"For nearly eight and a half years, you consistently executed your option selling strategies using deep ITM and ITM positions. But then, you suddenly shifted to deep OTM trades. What triggered such a drastic change?"
Vikas, our guest on the Big Bull Podcast, shared his journey:
"Deep ITM trades offered control and consistency but demanded excessive screen time—six to seven hours daily. The mental toll led me to explore deep OTM strategies, where premiums were lower but required triple the capital to maintain similar returns."
Key Challenges in Deep OTM Trading
- Margin Requirements: Higher capital needed due to reduced premiums.
- Volatility Risks: Wild swings caused "SL jumps," where stop-loss orders bypassed triggers during spikes.
- Mental Stress: Despite lower screen time, abrupt premium surges (e.g., ₹15 to ₹90) amplified emotional strain.
Deep ITM vs Deep OTM: A Comparative Analysis
| Factor | Deep ITM Selling | Deep OTM Selling |
|----------------------|-----------------------------------------------|-----------------------------------------------|
| Premium Collected | High (₹80–₹100+) | Low (₹10–₹25) |
| Margin Required | Lower | Higher |
| Stop-Loss Reliability | Stable execution | Prone to slippage during volatility |
| Best For | Traders prioritizing control & consistency | Those with ample capital seeking passive management |
Lessons from Vikas’s Transition
- Gradual Shifts: Avoid abrupt strategy changes. Scale position sizes incrementally.
- Capital Management: Deep OTM requires significant capital scaling for comparable returns.
- Peace of Mind vs Profitability: Weigh reduced screen time against higher volatility risks.
👉 Explore advanced options strategies to refine your approach.
FAQs
Q: Which strategy is better for beginners?
A: Deep ITM offers more predictable outcomes but demands active monitoring. Deep OTM suits those willing to accept higher capital requirements for passive trading.
Q: How do SL jumps occur in OTM options?
A: During volatility, premiums may "gap" past stop-loss triggers, executing at worse prices than anticipated.
Q: Can I combine ITM and OTM strategies?
A: Yes. Some traders blend both to balance premium income and risk exposure.
Final Thought
Every strategy has trade-offs. Success hinges on disciplined transitions, capital awareness, and aligning choices with your lifestyle.
👉 Master options trading fundamentals before committing capital.
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