Options decay and they lose their value over time... this is irrespective of the movement of the underlying.
Using option charts for exits provide a faster way to close a trade - this is specially useful when markets are rangebound and you have a position in any OTM option.
Look at this 15 min chart of nifty futuers (I use 15 min charts for positional trades)
Yesterday we just got an exit for a long positional trade in nifty futures.
But if we had waited this long to exit a positional trade in call options, we would have surrendered substantial part of our profits,
Here is the 8400 call chart.... see what I mean? the price yesterday is same as it was 10 days ago. But a trailing SL (horizontal line) would have provided a graceful exit much before.
Option writers are obviously not affected by this... the time decay ALWAYS works in their favour.
Using option charts for exits provide a faster way to close a trade - this is specially useful when markets are rangebound and you have a position in any OTM option.
Look at this 15 min chart of nifty futuers (I use 15 min charts for positional trades)
Yesterday we just got an exit for a long positional trade in nifty futures.
But if we had waited this long to exit a positional trade in call options, we would have surrendered substantial part of our profits,
Here is the 8400 call chart.... see what I mean? the price yesterday is same as it was 10 days ago. But a trailing SL (horizontal line) would have provided a graceful exit much before.
Option writers are obviously not affected by this... the time decay ALWAYS works in their favour.
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