I see that many traders sell PUT options instead of buying CALL options when they have bullish view even for an intra-day trade and vice-a-versa.
However I think that for intra-day buying call can be more profitable than selling PUT given it doesn’t require a large margin to be blocked.
Consider a case of Nifty option expiring on 5th Dec. It’s 12150 strike price CE & PE are both priced at ~70 and have similar delta. Suppose I have a bullish view for intra-day. If I short PE@12150, margin of ~85,000 will be blocked. Instead I can buy 10 lots of CE@12150 for Rs.53000 and earn more profit compared to shorting PE.
What can then be a rationale for selling PE instead of buying CE? Am I missing anything in the above analysis?
I have considered effect of time decay. But for intra-day, is this decay so significant that it beats the advantage of buying more number of lots?
If you are saying delta for short put and long call is same then let’s assume that if you buy 10 lot of call instead of one lot of short put , don’t you think your risk would be ten times more. So there’s no comparison between two trades you have mentioned above.
Yes risk is higher. But let’s say I trade only one lot even while buying the call. In that case, pay-off is same in both cases. Then why will I want to block the margin for selling a lot?
It depends on many factor (OPT GREEK’s) but you can’t compare it with Margin Req for selling PUT
TRADING OPTION’s Req deep practical working experience. I must say make your your experience than you will realise behavior of weekly contract vs monthly and you also find other traders approach on that by monitoring IV.
have you practically done that, try that if you success than it’s good. It does not make sense that what will be my approach or any other traders view Bcoz it doesn’t provide practical wisdom.
Don’t forget only 5% are Profitable traders so make your own wisdom
Well, for long call you will be paying upfront premium, u’ll in profit only when the spot breaches strike+premium but for short put u’ll be receiving premium, u’ll be in profit even if the Spot ( underlying asset) price stays flat or breaches break even. This is a just therotical explanation. But as @lotus said one has develop the strategy and gain practical knowledge. As option premium depends on multiple factors called option Greeks
@U_will_die_once what you mentioned is true if I wait for option expiry. But I am talkies about trading premiums in intraday father than wait ung till expiry.
I agree with @lotus too. I need to analyze effects of Greeks other than theta for intraday.
If it is purely on intraday basis, call buy can be done when you are very bullish. When you are mildly bullish put selling makes sense even though you give more margin.
Also it depends on the time you are taking trade. If you are taking trade early in the morning between 9.15 to 11 am you may sell put if you are mildly bullish.
Based on my experience, option buy can be limited to intraday and option selling can be for positional.
