Shorting OTM Calls 7 to10 days before expiry

General
1

is shorting OTM CE around 7 to 10 days prior to expiry a good strategy so as to ‘eat’ the premium?

1 Like
2

It is true that time premium of an option loses its value (theta) fastest when nearing expiry.

But, a drastic up move could result is losses.

try to hedge your position by making it into a BEAR CALL SPREAD.

all the best.

3

Not a bad strategy if done right. Check this for a detailed analysis.

4

It’s not a strategy.OTM CE Short means you are going to short the nifty meanwhile you are bearish on market if nifty wont be close more than chosen strike by you.there you make profit.if it’s close morethan Nifty+Premium(that you are received) you are in loss.

5

It’s like selling insurance believing that nothing will happen to the buyer.Use it carefully.Track Open Interest.Short where the maximum of open interest is.If anything goes wrong cut your shorts ASAP, since everyone will want to exit the same time as you do.!!! Happy trading.

6

Shorting OTM options in order to collect the premium is a good idea to get consistent income. However, it shall be taken with much caution as selling naked OTM options is posed to unlimited risk. Instead of selling naked calls, you may opt for covered call strategy which doesn't pose you to unlimited risk.

You may check out this article to have an idea on this strategy:

http://traderschowk.com/2015/04/01/how-to-make-your-portfolio-grow-in-a-falling-market/

If you have any queries, do let me know.