Five Proven Tactics for Winning Every Day
The approach you take to intraday options trading can either turn it into a goldmine or a minefield. You are not alone if you have ever looked at an options chart, perplexed by your trade's results, and wondered why it did not work despite you “predicting” correctly. This post examines the strategies used for intraday options trading in India, specifically during the Nifty and Bank Nifty weekly expiry periods.
Remember, for any intraday trading, the entire approach is based on an understanding of market movements, not predictions.
Basic Concepts You Must Understand
Prior to working on strategies, there are a few principles that need your attention:
1. Time Decay (Theta). The value of the option diminishes with time, primarily after 1 PM on expiry days.
2. Implied Volatility (IV). Don’t purchase options when IV is too high.
3. Open Interest (OI). Displays trader positioning. Sudden OI changes indicate potential breakouts or breakdowns.
4. Volume and Price Action. These indicators of movements within a single day are unmatched.
Strategy 1: ATM Straddle Sell (Time Decay Strategy)
Logic:
Once the market stabilizes, take advantage of time decay from Time Decay by selling both ATM Call and Put options.
Setup:
• Example: Current value of Bank Nifty is at 48,000.
• Sell 48000 CE and 48000 PE at 9:20 AM.
• Stop-loss: 40% of premium.
• Exit: By 2:30 PM or earlier if 60–70% profit is achieved.
Best Conditions:
• India VIX below 13.
• No important news or events.
• Market opens within the previous day’s price range.
Risks:
• Significant breakout movement can result in substantial losses.
• Always utilize a stop-loss or ensure your trade is hedged.
Strategy 2: Directional Breakout Buying
Logic:
Buy either a Call or Put option once a breakout occurs and is supported by volume as well as Open Interest (OI) confirmation.
Setup:
• Identify the high and low of the previous day together with the first 15-minute range.
• Trade entry on volume-led breakout.
• Purchase ATM CE above resistance or PE below support.
• Stop-loss: Low of breakout candle for CE (call), High of candle for PE (put).
• Target: Minimum 1:1.5 or 1:2 risk reward ratio.
Ideal Conditions:
• Retrending market.
• India VIX above 13.
• Clear price structure, no overlapping candles.
Risks:
• False breakouts on Tuesdays and Wednesdays.
Strategy 3: Reverse Near Important Support/Resistance.
Logic:
Anticipate and respond quickly to reversals around strong supply and demand zones before the broader market catches on.
The Revision Strategy:
Set Up:
- Identify zones on the 15 minute timeframe chart.
- Watch for reversal signals such as engulfing candles.
- Buy put options (PE) at supply zones and call options (CE) at demand zones.
- Place a stop-loss at the high/low of the rejection candle.
- Target the nearest VWAP or support/resistance level.
Ideal Conditions:
- The market should be range-bound.
- There should be agreement between the spot and futures charts.
- OI unwinding confirms reversal.
Risks:
- Taking entries without confirmation.
- Trading without a stop-loss.
Strategy 4: OI Shift Trap Strategy
Logic:
Institutions tend to falsely entice retailers with early OI buildup and later shift direction.
Setup:
- Track live OI data using Sensibull or Obstra.
- Identify heavy OI buildup during mornings.
- If OI drops at a specific strike while rising at another, trade in the new direction.
Example:
- Say 48000 CE has a 25 lakh OI at 10:30 AM.
- At 11:30 AM, it drops to 15 lakh while 48100 CE increases to 28 lakh for a total of 43 lakh OI.
- The market is likely bullish so buy CE.
Ideal Conditions:
- Wednesday and Thursday
- High liquidity in Nifty and Bank Nifty.
- Volume confirms the shift.
Risks:
- Delay in noticing changes in OI trends results in late entries.
Strategy 5: Expiry Day Option Buying After 1 PM
Logic:
On the expiry day, the options premium declines rapidly. After one PM, significant movement has the potential to yield substantial returns.
Setup:
- VWAP should be checked only after 1PM
- Determine trend for the day using VWAP
- Purchase In-the-Money (ITM) or At-the-Money (ATM) options as dictated by the trend
- Tack loss at the cost of the premium
- Targeting should be set at two or three times the premium
Example:
- Buy 48000 CE at 40 rupees
- “At 1:15 PM Bank Nifty breaks the day’s high
- Option rallies to one hundred rupees by 2:45 PM.”
Ideal Conditions:
- Fast momentum with low premium
- Low cost fast-moving options
Risks:
- No SL means you risk full premium loss
- Profit booking has to be fast
Rules of Engagement for Intraday Option Traders
1. You must set a stop-loss, no stop-loss means no trade.
2. Do not go after a missed trade. follow the next setup.
3. Unless it is a planned exit, do not hold positions near market close.
4. Do not change position size. Risk only 1-2% per trade.
5. A no trade is still a valid decision.
Risk Management Example (With ₹1 Lakh Capital)
- Maximum risk per trade: ₹2,000
- If premium = ₹100, buy 2 lots (₹10,000 capital)
- Stop-loss = ₹40 per lot → total loss = ₹2,000
- Target = ₹60 per lot → profit = ₹3,000; Target = ₹80 per lot → profit = ₹4,000
- Maintain at least 1:1.5 risk-reward ratio
Tools You Should Use
- Charting: TradingView (5 minute or 15 minute timeframes)
- Open Interest Analysis: Obstra, Sensibull, Market Pulse
- Indicators: Volume and VWAP
- News Updates: Use Telegram groups for RBI/SEBI live updates or other news feeds
Realistic Expectations
- A 60% win rate with a good risk-reward ratio is sufficient, so don't expect to win every trade.
- Emotional control beats chart patterns.
- One strategy at a time until mastered.
Conclusion
The right strategies and risk management transform intraday options trading into a consistent income stream. While it is a fast-paced game, discipline fosters success.
Start by:
- Daily practice of one strategy until automated
- Embracing losses as learning opportunities
- Maintaining a trade journal detailing reasoning, entries, exits, and emotions
Winning every trade isn’t necessary. All that's required is safeguarding capital and allowing profitable trades the room to grow.
