What should you do when you have sold options and it is going against you

@Sensibull
I am asking about short option either call or pull… I am specifically asking about index options (nifty of banknifty)

You have created short position (yes naked) based on news …and now market moves against your trade…

What are the all the possibilities one can do?

  1. I know about roll over possibility but …since we have to close current position (loss position) …its not that appealing … what else…

Please spend little time to explain your action/suggestion?

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Take this week option,
last Thursday you could sold 9500 PE 7 May around 20 as the expiry for April was 9860. Monday markets opened around 500 points down. Your 9500 is now ITM with approx. 280

Sell call 9600 of weekly option 7 May around 70. this would create a buffer of approx. 70 points.
Next rollover the weekly ITM to 9400 PE of next week 14 May for approx. 280.
Now the total credit you have is 280 + 70 = 350.
On 7 May expiry roll over the 9600 call for 14 May collecting some more premium. say 50 bucks. total credit is 350 + 50 = 400
Now your range for 14 May 9400 - 400 = 9000 on lower side and 9600 + 40 = 10000 on the higher side.
Similar adjustment needs to be done if it breaks the range.

@siva Thanks …Can you please clarify one more confusion.

  1. What is the disadvantage of shorting strikes price which are not like 18500 or 20000 …what if there is not much volume strikes like 18200 or 21200 …those strikes do have premium but not much volume …for a option seller what is right/wrong about those strikes?

Never sell naked option unless you are hni,market are ruthless always use spreads if you want to take a biased view,market on Friday was at around 9800 and next day it went 5% down look at vix it is at 40 means market can go crazy,market will be there for ever but your money will not if you blow up.use delta to know the risk.if your option is about to go itm then buy future to hedge if the option is completely itm no other option other than to book your losses

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They will have volumes for nearby expiries but sometimes selling naked options may be risky unless you are a pro, try to do spreads, sensibull has came out with many videos on options like what factors one should know before coming to a particular view, what strikes to select, what strategies should be used for particular situation, keeping stop losses, discipline and many more, I would suggest you to go through all those before trading in options.

Sir I hope reduce margin for hedged trade don’t get delayed beyond 1 June and are there any proposal to Remove exposure margin in hedged trade in future down the course

If the expiry is not nearing, then can think of buying ITM or ATM strike, the reason you get good delta as compared to your sold strike.

Can you please explain with an example…lets say weekly expiry is 2 full days away and you realize that you sold call option is going bad i.e. call premium is increasing and u see MTM loss…what would you do to fix it?

Your are already in the money (you sold call option) …now you are saying one should buy ITM or ATM to take advantage of upside to hedge the loss making sold position?

My question to you is why do you trade before you have chalked the plan.

Adjustments are only for those scenarios where your plan is not working.
It’s not for making last minute decisions based on fear

There are several things need to see,
You wrote call based on some analysis, may be looking at resistance, and if there is still time to expiry, then you should revisit to your analysis to see where is next resistance and what is OI building happening to the strike price you wrote.
If your analysis still suggest that the breakout which has came is not going to sustain then, it is better to wait with your position, and to minimize the losses you can buy ITM or ATM call to ride the trend if breakout sustains. You will still will be in loss but you can recover some of it from buying.
Look at the OI buildup & change in max pain.

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Buying ITM or ATM naked call is good suggestion but should I buy this call in the same expiry (I guess so but just confirming)

Yes, one must buy with the same expiry.