How stock market works and how money / price is supreme

Impatient trader vs Patient trader

How does the market take money from a impatient trader and rewards a patient trader with proper risk management in FNO segment?

In FNO, it’s all about probabilities where a edge lies with sellers of options having a 66% pop vs buyers with 33% pop approx. But not everyone has capital required for option selling. So only left option for low capital people in FNO is only buying options.

People showing big MTM profits on YouTube etc..

Here many people showing big MTM profits on YouTube and misleading techniques inspires them into market. For them where every try of a technique takes off your capital from you to someone with large capital resources who can actually influence the market.

Here there are many tools to help traders with right trades but again they only help people with understanding of how to use them. The tools are based on Open Interest, Volumes and order book analysis etc..

People showing genuine knowledge..

There are also some genuine people with no profit intentions try to educate the people on YouTube like Vivek Bajaj sir with face2face and learn2trade series and some others.

How does market actually work with probabilities?

Say delta in option strikes acts like probabilities of buyers chance of winning.

Say a OTM option strike with Delta of 0.3 is saying option buyer has only 30% chance of making money verses a seller with 70% chance of keeping the premium upon expiry end.

And a ITM with 0.7 reverses this scenario for buyer if used correctly.

What is risk reward and why it’s important to sustain in market?

A 1:1.5 RR means a say 5 point SL verses 7.5 points Reward on each trade. It is important for option buyers to book small loses with larger profits to sustain in market.

On top of these again other greeks like volatility, gamma, rho which also effects the option traders so probabilities is all we have got in understanding the market.

Note nothing is 100% and nothing is risk free. It’s all about taking small losses against large profits to maintain a positive ROI end of the day. A trading setup and rules can get you in right path but with no proper Risk reward no one can sustain here.

Options Buyers vs Sellers

Now in market there are buyers and sellers. Buyers need sniper entries to make money but sellers have advantage to be profitable even when they are correct to a extent as they have theta on their side which keeps killing option premium everyday.

 

Can Options buyer really make money?

So one question may arise to everyone whether a option buyer can make money or not. Definitely “YES” But they needs a specialised skillset with favourable RR and sniper entry and exits using advanced tools. A buyer needs often needs reverse engineer a sellers mindset to be profitable. Say a large OI builtup on a strike  on CE then seller is betting it will not breach and market may move opposite direction that is down or sideways below that strike but seller is betting strike won’t be breached. But is it as simple as that? It was initially but more and more tools like OI pulse, Autotrender, Ltp calculator etc are coming up where it is easy to decode sellers position, so it won’t be so simple going forward.

If we back test straddle was working perfectly few years back but as popularity grown, it stopped working? Why?

Why Straddles or Strangles are becoming more risky?

Because retail users losses are needed for big players profits. It is a zero sum game where one losses money and other gains.

So if everybody starts using Open Interest buildups etc and decoding it simple then who will lose money for big players to gain.

Government gets taxes, brokers get commissions, so they are neutral.

Happy trading….