One question that many people have asked us is about how to gain profit from options trading. The real answer to this question, as we have seen from our vast experience of trading in options, is that if you want to earn profits then you should be comfortable in booking losses as well. If you know when to book a loss and get out of an options trade, the profits will start flowing very soon.

It sounds like a no-brainer, but unfortunately, many traders have a big problem in booking losses. Trading in calls and puts is exciting and it can give you handsome profits. But you should not be only comfortable in booking profits. You need to understand that exiting a trade with a small loss can save you from incurring big losses which in turn can save a lot of money for you.

So what is the rule that can give you large profits in options trading? It is:

“Exit your loss-making trades early and continue with your profitable trades for as long as you can”.

Many of those who trade in the markets today feel that a stock market is a place where luck plays a big role. You have to continuously enter and exit trades with the hope that your luck plays in your favour and some of these trades give you good profits. We completely disagree with this, since this is nothing but gambling.

Trading profitably in options is a systematic process that requires education, careful research, skill, discipline, and lots of patience. profits do not come randomly and you need to dedicate your time and effort in gaining those.

We have seen lots of traders who have been trading profitably month on month in the markets and are making consistent profits. They have their own trading strategy in place and are equally comfortable about booking profits as well as losses as they come. They know exactly which trades they want to execute and before entering into the trade they evaluate what is the probability of gaining profits from each of those trades.

How to become a confident option trader?

To make constant profits from options trading, you will have to trade confidently in the market. Now you might be wondering “how do I get this confidence?”

So let us now see some of the things that you need to do to get the confidence to trade profitably in options.

Before we begin with the discussion you need to understand that to make handsome profits you will have to take your options trading as a business. Like any other business, trading also can give you good profits and even losses. So how seriously you take it as a business will determine how much profit that you will get.

Steps for trading successfully in Options:

1. Learn:

Before you start with options trading you will have to get a proper education. Nowadays there are excellent sources of getting educated about options trading. There are reputed institutes like Finideas which teach the nitty-gritty of options trading to serious trade  If you want to learn options trading for free you can also watch the thousands of videos on YouTube which are available. If you are facing any problems, then you can search for an answer on Google or even post your questions on forums like Quora to get answers from the experts.

Remember that learning is a continuous process, so you have to develop the habit of reading and staying updated about the markets every day. The more you learn the sharper you will become.

2. Test:

While learning options trading you will come across various strategies with which you can trade. However not every strategy will be right for you and their profit potentials will also be not equal. To earn the best profits you will have to select a strategy which you can manage well.

After identifying the strategy you will need to test it with past data to see whether the strategy is yielding you the profit that you expect. If the results are good then you should good then you can use the strategy in the live market too.

3. Make rules:

One of the biggest reasons why most people do not make money from the market is because they do not have a proper risk-return profile. They either:

• End up taking unlimited rates for making small profits or
• Take no rest at all which eliminate all the chances of making profits as well.

To avoid this, make some simple rules which will allow you to maximize profits and minimise losses. While making losses zero is impossible you can certainly take steps to minimise the losses and maximize the probability of making profits.

4. Trade:

Now it’s time to place real trades in the market. You can think of starting with small quantities and then increase the volume of trade as you become comfortable and confident.

5. Refine your strategy continuously:

The markets are dynamic, so you will have to continuously refine your trading strategies to earn profits from the market. This is an ongoing process which you will have to follow as long as you trade. The more refined your strategy is, the more will be the probability of making profits.

6. Fund management:

You will always have to have realistic profit expectations while trading. For example, if you have invested Rs. 1 crore and expect to make a profit of Rs. 5 crores, then it is nearly impossible. Instead of aiming for profits it is better to create a risk-return profile for yourself and determine how much losses you can bear. Based on that you will have to frame your profit expectations also.

One thing you need to remember is that you need to accept both profits and losses with an open mind. If you make a profit then you get money added to your account. If you make a loss, then you get a learning of what can go wrong and will need to avoid making the same mistakes in trading again.

Following these rules will gradually make you a confident option trader and increase your chances of making profits. If you need any help or have any questions, feel free to contact us.

This article is for education purpose only. Kindly consult with your financial advisor before doing any kind of investment.