Zerodha founder on odds of making money in options trading

The stock market may be the toughest place in the world to make easy money, especially in alternative trading strategies. Regarding whether writing options has odds of making higher profits, Zerodha’s founder and CEO Nithin Kamath said in a tweet that it is possible, but only when risk is compared to buying options.

“Because maximum profits are limited and losses are unlimited, if the risk is not managed properly, alternative writing can be eating like an ant and pooping like an elephant,” Kamath explained in a tweet.

For most writers of naked alternatives, the losses during a volatile month can be equal to the gains made over a long period of time. If you write options naked, the risk must be limited either in the form of allocated capital or a fixed stop loss of 1 to 5% of the capital, the lower the better. Kamath ruled.

“Writing naked plaster, especially in stocks, is by far the most risky type of trading available. Every day, there are a million things that can go wrong for a company — Macro & Micro. Given the limited rewards and unlimited losses, not with writing plaster in the long run “, he further explained.

The only way to significantly improve the odds of making money by trading options is to trade with alternative strategies with a maximum loss. The odds of earning and surviving are higher. And longer survival, the experience can help become a better trader, added Kamath who is known for educating investors on social media platforms.

Zerodha, the Bengaluru-based brokerage firm, began operations in August 2010. The startup was launched by brothers Nithin and Nikhil Kamath with its own funds and has zero debt. The retail brokerage firm has over 8 million customers who trade in stocks, currencies, commodities, mutual funds, bonds via the Zerodha app. At the same time, Varsity is Zerodha’s in-depth collection of stock market and financial lessons.

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