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How to improve option writing with optimal strike selection, Shubham Agarwal explains

Strike selection plays a very big role in Option Writing trades. What strike we select decides the amount of returns we will be making as well as the amount of risk that we will have to bear.

November 26, 2022 / 09:38 AM IST
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Option writing (selling) is one of the most successful trades around the globe as history has it. However, success comes at a cost. The cost is of very high risk profile.

Strike selection plays a very big role in Option Writing trades. What strike we select decides the amount of returns we will be making as well as the amount of risk that we will have to bear.

Directional move is the enemy of the Option writer. Now, we all know that closer the strike is to the current market price more will be the sensitivity to the directional move. One way to distance from this is by being one of those writers who Sell both Call and Put. Remember, there will be one option that will be positively impacted by the directional move and another one will be negatively impacted.

If the underlying rises