Introduction
Having spent 38 years sailing the unpredictable seas, I have risen through the ranks from a deck cadet to a ship Captain over two decades. This journey has not only shaped my career but also influenced my life and trading philosophy. Just as the ocean can be a serene paradise one moment and a tempestuous beast the next, my trading journey has seen its fair share of highs and lows.
I started as an impulsive cadet, much like a rookie golfer who swings with all his might, hoping to drive the ball straight down the fairway but often ending up in the rough. Over the years, I evolved into a composed captain, akin to a seasoned golfer who knows that patience, strategy, and a little humor can save the day. Join me as I navigate the waters of trading, where I transitioned from day trading to swing trading and finally landed on the fairway of option selling, all while dodging the occasional sand trap.
Chapter 1: The Allure of Day Trading
In the early days, day trading was a wild ride, akin to the electrifying thrill of sinking a last-minute birdie putt that sends your heart racing. The adrenaline rush of buying and selling stocks within a single day was intoxicating, like believing that with just a little more force on my putt, I could nail that long-distance shot. The sensory overload was exhilarating—the rhythmic hum of my computer, the flashing green and red candlesticks reminiscent of a scoreboard, and the electric anticipation buzzing in the air as I executed trades. However, the reality of this high-stakes game hit me like a rogue wave. The relentless pressure to make split-second decisions turned trading into an emotional rollercoaster, often leading to losses that stung like a double bogey on the final hole when victory was within reach.
Chapter 2: Transitioning to Swing Trading
Realising that day-trading was not the sustainable path I initially thought, I sought a more balanced approach and transitioned to swing trading. This method allowed me to hold positions for several days or weeks—much like savoring a relaxing day on the golf course instead of rushing through 18 holes. The switch was liberating; I could analyze market trends without the incessant pressure of real-time trading. The thrill was replaced with a more strategic mindset. I learned to read charts over longer time frames, understand market cycles, and appreciate the importance of patience. However, my journey in swing trading was not without its challenges. Despite achieving some profitable trades, I sensed an underlying discontent, akin to hitting a flawless golf shot that elicits applause from onlookers, yet leaves me feeling unfulfilled. Here are few shortcomings I faced during that phase:
Extended Holding Times: I often underestimated market volatility, leading to extended holding times for losing positions. It felt like being stuck in a sand trap—no matter how hard I tried, I just couldn’t get out.
Market Timing: Swing trading relies heavily on market timing, and I faced challenges in accurately predicting short-term movements. I sometimes felt like I was trying to read the wind direction on a windy day—good luck with that!
Emotional Stress: While swing trading offered a reprieve from the whirlwind of day trading, it still brought its own emotional challenges. Picture this: my trading journey was like a ship sailing along a stunning coastline dotted with charming towns, where the sun sparkled on the water, and the scenery was breathtaking. However, just as the ship would occasionally face turbulent waters, watching my positions swing negatively over days tested my patience. It felt akin to that agonizing moment when a slow putt hovers on the edge of the hole, refusing to drop in. Eventually, the ship would sail away from those beautiful shores, leaving behind the allure of potential profits, only to navigate the unpredictable waves of the market ahead.
Dependency on Technical Analysis: I became too fixated on technical indicators, neglecting fundamental analysis. I was like a golfer obsessed with perfecting his swing while ignoring the importance of reading the green.
Lack of Consistency: Without a solid trading plan, my approach to swing trading became inconsistent. I found myself drifting like a ship without a compass, unsure of which direction to take. My inability to stick to a cohesive strategy led to erratic results, much like a captain who can’t decide whether to sail close to the shore or venture into the open sea, resulting in a course that zigzagged unpredictably and left me battling turbulent waters instead of charting a steady path to success.
Economic News Impact: Major economic announcements often caused unexpected price movements. Failing to account for these events felt like being blindsided by a sudden rainstorm while out on the course.
Inadequate Risk Management: I initially overlooked the importance of proper risk management strategies, treating my trades like a Ship setting out to sea without a proper sailing plan. This oversight resulted in larger losses than anticipated, prompting me to reevaluate my approach—much like a Captain realising halfway through a voyage that they did not account for an obvious hazard, leaving them to doubt and reassess their navigation plan.
Difficulty in Letting Go: I often found it challenging to accept losses and cut my losses short. This reluctance to exit losing trades sometimes led to further losses, weighing heavily on my trading psyche—similar to that one hole that keeps haunting you long after you’ve left the course.
