You may be wondering if it’s truly possible to make such a substantial profit in a single day. Some may even consider a 10 times profit to be impossible. However, let me explain how it can be achieved.
Step 1: Evaluate your capital at risk.
Your risk capital is the minimum amount that you can afford to lose without experiencing any significant financial impact. For instance, if you have a total trading capital of INR 100,000 and you are comfortable with losing INR 2000 per trade, then INR 2000 would be considered your risk capital.
Learning technical analysis course from a qualified trader or trading analyst, result in the gain of your entire investment.
Step 2: Hold off until the option contract’s expiration date.
Select the most highly-traded option contract, such as the NIFTY50 index option. From there, I will wait until the expiration day, or perhaps one day before.
Next, I will examine the day’s ATR range using any available technical analysis software. For example, the free technical analysis tool at icharts.in could be used.
ATR, or Average True Range, represents the average difference between a day’s high and low values, with a 14-day average typically used.
For instance, if the NIFTY index is currently trading at 8285 and the ATR for NIFTY50 is 120 points, this indicates that on an average day, NIFTY could move either up by 120 points or down by 120 points.
Step 3: Selecting the appropriate option contract
This step requires some thought, but there is a simple approach to selecting the correct option contract.
First, determine the market trend – whether it is bullish, bearish, or neutral.
If the trend is bullish, consider purchasing an Out of the Money (OTM) Call option. For instance, if the NIFTY Index is currently at 8285, one might consider buying an 8300 Call option, which will likely have a premium of around INR 2 on the day of expiration.
If the trend is bearish, consider purchasing an OTM Put option. For example, if the NIFTY Index is presently at 8285, an 8250 Put option might be a viable option, with a premium of roughly INR 2 on the day of expiration.
If the market is in a neutral phase, consider purchasing both an OTM Call and an OTM Put. In this example, one could buy an 8300 Call and an 8250 Put, with a total premium of only INR 4.
If you are unable to predict the market trend, it is recommended that you refrain from trading.
Step 4: Precautions to take
It’s essential to exercise caution when employing this strategy since it is highly speculative. Your profit is entirely reliant on your trend analysis and the accuracy of your trend forecasting.
If your trend forecasting is precise, you may earn a significant profit. However, if you require additional training in trend forecasting, you may consider enrolling in our Advanced certificate course in stock market.
Conclusion:
Derivatives can be an excellent risk management tool, but they can also be used for speculative purposes. The choice is entirely yours, but it’s crucial to keep your risk tolerance in mind. If you’re interested in learning more about derivative strategies, you may want to consider enrolling in our Derivative Strategies program.
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