to 3 months gains. So my net gain is what I make in 9 months.
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