𝐁𝐚𝐬𝐢𝐜𝐬 𝐨𝐟 𝐃𝐞𝐫𝐢𝐯𝐚𝐭𝐢𝐯𝐞𝐬 - 𝐏𝐚𝐫𝐭 𝐈𝐈 • How options can be used • How to trade in options & exit strategy- buyers • Imp of theta decay • How to trade in options & exit strategy -sellers Time for a Thread🧵 Curated in collaboration with @AdityaTodmal

• The lame textbook def of right but not the obligation etc is simply confusing • This is how you can remember, by understanding the logic of the instruments with your view on the market

• In a nutshell: Options are instruments used to express your view on the market • The view could be same but the instruments played by the buyers and sellers could be different

• For Option buyers: • Its imp to set a price target • and to set a time target as well

• Time is an important factor to be considered • Movement should outweigh the time decay

• Remember option is a wasting asset • Time decay always works against option buyers • Time decay is the highest when the option nears its expiry

• Stock moved up but my CE dint move up 😭😭😭 • Buying too early in the series means paying higher prem for an OTM option • Remember, OTM option only has time value

• Exit conditions are very crucial • Evaluate your position everyday whether the theta decay is eroding your option premium faster than the movement you are waiting for • If yes have a SL

• Option selling :betting where the market wont go • Need a broader view over a precise view

• Draw a mental probability distribution chart • Theta decay is a friend of option sellers🤝👬

• Exit conditions for option sellers • Time to expiry is less: theta decay will bail you out, ceteris paribus • If its breaking a major support or resistance: exit • Meanwhile: adjustment is the name of the game, to protect from huge MTM swings

• This was a part II Thread on derivatives • You can check out the 1st part here👇 • If you ❤️ this, why not share? • Retweet the first tweet and help others find this 🧵 • Happy learning 🤓 to everyone!

• I curate threads on trading & finance📉📊📈 • You can check out other threads 📌 on my profile 😃✌️ Follow us: @AdityaTodmal & @niki_poojary for more such interesting Threads! Have & happy 🪁🧵 & a safe 😷 weekend!