Which approach is more suitable in the case of scalping trades (1m time frame)? Option buying or selling?
If reversal than selling has slight edge due to IV crush , if to the flow than buying due to IV Expansion ( Panic Square off).
Option buying any day. For selling you need way more capital.
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Option selling has consistency but need good capital
buying can be done with small capital too but not easy…required good skill
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For scalping this aspect doesn’t come in to play
Selling also need skill
@Weallrsame it all depends on the strategy. Scalpers do both buying and selling. Since the time frame is very small, time decay doesn’t give any edge to sellers.
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In scalping trade , you can make money by buying option , but you need to be quick “in & out” with higher lots
yes but i feel selling anyone can do
but buying requires extra skill
Selling and holding till expiry has a high theoretical POP. This gets people in to a false sense of security.
Each time we win we win small. The losing days where the lose could be many x above the win wipes out the small profits made in the large number of winning trades. For that to not happen skill is required.
For scalping the POP angle of option selling anyway doesn’t come into play. We are in an out fast. We are not holding till expiry or for extended period of time. Option buying will work just fine with less capital.
Also for a scalper the real challenge is to manage the transaction cost which will cut in to the small profits that is made. Its also a physically and mentally intensive trading style unless automated.
I havent done scalp yet but did option buying many times…
Its very tough for me to fight with time decay which is biggest enemy in option buying…
Whereeas option selling is opposite…
Naked positions taking overnight are always v v risky in option selling
Better to carry forward hedged or square off in day trade
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Before.moving into option selling i personally feel option buying has to be experienced and to be done by a trader …
Making your.small capital into big only option buying or futures can do and also shows real experience of trading
This thread is about scalping where time decay doesn’t come in to picture.
Need more capital. One has to worry about adjustments when market moves against position. One has to worry about margin limits and so on. Option selling is just more hyped than option buying.
i agree scalp trade time decay doesent come into frame …
Option selling is more into hyped because traders are looking for consistency in there income …
Do you really think option buying has consistent income ?
In trading we need to look at accuracy (translates to consistency) along with risk reward. Just higher accuracy or consistency is of no use.
Option selling has high accuracy but low risk reward. Only those option sellers make money who can keep their losses small. Otherwise 90% time you win and enjoy consistency. 10% time when you loose you loose all that you made and more in 90% trades. The high accuracy of option selling enables the hype around selling but what % of sellers are profitable with higher accuracy of selling. The recent SEBI report draws the fair picture.
Option buying has lower accuracy but high risk reward. Even if one wins just 10% of the time the insane profits one can make more than covers for the 90% loosing trades. But only those option buyers make money who don’t take insane leverages with their capital and keep their position size within sane limits.
The accuracy mentioned here is just theoratical. The underlying signal generation system can considerably modify the accuracy of sell and buy strategies. My positional and intraday option buying strategies have accuracy in the 47-60% range.
Scalping is difficult to pull off consistently. Slippage will kill. Scalpers get in on momentum, and if the setup fails - book losses on reversals. Both these will have large slippages. And the more the # of trades, the worse the slippage effects.
Yes. Many think option selling is just about placing far away OTM trades and letting the probabilities play out. If you do that long enough, some day you could swallow a bomb which will wreck your long built profits. So its better to adjust your legs in between with some skill/intuition/calculations.
Having said that, I still feel executing ‘consistently profitable option buying strategies’ require lil more skill, patience and persistence than Option selling strategies, which require tact, poise and considerations.
Good accuracy bro…
60% is good …
Agree to your point
Option buying 1 good trade can surely cover many losses
option selling 1 wrong trade can surely vanish all your profits…
Thatswhere skill,patience,position sizing,hedging etc etc comes into play …
Dont you think traders are more attracted to buying because of its thrill and excitement
whereas option selling is very boring game…
But if i look into business point of view then selling is more comfortable i guess…slow and steady
this is a never ending argument
buying vs selling …
its individual choice what they are comfortable with…
investing 10 lakhs Annually ROI 30% looks small
but investment 5 lakhs and Annually ROI 100% looks good
thatswhy option buying attracts more traders because of its roi,thrill and excitement
Option buying and scalping goes symmetrical. The scalping should be done with some automated system that allows little manual intervension. Keep the trade time low and profit target also low.
Others can share the experience
People come to the stock market to make money. Rest is just conversation. I am not sure we can compare what people do based on fear and greed in the market to what people do in Disney Land.
Option buying allows one to start with small capital. The other side of this is that people can also take more leverage with less capital relative to option selling where higher margin need to be blocked. This attracts more people towards option buying.
Trading is like doing a business be it option selling or buying. Good for you if you have figured out an option selling strategy. Keep at it.