How I Trade WEEKLY OPTIONS With VWAP Indicator (VWAP Trading Strategy)


– [Trading Instructor]
So in today’s video, I will explain how I use
VWAP trading strategy to execute five trades
in weekly option segment, and I will be
explaining my entry, exit, and logic
behind those trades. So, let’s get started. So, let me first show
you how to get VWAP Indicator and MVWAP for futures segment. Now, many of you know
that I use tradingview.com for VWAP and MVWAP trading, but since we are looking
at options data here, that is options trades here, so I am taking trades directly
from the Futures Chart. So, this solution is suggested by one of our community members because I don’t use
Upstox or Zerodha. So, just go to pro.upstox.com, and then click on add workspace, and give it any
name that you want. For this particular case, I have given the name charts. And once you get
the chart segment, then you can sort
of click on this, add a widget, and
then click on chart. Once you do so, you will
get search panel here. In this panel, just
enter Bank Nifty. Go to the futures segment here, and click on the
current futures month, and there you get the chart. On this, click here, set the
time frame as five minutes, and then go to the
indicator segment. Search for VWAP Indicator. Once you get the VWAP
indicator, just put it on it. Choose any color that you want. Let us pick blue here. So, this line becomes
the VWAP Indicator line. Once you have this, again,
go to the indicator section, and here enter moving average. So, there you go, you get
this moving average here, and in this particular section, choose exponential here, and instead of
close, select VWAP. So, then you apply. So, now you get VWAP
and MVWAP on the chart. So, the first options
trade that I took was on 18th November, and
I updated these trades on the Telegram channel, and I had disclosed
it beforehand that this week I
would be trading only in the options segment. So, the first trade
that I did was on 18th November,
and in this case, I actually sold options
at about 283 and 272 and then covered it here at 232. So, all the order
detail screenshot will be available on each Chart. So, let me just explain
why I took this trade that is of selling options. Now, before that,
let me just tell you that selling options
is extremely risky, and this is something I
always advise against. So, in case you don’t
have better understanding of market or yourself, or you don’t have a
strategy in place, then please avoid
selling options for the time being, and only focus on
buying options. So, in this chart, let us first take a look at what
happened on 17th. So here, you get a
wide range candle, which eventually
closed at this level. Look at the wick here. This actually represents presence of strong sellers in the market. You then get one
more bearish candle, again representing
that strong sellers are present in the system. So, next morning
market opens up, you sort of get a good
bullish candle here, but by the time it closes, it closes at this level, again you get a long wick here, and then you get
this bearish candle that forms on the chart. Now, once this is formed, you need to take into account how sellers have managed
to push prices below. Combine this with
the long wick here. Series of wicks here, along with the wick that you
saw on the previous session. So, clearly at this point, you should be
thinking that buyers for trend for the day
remains on the downside, or to put it in a better way, buyers would find
it difficult to take price higher
above this level. So, even after knowing this, I did not short sell here. I waited for further
confirmation, and once I got the set of
these two, three candles, and I started seeing
price moving lower, it is only then that I
decided to short sell. So, the key element here
is to analyze price action, and then combine it with what is going on in
the current session, and deciding on a trade. So, until this point,
price structure was turning negative and
so was VWAP structure. Now, I have covered such
price structure elements in great depth in the
intraday trading series, but when it comes
to VWAP structure, I haven’t covered
it here on YouTube, and I know many of
you have enrolled for the VWAP Trading Course that
is scheduled to release on 1st December, and you
will be understanding in that training
where I will explain what I mean by VWAP structure, and why it is so crucial when
it comes to intraday trading. So, when I started
short selling options in these two candles, that is when I
could spot weakness in terms of price
and VWAP structure, and hence I sold
it at 283 and 272. Now, let me tell you
why I covered the trade with this candle that
was forming on the chart. So, when this bearish candle
was forming on the chart, this was actually a
pretty strong candle, but by the time
the candle closed, we had this long tail that represented some
demand in the market. And do take a note
at volume as well. Now, based on this candle alone, certainly you cannot
cover the trade, but look at where this
long tail is forming. It is forming
exactly in the region where these two long
tails are visible. So again, this is a
price action concept that I have covered, and this became my
exit point for the day. That is I covered my
option here at 232. So, the second options
trade I did for this week was on November 19th
where I sold put options round about at
this level at 202, and I covered it at this
region at about 141. So, let me now explain the
rationale behind this trade. So, as the market opened here, it started moving lower, but look at all these long
tails that were forming. This was actually
telling me that there is some underlying
demand visible in the market. Now, do take into account
18th November as well because here you see
a long tail present. Again, here you see long
tail in these candles. So, these clearly
signify there is some underlying demand
that is visible, and while price was
moving lower initially, based on price structure, there was a trade
to be taken here. Now, once price structure was confirming a trade
