The biggest reason why options buyers lose money?

So my dear friends, you are not making money
from the Options trading, right? Because we know that 80% of Option traders,
80% of Options buyers actually lose money. Who buys Options actually? Traders like you and me buy Options. Because we all are small traders. And on the other hand, who sells option? The big Institutions, the mutual funds, the
foreign institutions, the big traders, they all short sells Options. They never buy Options. And we buy Options hoping that the Option
price will move up. But many times I have seen that the price
of underlying is moving up but the price of the call option is moving down. Many times I have seen that the price of the
underlying is moving down and the price of the put option is also moving down. So why it happens like that, because my dear
friends options is also having a time component in it. Along with time the Option price actually
moved down. And 80% of Options actually expires worthless. So 80% of Options sellers who are actually
selling the Options, they make money and rest 20% of Options buyers only make money. So we need to understand how to stop losing
money. Because if you want to make money in the stock
market or in Options trading, you need to know how to make money. That is fine but you need also to know how
to stop losing money. If we do not know how to stop losing money
we will ultimately end all of our capital. And that will happen very surely in Options
trading. So in this video, I am going to show you the
top mistakes, the biggest mistake, the Options traders make. So let us see how the Options traders make
these mistakes. But before that let me give your a short intro
of mine. Hello friends, I am Indrajit Mukherjee from If you want to grow your wealth from the stock
and commodity markets hit the subscribe button and hit the bell notification icon. You can also send me your stock market related
queries through WhatsApp in my number +91-9674321856. The biggest mistake that Options traders make
that is actually not knowing how to trade Options. They thinks that the price has come down for
a stock and it will move up. Fine, that is very fine. Before few days actually one of my clients
has asked me sir I have bought Indusind Bank 1600 call option for this expiry. That means for January expiry. So what should I do? I am not going to make profits or where should
I keep stop loss. So, I was not very aware about Indusind Bank
chart. So I told him let me see the charts and then
I can comment. So now what I have seen that he has made a
great mistake. Because he has bought a far Option of Indusind
Bank. That Option is very far, very far, very away
from the current market price. And he is not going to make a single paisa
out of that Option. The whole Option is surely going to expire
worthless. And I’ll show you how. So let us check IndusInd Bank chart. Now my dear friends, I have seen that Indusind
Bank is currently in a downtrend. So that is not the point. The current price of Indusind bank is 1332
rupees. So you can see the current price is here. And that gentleman, he has actually bought
a call Option of 1600. So you can see how far is 1600. Now, that call Option he has purchased that
is also of January Expiry. So today is 28th of January. So the last Thursday of January is not very
away. And I am very sure that he is going to lose
all of his capital in this particular Indusind Bank 1600 call Options. Why? Suppose Indusind Bank actually bounces back
from 1332 level so say this level, that was its resistance. It is around 1600 level. But my dear friend, is it so easy? Indusind bank has fallen a lot and expiring
above 1600 is next to impossible. So that is the biggest mistake that this guy
has made. He has bought a far away Option, he has bought
1600 call Option that will surely expires worthless. So these guys are actually eaten by big traders. These small traders are actually eaten by
the big traders. So my dear friends, let us find how much price
the call Options of Indusind currently having. So let us also add the close to money options
for Indusind Bank. So let us add the Options. So Indusind bank January 1600 CE. You can see the price of the Indusind bank
January 1600 CE is less than 2 rupees. Now the price is currently at 1330. So let us find some near to money options
also. So let us find what close to money options
are there. So we can see there are 1320 CE, there 1340
CE. And the current price is 1342. So let us add the 1340 CE. So you can be the price of the 1340 CE is
33 rupees. So you can see the price of 1600 call options
is less than 2 rupees. And the price of January 1340 CE is at 33
rupees. So that is the difference. Now let us check the lot size of Indusind
bank call option. We can see the lot size in 400. So if the gentleman wants to buy the IndusInd
Bank call option how much money he needs. Suppose, he is buying the 1340 call options. So, 400 into 33 rupees, equals to 13200 rupees
capital to buy 1340 rupees CE. Now how much money he needs to buy the 1600
call options. Its price is 1 rupee 65 paisa. So needs only 660 rupees. So instead of 13000 rupees, he needs only
600 rupees to buy that cheap call option. So friends, you are saying that a trader is
undercapitalized so he is buying a far away option. He cannot buy a near to money option. Because he does not have 13000 rupees. So he is buying a far away option 1600 call
option with just 600 rupees. Hoping that his 600 rupees will be doubled. He is already undercapitalized because he
is buying option. And there also he is making that mistake that
he is buying the far away option hoping that his money will be doubled. So all the 600 rupees will actually evaporate. So do not do this kind of mistake. Any time you are buying options, buy close
to money or in the money options. The best options are to be bought are the
in the money options because in the money options are already in the money. So if the price of the underlying goes up
the option price will also go up in the similar manner. And if you buy out of the money options, and
mainly if you buy far away options, if the price of the underlying goes up unless and
until it is close to your strike price, the option price will not go up. So he will think that the price of the underlying
going up but the price of the options is going down. So you can face this scenario. So if you cannot afford to buy in the money
options, at least try to buy close to money options. And if you cannot afford close to money options
also, do not trade options. The options trading is not for you. It is your hard earned money my dear friends. Why are you going to waste it? Why are you going to waste your 600 rupees
also for the big traders who have actually shorted the 1600 call option. There are big traders who have shorted that
1600 call option and they will just engulf your 600 rupees. They will engulf 600 rupees of these small
traders. You will lose money. You will lose this in the stock market and
your money will be written by those big traders. So do not do this mistake anytime my dear
friends. So I feel that I have describe the biggest
mistake that the option traders make that is they try to buy far away options. Hoping that the option price will move up. So next time whenever you are tempted to buy
a call option or a put option at least try to buy a close to money option. Do not try to buy all those far away options. So my dear friends, if you have seen this
video, take an oath today that from now onwards you are not going to money far away options. You will try to buy in the money options. If not possible you will at least buy close
to money options. Before I leave this webinar, I want to make
an announcement that the budget is coming on 1st of February 2020. And before the budget I am going to publish
a special video that will describe how to trade the volatile markets like a budget day. So wait for my special video and do not forget
to subscribe to my channel before that. So my dear friends, if you liked this video,
do not forget to hit the like button and do not forget to comment below this video. Because your comments give me a encouragement
for making new videos and making videos on new topics. So if you like this video do not forget to
share it with your friends and relatives. So friends, thanks a lot for watching this
video till the end. Bye-bye

2 thoughts on “The biggest reason why options buyers lose money?

Leave a Reply

Your email address will not be published. Required fields are marked *