InvestorQ : What is the best time for a trader to be selling options?
Nishant Chandani made post

What is the best time for a trader to be selling options?

Answer
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Abhi Yadav answered.
2 years ago


Selling options works best when the stock or the market is exhibiting a clear trend. For example, if RIL is exhibiting a consistent bullish trend, then traders can make profits by consistently selling put options of higher strikes. By churning your money more often it is possible to improve your yield on selling options when the direction of the stock price movement is fairly clear.

The next question is whether to sell ITM options or OTM options or ATM options? For every option seller it is a trade-off between an in-the-money option and an out-of-the-money option. An ITM option can give you higher premiums but also comes with higher risk. The OTM option, on the other hand, comes with much lower risk but also with much lower premium potential. As an option seller you need to take your strike decision judiciously.