How far this strategy is right? Near the expiry, options tends to loose value and its price starts to decrease. Selling options first will be more wise decision. However, it requires either full future margin if want to hold till expiry or less margin but to sq off at the end of the day. Small traders like me find it difficult to face such scenario. Is decision of “buying nxt/far months(for the reason that it can be hold till nxt months expiry) ATM/OTM options (call/put as per the view)just 3/4 days before the expiry” wise?
It depends and we can not out-rightly say it will work. But few factors should be considered here.
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Are you buying with all the capital available to you? If yes then even if one is wrong for one time he can end up losing all his capital. So one has to allocate capital accordingly and manage risk properly in order to sustain in markets. With little capital one can not do proper diversification or risk management and is bound to loose at one point of time.
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To end up in right direction all the times is not practical.
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The probability of OTM options ending in the money are very less and we can say odds of winning are not in our favour.
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With small capital, chance of getting effected with emotions like greed are more and one will lack in self-discipline while trading.
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Options is a trading product not an investment , i mean options are dependent on intrinsic value and time value. Time is the biggest concern in the options trading. Sometimes holding an options not more than 2-3 days is wise decision.
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