Comment on Option buying: The riskiest trade out there

Nrupal Sanil commented on 09 Jul 2021, 01:03 PM

Hi Nitin,

I totally appreciate the concern shown by you. But the problem is that putting such restrictions might end by creating huge hidden risks. For example, today I found a great opportunity in selling a Nifty 15700PE and buying 2 15500PE for weekly expiry of 15th July 2021. But I couldn’t buy the 2 positions in 15500PE. I am well aware of my theta decay risk and I was prepared to take that risk.

But what is of an even bigger concern is this:

When I tried to execute the order through sensibull, I could only place the sell order. Once the order was complete I tried placing a buy order through sensibull and it didn’t go through! I absolutely don’t like staying unhedged in short option position even for 15 seconds! Because theta decay may make me go bust in a few months, but naked sell position can make me go bust in a matter of minutes!

Hence, I went to kite and placed the buy order. After placing the order I realised that by default you guys have made it an MIS. Now the risk is, if I wake up late on the next trading day I stand a chance of going bust! Or, even if I wake up on time, there is HUGE Gap risk associated with my position if Nifty opens significantly below!!

As Nassim Taleb says in Antifragile, you may be acting like the overprotective parent who is accumulating tail risks with a disguise of ‘protecting’ your customers. And just like the overprotective parents, you have extremely good intentions, but……

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