Which one is better – option buying or option selling?

Question and Answer – ForumCategory: generalWhich one is better – option buying or option selling?
Raghu Staff asked 3 years ago
1 Answers
Raghu Staff answered 3 years ago

The answer depends on your trading style –

  1. Prefer 1-2% returns per week on a large capital
  2. Prefer 200% in one (sure shot!) trade

But if we consider the probabilities of these two styles – 1. happens good 80-95% times and 2. happens on the rest (5% – 20%).
I personally prefer option writing.
Targetting 1% per week consistently. Assuming you gain 1% 40 out of 52 weeks in a year, and miss (take a hit of -1% or -2% or avg -1.5%) in the rest 12 weeks, still the expected gain is 40%-18% = 22% (far better than most of the mutual funds today!)
I am currently focussing on increasing the number 40 to 52, and 1% to 2% 🙂 I have been writing index options for quite some time. You can see the performance here – http://niftybanknifty.com/performance-nav-returns/
The only drawback is you need a huge capital to write options. If you trade with discipline, option writing will definitely help you earn a passive income.