in the market, I was then more interested about what VWAP structure looks like. So again, VWAP
structure for the day, in my opinion, was
not at all weak, and hence I did anticipate
some bit of movement coming up in the market. I did think that momentum
would be on the lower side based on how the
VWAP was structured, and price was also
in a range here. So, I was more inclined
towards selling put options rather than buying call options. If you look at what
happened throughout the day, once the initial burst
of market was over, price just
consolidated sideways. So, my initial reading of about momentum in the
market was right, and had I bought
call options here, I wouldn’t have
made much of gains as market largely
remained in a range. So, this particular
case was, again, an example of looking
at price structure, VWAP structure,
and then analyzing if there are strong participants
present in the market. So, I could have easily bought
call options in this region, but because I
anticipated a fairly low momentum session
heading ahead, that is why put options, that is selling put options, was a much better trade here. So, one of the key aspects when it comes to considering
selling call or put options is the underlying
momentum in the market. If you spot momentum is strong, do not attempt to sell options because the
positions can lead to huge losses if market
moves against you. So, the third trade
I did this week was on November 20th,
and in this trade, I took entry at
31,100 call option at about 278 in this region, and then I exited here as this
candle was forming at 335. So again, let me explain
the logic behind this trade. So, first comes the
price structure part. So, in the previous session, you see there is some sort of a bullish piercing
that you see here. That is usually a sign of
strength in the market, and then you get this
wide range candle here. Again, look at the volumes here. Volume’s are pretty strong. So, in the morning session, initially you saw
price moving lower, and then you got
these two candles here which are not entirely positive, but it did represent
lack of strength when it comes to
sellers in the market. I also take into account these long tails that
are being formed here. This is also very
close to this tail that you see in
these two candles. So, this for me was
a low risk trade here because I could just keep
a stop loss at this level and go long here. So, this is the main reason, along with, again, the
concept of VWAP structure. While price was moving
lower on November 20th, I felt the VWAP
structure was strong, and there was some strong buyers present in the system. So, when it comes to
exiting the trade, many of you did
write to me on email as to why I exited
the trade here. So, look at all these
long wicks that you see as price is moving higher. This actually represents lack
of momentum in the market. And therefore, once
I saw one of these strength candles
forming on the chart, I used this to exit the
trade completely at 335. So, my analysis was right, here because over the period of time, until the market
closed for the day, it just drifted sideways. So, had I held the
trade at this region, and exited somewhere
here when market closed, option was actually
at 328 odd levels. So, I exited here at 335. So, in the end, it did not
make much of a difference. The only difference
that I would state is that I exited as price
was showing some strength and with so much time
remaining in the market there is so many things
that can go wrong, and therefore I would
rather prefer exiting here than waiting for
the session to end. So, the fourth trade I did was
yesterday, that is Thursday. So, in this trade I
did come at a mistake of entering earlier and I
entered 31,300 call option as this candle was developing. I did anticipate this to
be a very strong candle, but in the end, this
candle was pretty weak as you did get a long wick here. So, I entered 31,300 at 150, and I exited it somewhere
here at 105 level. So, once I took a loss
in the morning session, I did not attempt to trade here, and I certainly did not see that price would move sideways, but usually when I take a loss
pretty early in the session, I usually step out for the day, and I come back next
day for trading. So, let me first explain the thought process
behind this trade. So, I did see couple
of long tails out here along with these
bullish candles. So, I did consider
some bit of momentum was present in the market, that is on the previous session. So, when price
started moving higher, given that VWAP structure
was also strong, I did anticipate
this candle to close above the high point
of the opening candle, and price would rally ahead, but certainly that
did not happen. I did commit a huge mistake of anticipating this candle
as it was developing. Usually, I do wait for
candles to close out before I initiate a trade, but such errors do happen, and this is something
I just take note of in my trading journal, and I try to improve
in the next session. So, when I found this
bearish candle closing at this level, I did think that my entry here was
completely wrong, and this trade would
end up in a loss, but somehow I still
managed to convince myself that this was just one
candle that was forming, and price would head higher. This is a psychological mistake that most traders make, and even I do so on
a consistent basis, but the key here
is to not repeat such mistakes quite often. So, eventually price
started heading lower, and this is where I decided
to close out my position because I was
clear at this point that somewhere in my
analysis I was wrong. Yes, price did
move higher again, but since I switch
off at this level, I usually close out my
monitors for the day, and I go out, so which is
why I was not compelled again to initiate a trade. So, once you start taking
trades based on intraday, in case you get a
loss pretty early on, that is between
10:00, 11:00 a.m. Just close out the
monitors for the day, and head out somewhere. You can always come back
next day and start fresh. Many beginners come