Inconsistent Profitability: While I experienced some winning trades, my overall profitability was inconsistent. The fluctuations in my earnings caused uncertainty, much like never knowing if the next swing will result in a hole-in-one or a complete whiff.
Chapter 3: Discovering the World of Option Selling
As I grew more confident in my skills, I stumbled upon option selling—a strategy that felt like discovering the perfect hybrid club just when I thought I had tried everything. The concept of generating income through selling options captivated me. Instead of chasing short-term gains, I was now focused on consistent cash flow, like sinking every putt on the back nine. The beauty of option selling lies in its ability to capitalize on market volatility while managing risk effectively. I learned to sell covered calls and other short spread strategies that provided me with a safety net while still offering potential for profit. The emotional burden lifted as I approached trading as a business, focusing on probabilities and risk management rather than the thrill of the chase. Here are few positive points about option selling trades, enriched with technical terms and a sprinkle of humor:
Consistent Income Generation: Option selling enables traders to generate a steady stream of income through the premiums collected from selling options. It’s akin to how insurance companies earn consistent revenue from policyholders who pay their regular premiums, regardless of whether a claim is made. Just like the house in a casino, which consistently profits from games played, option sellers benefit from the statistical probabilities of options expiring worthless. In both cases, the businesses thrive on the principle of generating income while managing risk—making it a win-win for those who play their cards right!
Market Neutrality: Option selling strategies can be effective in sideways or declining markets. Unlike traditional buying strategies, option sellers can profit even when the underlying asset does not move significantly.
Leveraging Volatility: By selling options, I can take advantage of high implied volatility. As options expire, the premium received can be substantial—like that unexpected bonus from a hole-in-one!
Flexibility in choosing Strategies: Option selling opens the door to a world of strategic possibilities, from covered calls to synthetic options to imitate a stock, and an array of premium-selling spreads. Traders can navigate between Defined Risk Strategies and Undefined Risk Strategies, tailoring their approach to fit their unique trading style. By selecting the right Option Delta, they can infuse a directional bias into their otherwise neutral strategies. Unlike stock trading, where a position can vanish the moment a stop-loss is triggered, a Defined Option Strategy allows you to limit maximum losses while still holding onto the potential for recovery. This means that if the underlying price shifts in your favour, you could ride the wave to maximum profits, turning what could have been a loss into a winning opportunity!
Flexibility in Defining Risk: Just like the flexibility of choosing different strategies in trading, I can tailor my risk levels to match my appetite by selecting appropriate strategy Delta. This allows me to define my risk clearly or keep it more ambiguous, depending on the strategies I choose. Through this process, I can also establish their Probability Of Profit (POP). Undefined risk trades, for instance, typically offer a higher probability of profit, akin to a buffet where the options are vast and the potential rewards can be significantly enticing. This adaptability in risk management empowers traders to navigate the markets with greater confidence and precision.
Flexibility in Choosing Contracts: The options market offers a diverse array of contracts with varying expiration dates—ranging from weekly to 30-day and even 90-day options. This variety provides a trader with the flexibility to select contracts that best align with their trading styles and strategies. For instance, a trader who prefers quick, short-term plays may opt for weekly contracts to capitalize on short-lived price movements. Conversely, a trader with a longer-term outlook might choose 30-day or 90-day options, allowing for more time to benefit from anticipated market shifts. This abundance of choices empowers traders to tailor their approaches, optimising their strategies based on market conditions and personal preferences.
Lower Investment Cost: The investment cost of premium selling option strategies is consistently lower than that of purchasing stocks outright, making it an appealing choice for traders looking to maximise their capital efficiency. For instance, let us consider a trader interested in Tata Consultancy Services (TCS), which is currently priced at ₹3,500 per share. If the trader decides to buy 175 (1 LOT) shares, the total investment cost would be ₹6,12500.
In contrast, if the same trader opts for a premium selling strategy by selling a 50 Delta put option with a strike price of ₹3500, they might collect a premium of ₹86 per share, generating ₹15,050 in income. This strategy requires the trader to set aside only ₹1,10000 in capital , which is more capital-efficient than outright buying the shares.
Moreover, the Probability of Profit (POP) for selling put options is 68% much higher than that of traditional stock purchases, which is 50%.
Thus, by engaging in premium selling through the 50 delta put option, traders not only reduce their upfront investment but also increase their chances of a successful trade, creating a more favourable risk-to-reward scenario compared to simply buying TCS shares outright.
