Sl setting in option trading

I have a doubt which has been lingering: Last time when I raised a query about selling or squaring off a CE which made an return of 20% on the Next day, you told me that, that would be not worth an effort because we may loose all the future gains which could be higher than 20%, and the same logic applies to setting a SL; the markets never behave as predicted, the SL can be hit on the next day itself but later the market would have moved up from there. Why do we need a SL when we have previously decided our risk. Your suggestions are deeply thanked and appreciated.

When it comes to options trading, Setting SL is important to save your capital from vanishing. Sometimes by luck, your Call or Put may get doubled next day due to gap up or gap down but this cannot happen every day.

Either you use prebuilt strategies that are in Upstox app to limit ur maximum risk or play in naked options with a exit plan.

You can’t keep a 10-15% stoploss on OTM options as that will get hit the moment you enter.

It’s best to have an ENTRY and EXIT plan while trading in Options while watching the price action on the Underlying strike price.

Suppose, You enter a trade after a confirmation candle of either a breakout or breakdown, Know your exit plan and play options accordingly.

This way, you will lose less % of your capital and you can use rest of your capital to trade again with a solid plan.

If you don’t have a exit plan in options, U may vanish ur capital and that is the worst part of not managing risk in options trading.



As you said, if your risk is defined, you don’t need to worry. The next question would be how would you define your risk? In my opinion its just by setting a SL and a TGT.

Stoploss is a very important tool to manage your risk and save your capital from getting wiped of.

Markets can always reverse after hitting the stoploss. In that case you should still follow your strategy with discipline and re-enter.

Hope this helps!


I would say bro what is your expectations from option trading, option trading is high risk game till you are not mastered, till learning use equity trading in form of swing trading or short time investment is okay but if you are looking a career in long term educate yourself and have a proper trading psychology about investing your money wisely. Something derivative seems very attractive but it’s true at least 80% of money is lost due to gambling or easy money making thinking. Have some time bro watch and analyses and then see if it suites you, and of course there are many variables works on a derivative contracts. So you never know if any one the Greeks is against you. Btw best of the luck.
Vishal Singh


Thank you for the education.

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Thanks for your reply but I still have some area to clarify. Eg. I buy a CE for 100, set SL at 95 days to expiry is 25 days, the stoploss can get triggered on any of these days, could get triggered on 5, 6, why even on day 2. Once the SL is triggered, the CE is squared off leading to loss of total premium paid. Now, here, what if there are more days to expiry and my SL could have made not to get triggered by SL, i could have made profit. The big point to note is : I do not get any refund from my premium paid if the SL gets triggered so as to say the loss can be reduced . Please let me know as the max risk is only my premium paid. There can be no other losses. Does Upstox provide TSL feature.

No, for example if you bought 2 lots of NIFTY CE 25th MAY expiry at 100rs with 95rs Stoploss, that comes to RS.10000 premium. Suppose, your Stop loss gets hit any day before 25th May end and the option is within the NIFTY strike ( In the Money), you will get full refund of ur premium after deducting ur stoploss of Rs.5 , that comes to 9500.

If the option goes out of the Nifty range ( out if the money), you will lose all the premium on 25th May day closing.

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Thank you very much for your reply, please correct me this is what I could get from your reply: I buy a CE of 5 day expiry say at 18300 (strike Price on day 1), the Spot is 18100. I have set a SL for my 18300 CE at 18200. Now after a day the SL gets triggered and my position is squared off, but on the fifth day or the expiry day it closes at 18400. It is only in this case there will be a refund else zero . This is my inference, please correct me if I have not understood or I am wrong.

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Yes! You got it right! Your 18300 CE becomes in the Money so you will be getting the premium if it is trading at 18400! If it’s below 18300, you will lose all the premium and it expires at Zero value.

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This will be my last query and everything will become clear for me, Thanks for your prompt reply, In the case where my SL is triggered it means that the option I bought at 18300 gets squared off at 18200 as SL was set at this, Now this point will make me clear : For refund is18300 considered or 18200. Thank you in advance.

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As 18200 was ur Stop Loss, the option price when Nifty was at 18200 will be considered.

eg, you bought 100 Qty of 18300 CE at Rs. 100 when Nifty was 18300. If Nifty came at 18200 and ur option price became Rs. 50, you will be refunded Rs. 5000 if you closed the trade.

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Thanks now I am clear, the price of the premium when the SL was triggered is considered, i.e the SL level and it has to be ITM on the DOE.

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