at this mistake of trying to win back
whatever you’ve lost here, and I think this mistake
should be avoided. So, the fifth trade I did today, that is as of November 22nd, I did sell 31,300 call
option at this level, that is 237, and
then I covered it as this candle was
forming at 199 level. So, let me just explain this. So, in the morning
market opened here. VWAP indicator moved
below the MVWAP line, and series of candles that were reasonably strong
on the downside. I was more interested
in the volume expansion that was happening
in the session. So, then we saw price
starting to retrace some bit on the
upside, but mainly, it failed to cross the
VWAP indicator decisively, and more importantly the
opening candle’s high point. Do take a note at
previous session there is this long
wick present here, which did signify
some bit of sellers that are present in the market, and post this, price
did move lower. So, I then waited for this
bearish candle to form. This was not entirely bearish, but this was a sign that sellers are reentering the
market at this level. So, this is where I went ahead and short sold a
call option at 237, and initially price
did move lower, and then we got
this bearish candle that was closing near
the low point of the day, but in the last
one minute or so, price started moving higher, and this closed in the
middle of the range. So, if you recollect,
this was the same exit I did either I think
in trade one or two, that is the trade I took
on Monday or Tuesday. So, I did realize that
some bit of demand is coming in in the market. So therefore, I decided to
close this position at 199. So, for the week, I
did about five trades in the options segment, and I was lucky enough to be
profitable in four trades, and one trade was a
loss making trade. So, let me just explain
couple of pressure points that you will face when
you’re trying to implement this VWAP trading strategy
on option segment. That is the weekly
option segment. So, the first point that you
need to take into account is strike price selection. So, if you look here,
price was at 31,280, and I went for
31,300 call option. So, I could have chosen
31,400 call option, that is strike price, or even 31,200 call option, but the reason I chose
31,300 was based on the resistance that I
was seeing on the chart, and as a rule of thumb, in case you’re looking to buy
call options or put options, do not prefer Out Of The Money (OTM)
call or put options. Yes, you can take entry
once strike price away, that is if price is 31,300, and you anticipate strong
bullishness in the market, you can take entry into
31,400 call option, but do not go after
31,500 or 600 call option. Yes, the premium
rise will be rapid in those strike prices, but you need exceptional
bit of momentum for you to make money when
it comes to weekly options. So, the second point
where you will face a lot of problem is setting
the right stop loss. Now, when it comes
to weekly options, again I’ll explain
with this trade. So, when I short sold
call option here, most of the traders
would keep a stop loss at this level itself or would keep it somewhere
at VWAP indicator. The thing you have to
understand with weekly options is that as price moves from,
let’s say, 31415 to 31,100, the net price change in weekly options
is significant. Therefore, if you keep
stop loss too close to your entry price,
it will be triggered. So, take a note of my
VWAP indicator video that I did with
respect to stop losses, I will leave a link towards the top right end
of your screen, where I have explained how
to put stop loss correctly. Now, when it comes
to trading options or stocks successfully
with VWAP indicator, there are two main aspects
you have to understand. Number one, what is
the price structure, And number two, what is
the structure of VWAP. Now, go through my
previous videos, where I have covered price
structure in great detail, and in case some of
you have not enrolled for the VWAP Trading course, it
is completely up to you because it’s optional, you can go through my previous
videos on VWAP indicator, where I have given
out some hints about how to do the same. Again, link to all these videos will come up in the
description box below and in the comment
section below. So, there are couple of
more important points that you need to keep in mind. Now, yesterday
was November 21st. That is Thursday. This is usually when expiry
session happens in a market. Do not sell options
in this session, that is expiry session,
in case you don’t have significant experience
in the market. Now, I always promote that
people should not sell options, and that is mainly
because risk management, when you sell options,
is the number one thing that you need to look out for, and I found retail traders
start selling options without understanding the
underlying risk in it. The second important point
that I want to state out is that when you’re
looking to buy options, buy options near the
previous support level, or buy put options near the
previous resistance level. Now, couple of trades
that I’ve explained in this week, they
were purely taken based on the previous
support and resistance level. So, the November 20th trade
that I took in this region, this was purely
based on, number one, price structure, VWAP structure, and, number two,
that this region where I took entry
was very close to the previous support
level on the chart. So, when you look to
buy at support level, that is call option,
odds are always high for that trade to
work in your favor. So, do not forget these
two crucial points about knowing the risk
in selling options and why understanding
previous support and resistance
level is important when it comes to buying options, that is call options
and put options. So, this week’s
video was all about options trading
and VWAP indicator. In case you want me to
trade VWAP indicator on any other asset class or on any particular
stock for a week, then do let me know in
the comment section below, and I will definitely
consider that.

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