The zero-to-hero option trading strategy is a specific approach used by some traders on expiry days
What is the zero-to-hero option trading strategy?
It can be advantageous if applied correctly, but it’s crucial to comprehend the underlying principles before implementing it. This strategy focuses on capitalizing on sudden price movements that occur near options’ expiration. The zero-to-hero option trading strategy refers to a trading approach where an investor aims to transform a small or zero capital into substantial profits through options trading. This strategy typically involves taking on high-risk positions with the potential for significant returns
How does the zero-to-hero option trading strategy work?
- Initial investment: Start with a small amount of capital that you are willing to risk.
- Educate yourself: Learn the fundamentals of options trading, including the concepts of calls and puts, strike price, expiration dates, and option pricing.
- Analysis and selection: Conduct thorough research and analysis to identify potential opportunities in the options market. Look for stocks or assets with high volatility or upcoming events that may impact their prices.
- Options trading: Purchase options contracts based on your analysis. You have two main choices: buying call options (expecting the price to rise) or buying put options (anticipating the price to fall).
- Manage risk: Set stop-loss orders or implement risk management strategies to limit potential losses. It’s essential to have a clear exit strategy if the trade goes against your expectations.
- Profit realization: As the options’ underlying asset moves in your favor, the value of your options contracts increases. When you believe you have achieved a satisfactory profit, sell the contracts to realize your gains.
- Continuous learning and refinement: Keep learning and honing your options trading skills. Analyze your trades, identify patterns, and adapt your strategy accordingly.
zero-to-hero Option Strategy For Expiry Day
You first need to collect options data to understand exactly where index is going to expire. You may not get the exact level, but you will get a band within which the index is going to expire. For that go to spider software OI comparison chart
Just open this software on the expiry day morning. Concentrate on the first image. Locate the point when the last time the red bar is longer than the Green bar and the first time the Green bar is longer than the red bar. The red bars are put open interest and the Green bars are call open interest. See the image below:
Here 18200 is last when put open interest is greater than call open interest. So the expiry will be above 18200. And 18300 is first when to call open interest is greater than put open interest. So the expiry will be below 18300.
The zero-to-hero Option Strategy on Expiry Day by using Spider Software
- Keep 18300CE (Call option with a strike price of 18300) and 18200PE (Put option with a strike price of 18200) of the same month expiry in your trading terminal.
- The strategy focuses on the period after 1:30 PM when the real market movements are expected.
- If the Nifty index falls below 18300, buy a 18300CE option. This is because when Nifty crosses the 18300 level, call writers may start covering their short positions, causing the call option price to rise. Aim to purchase the option for 1-5 rupees.
- As the Nifty index rises above 18300, the value of the 18300CE option may increase significantly. You can potentially sell the option for 10, 20, 50, or even 100 rupees, capturing the gains from the Nifty’s rise.
- Similarly, if the Nifty index goes above 18200, indicating that it is unlikely to expire above that level, buy a 18200PE option. This is because when Nifty crosses below 18200 level, put writers may start unwinding their long positions, causing the put option price to decrease. Aim to purchase the option for 1-5 rupees.
- As the Nifty index falls below 18200, the value of the 18200PE option may increase significantly. You can potentially sell the option for a profit as the Nifty declines.
Please note that options trading involves risks, and this strategy is based on your assessment of the market movement. It is essential to conduct thorough research and analysis and to have a clear understanding of options trading before implementing any strategy. Consider consulting with a financial advisor or professional trader for personalized advice.
Want to Learn How to do Trading in Live Market? With systematic Trading Strategy on the Day of Expiry.
Disclaimer: The information provided in this Blog is for educational purposes only and should not be construed as financial advice. Trading in the stock market involves a significant level of risk and can result in both profits and losses. Spider Software & Team does not guarantee any specific outcome or profit from the use of the information provided in this Blog. It is the sole responsibility of the viewer to evaluate their own financial situation and to make their own decisions regarding any investments or trading strategies based on their individual financial goals, risk tolerance, and investment objectives. Spider Software & Team shall not be liable for any loss or damage, including without limitation any indirect, special, incidental or consequential loss or damage, arising from or in connection with the use of this blog or any information contained herein.