If TCS moves by ₹250 in 35 days, an outright stock position would yield a profit of ₹43,750, which translates to a return of 7.1%. In contrast, if the trader had opted for selling a put option instead, they would realize a profit of ₹15,050, resulting in a gain of 13.6%. This comparison highlights the potential advantages of using options strategies, where the percentage return can be significantly higher than traditional stock ownership, showcasing the power of option selling in enhancing overall profitability.
Rolling Of Options: Allows me to adjust your position without closing it for a loss, especially if the trade moves against me. I can roll to a later expiry (and/or different strike) to buy myrself more time, reduce directional risk, and even collect additional credit. This gives my strategy a second wind instead of letting it crash and burn.
Think of it as saying, “Alright market, I see you’ve taken a detour — let me reschedule my fight instead of surrendering mid-battle.”
Product Indifference: As long as the swings in P&L, the variability of ending P&L, and tail exposure align with my preferences, I can select any underlying asset from the vast options universe—be it TCS, Reliance, or any other stock like XYZ.
Emotional Resilience: The focus on generating income through collecting option premiums rather than chasing price movements fosters a more disciplined trading approach.
Stock traders pray for moves. Option sellers profit from time.
Which side do you want to be on — the one hoping, or the one collecting?
Enhanced Portfolio Returns: Incorporating option selling and collecting premiums into my portfolio has enhance overall returns. By regularly selling options against existing positions, I have increase my portfolio’s yield, optimising returns like finding a better angle on the green.
Education and Skill Development: Engaging in option selling requires a deeper understanding of market dynamics and risk management. This process fosters continuous learning, much like refining your swing with every round of golf you play.
Potential for Long-Term Growth: The combination of consistent income generation and risk management has lead to long-term portfolio growth. Option selling encourages a strategic approach that contribute to wealth accumulation over time—kind of like gradually improving my handicap.
Option Greeks: The Unsung Heroes Behind Every Smart Trade
Just like a seasoned ship Captain does not make a passage plan without consulting a stack of navigational tools—Guide to Port Entry, List of Lights, Mariner’s Handbook—a serious trader does not place a trade without understanding the landscape ahead. Similarly, a professional golfer does not tee off without analyzing the course layout, wind direction, green speed, and those irritating little water hazards that love to eat balls and dreams.
Now, in the world of option selling, our “course map” comes in the form of option Greeks—Delta, Vega, Theta, and Rho—and Implied Volatility (IV).
- Delta tells you how much your option’s price will move in relation to the underlying asset. It’s your directional bias meter.
- Vega shows how sensitive your position is to changes in implied volatility. High Vega? Expect a bumpy ride if IV shifts.
- Theta reveals your friend or enemy: time decay. If you’re an option seller, this one’s usually on your side—like a helpful caddie whispering, “Just wait it out.”
- Rho is interest rate sensitivity—not a daily concern, but it matters when macro conditions change.
And then there is Implied Volatility (IV)—your market weather forecast. High IV means a storm’s brewing (and premiums are rich). Low IV? It’s a quiet sea, but profits might be harder to snag.
Armed with these tools, an option seller can decide whether to deploy wide spreads (more margin for error, lower reward) or tight spreads (higher reward, more risk exposure), depending on their risk appetite and market outlook.
So before I pull the trigger on a trade, I ask myself : Have I studied the course? Do I know where the sand traps are? Or am I just hoping to hit a hole-in-one in a hurricane?
Conclusion
The evolution from day trading to swing trading and finally to option selling has been a transformative journey filled with ups and downs. Each phase taught me valuable lessons about myself, my trading habits, and the markets. I learned that trading, much like Commanding ships and Golfing, is not merely about making money; it is about developing a mindset that embraces patience, discipline, and a good sense of humour. Today, as an option seller, I feel empowered and in control of my trading journey. I encourage fellow traders to embrace their unique paths, learn from their experiences, and adapt their strategies—while keeping a light heart and a good laugh in tow. After all, whether at sea, the Golf course, or the trading floor, it is all about enjoying the journey along the way!
The writer boasts 35 years at sea, with 20 years commanding large tankers. Simultaneously, he launched his trading journey 18 years ago, marked by learning and adaptation. The lessons from his maritime career have seamlessly intertwined with his trading experiences, creating a unique perspective that blends nautical wisdom with financial acumen.
vinodsingh2144@gmail.com
Well written!
Well written!