So before starting this video I will give you a recap of what we learned in the previous episode. We understood the option chain in the previous episode.
We understood that Sir has drawn an imaginary line. Looking at the spot, you have to draw an imaginary line from the spot to the option chain and Sir told you that we will talk about a specific point from where the market can reverse and I told you the story of a monkey. If you have not watched the previous video, there is a link on the I button. You can go and watch it. Now we are going to talk about the future. So Sir, let’s start. Now we saw that basically we have both sides. Now we know that whether you look at the option chain of Nifty, whether you look at the bank of Nifty or look at a stock specific, you will know it immediately.
What do we have now? Now we do not have only the option chain.
Now we do not have only this data forest. Now we can identify the trees which are useful for us. So when we visualize these numbers, we will know that this particular stock is bearish, this particular stock is bullish, Bank Nifty is bearish, Bank Nifty is bullish, Nifty is bearish, Nifty is bullish.
We can find out by looking at it. You can find out by looking at LTP. Yes, by looking at these last traded prices. But we will not start trading from here. Many people feel like this. At this time people say that it is so easy to play like kings. Then I will trade like this every day. But this is the beginning from here, not the end. Trading is the last process. It will happen at the end. So half knowledge is dangerous. Let me tell you, learn it completely. So now here we will see that when we look at these prices, these prices fluctuate during the day, if it comes from 500 to 499, then the imaginary line has come up. So as soon as the imaginary line will go up, the prices will also come up immediately. Now if the imaginary line is here then there is 102 premium. If the market comes down by 10 rupees then it is 12 rupees. Even if this 102 is a little less and this 54 is a little more, but the prices will change immediately. And what will happen in the market due to that? Changes will happen. Now let us try to understand this, how can we understand this? This is where the selection of the right strike price comes in handy. When I ask my viewers many times, tell me one thing, at which strike price do you trade as a buyer? So what do people like in options? People like to go out of the money in options. That brother go out of the money, it is a cheaper premium. I always give everyone an example. Suppose at night you forgot your purse, forgot your credit card and you got stuck somewhere in the market. Market means that you got stuck in a very deserted place. You have nothing in your pocket. You see only one shop open and you have only 5 rupees in your pocket. You have only rat poison to buy. That is what you get to eat. You don’t get anything else. What to do? Wait till morning or buy the medicine and eat it? Wait till morning. So brother, don’t trade when you don’t have money. If you have to eat rat poison, you will die overnight. Yes, don’t trade when you don’t have money. Find other means. There are many means to earn returns in the market. But if you have to trade, don’t eat rat poison. Buy the right premium, trade at the right premium. It is that simple. So here also it is important to buy the right premium. At which particular premium you have to invest money, suppose all these people are doing business. All of them are traders. All of them are businessmen who are doing business and you have to invest money in their business. These are also businessmen in whose business you have to invest money. So a person who is himself in debt, all these people are the same, out of the money people. They are themselves in debt. They have no intrinsic value of their own. They are in the hope that if the market comes down to 1 rupee at 600, then my 1 rupee will have intrinsic value. Okay. Till then, the whole hollow is in premium. They are also in the same hope. Will you buy at the money or will you buy at the money that already has intrinsic value? So it’s simple, we will buy at the money that already has intrinsic value. Meaning if you are buying as an option buyer, then the one that has intrinsic value, that’s where you should go to buy. Meaning go in the money. Some people think, if I answer my viewers here in the comments, that if you want to buy the premium here, what premium will you buy? At what strike price will you buy? So what do most people prefer? Most people, many people prefer ATM. ATM means adding money.