Introducing Option Magic | Advanced Trading Strategies6 min read
The world of options trading is dynamic and complex, making it difficult for both novice and seasoned traders to navigate. However, with the right tools and strategies, anyone can succeed in the world of options. We have launched an options trading platform where you can simply express your opinion and receive the best option strategy.
Whether you’re a novice trader or an expert, Option Magic can help you find the best trade and carry it out effectively. Our goal is to help you gain knowledge and confidence in options trading and become a successful trader, which should help you generate a regular source of secondary income, at least initially.
What is Option Magic?
Option Magic is a module in which traders can trade on Option Based Strategies like Spreads, Condors, Strangle, etc.
Users can provide their opinions on the market trend, such as bullish, bearish, neutral, or a big move, and we will then recommend the best options trading strategy to trade in Nifty and Bank Nifty. To reduce risk and raise the likelihood of profit, we advise users to trade using hedge-based 2, 3, or 4-leg strategies. All the strategies suggested here carry limited risk.
How do I select the Option Magic trading module?
Option Magic can be found by clicking on the Options Strategies icon in the “All Investment Options” section.
Option strategies involve trading in multiple Option Contracts (buy or sell) at the same time. Users must first choose whether they want to trade in the Nifty or Banknifty index.
After selecting the instrument, the user must click the Option Magic Module to place trades.
This makes it easier for users to select an option strategy based on their Nifty or Banknifty market views. The strategies selected have limited losses due to strong risk management techniques that prevent the traders from incurring heavy losses.
Landing Dashboard for Advanced Trading Solutions
Option Magic Landing Page
Users are given four views to choose from: Bullish, Bearish, Neutral, and Big Move.
Detailed Page for any Move
Users are shown the Max Profit, Max Loss, Break Even Point (the underlying target after which the Strategy will start giving profits), Probability of Profit (approximate probability of the strategy ending up in profit by the expiry day), the approximate funds or margin required by the traders.
Here are the 4 scenarios and the strategies that would be recommended
If the view is Bullish, then the user expects the underlying (eg. NIFTY) to go up from the current value until the expiry date.
There is also an Option for Small Move, Medium Move, and Large Move, i.e. if the user is expecting the market to be bullish by the coming expiry, the user has a choice for choosing among the given set of the magnitude of movement of the underlying (NIFTY, BANKNIFTY). Let us understand with examples the expected movement a trader can have for a bullish move.
A Small Move means the user expects a move of around 25-50 points, a medium move means the user is expecting a move of around 50-150 points, and a large move which user is expecting a move of more than 150 points.
A. Small Move
Bull Put Spread: Bull Put Spread involves selling a put option and buying a lower strike Put Option for Protection. In this trade, the ATM (strike closest to the spot) is chosen for the sell Put Leg and two strikes below the ATM strike are chosen for Buy Put Leg.
Maximum Profit in this strategy occurs when NIFTY closes above the higher strike (sell put leg strike) and Maximum Loss in this strategy occurs when NIFTY closes below the lower strike (buy Put Leg strike).
B. Medium Move
Bull Call Spread: This trade involves buying a particular strike call option and selling a higher strike call option. This makes the overall trade cheaper than just buying a call option as you also receive a premium from selling the higher strike call option. Bull Call Spread involves buying the ATM (strike closest to the spot) strike call, and selling the call 2 strikes higher than the ATM strike.
Maximum Profit in this strategy occurs when NIFTY closes above the (higher sell call strike) and maximum loss in this strategy occurs when NIFTY closes below the (lower buy call strike) in which you lose the net premium you had paid.
C. Large Move
Buy Call: This trade involves buying the ATM call. Maximum profit for this case is unlimited and max loss occurs when the underlying closes below the ATM strike on the expiry.
If the view is Bearish, then the user expects the underlying (e.g. NIFTY) to go down from the current spot by the expiry.
A. Small Move
Bear Call Spread: This trade involves selling a call option and buying a higher strike call option for protection if the bearish view goes wrong. Hence, the losses are limited in this.
Here, you sell the ATM strike (the strike closest to the spot) call and buy the two strikes above the ATM strike call option for protection.
Maximum Profit in this trade occurs when the underlying closes below the ATM (lower) strike, and maximum loss occurs when the underlying close above the higher strike.
B. Medium Move
Bear Put Spread: This trade involves buying a put option and selling a lower strike put option. This is cheaper than just buying a put option as you receive the premium from selling the put option.
Bear Put Spread involves buying the ATM (strike closest to the spot) strike put, and selling the put 2 strikes lower than the ATM strike.
Maximum Profit in this trade occurs when the underlying closes below the lower strike and maximum loss occurs when the underlying closes above the ATM (higher strike).
C. Large Move
Buy Put: This trade involves buying the ATM put. Maximum profit for this case is unlimited and max loss occurs when the underlying closes above the ATM strike on the expiry.
If the view of the trader is neutral, he expects the market to be range bound (within a range) until the expiry.
Based on this view, we recommend users take positions if their views are Nifty or Banknifty which is range bound in between a small, medium, or large range.
4) Big Move
If your view of the market is Big Move, then you expect the market to be volatile and can move big in either direction after certain being range bound in a particular range. So, if your view is neutral in direction and bullish in volatility then you should trade in the strategies which give you profits with limited risks if there is a big move in either direction.
Once the orders are placed, they are made visible in the Live Trades Section on the dashboard, under the Executed Tab. Users can click the Strategy to get the details of all the Options legs that have been placed, with their entry spreads and the current spread they are trading at.
Spread is nothing but the difference between the prices for the buy option legs and the sell option legs. Eg. Suppose, if you traded in a 4-legged strategy with two buys and two sells, let the premiums/price for the two buy calls be 32 and 37 respectively, and the premiums/price for the two sell calls be 21 and 25 respectively. Then the spread would be, ((32+37) – (21+25)) = 23.
After clicking on the details, users can square off the strategies from the square of the button, and the strategies will go to Closed Sections.
Live Trade Page
Strategy Details Page
Details of Executed Strategies