Understanding the Challenges and Strategies for Making 100,000 INR in a Month through Option Trading

The pursuit of achieving financial goals such as making 100,000 INR in a single month through option trading is ambitious, yet fraught with complexities. Notably, experienced traders often advise against setting short-term financial targets, such as monthly, suggesting instead the importance of setting half-yearly or yearly targets for realistic and sustainable returns. While high returns are possible, they require consistent learning, experience, and a well-thought-out strategy.

Experience and Systematic Learning

For someone aiming to achieve such a goal, a capital of 25,000,000 INR (25 lacs) will serve as a strong foundation. With a solid understanding of the market, a robust trading strategy, and a minimum of two to three years of experience, the likelihood of achieving these targets increases significantly. It is crucial to master the chosen strategy and understand the underlying logic, ensuring that the strategy has a positive risk-to-reward ratio, has been backtested adequately, and is scalable.

Exploring Low-Risk Option Strategies

Despite the potential for high returns, the involvement of risk is substantial. Therefore, most strategies that promise quick 100,000 INR profits in a month are not only ill-advised but also involve substantial risk. To minimize risks, one can consider low-risk strategies such as Covered Call and Covered Put.

Covered Call Strategy

The Covered Call strategy involves buying blue-chip company shares in derivative lots and selling out-of-the-money calls. While the initial investment for such a strategy can be substantial, the returns are relatively stable.

For example, a blue-chip company with shares priced at over 2000 INR per share would require a significant capital of 1,000,000 INR for one lot. Selling out-of-the-money calls can yield around 20 INR per month, making a substantial return of 10,000 INR per month. To achieve this, one would need an initial investment of 10,100,000 INR (1 crore) to ensure a consistent monthly return. However, it's vital to be cautious, as share prices could increase, potentially leading to assignment and the need to sell additional shares.

Covered Put Strategy

In the Covered Put strategy, one buys blue-chip stock and simultaneously sells out-of-the-money puts. This strategy aims to protect the underlying investment by receiving premium payments.

A similar approach as with the Covered Call strategy, this requires 10,100,000 INR (1 crore) of capital to ensure a manageable risk profile and consistent returns. However, market volatility must be closely monitored to manage risks effectively.

Conclusion and Final Thoughts

While the pursuit of 100,000 INR in a month through option trading remains challenging, it is not impossible for experienced traders with a solid investment strategy and a substantial capital base. It's essential to conduct thorough research and understand the risks involved. Remember, no guaranteed returns exist in the world of finance, and it is always wise to proceed with caution and informed decisions.

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Ensure to leverage your capital wisely and continuously educate yourself on market dynamics to navigate the complexities of option trading.