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Options courses by social media influencers abound: Attend or skip?


Recently, when a Twitter user questioned Sundar on why he was against the new P&L verification tool offered by options trading platform Sensibull, he shot back with an ‘obscene’ comment that outraged many Twitter users.

Social media finfluencer Vikram Prabhu was criticised on Twitter for putting a fake P&L screenshot, which came to light as his P&L showed the Bank Nifty quantity at 1,000, which was beyond the revised quantity freeze limits (maximum units you can buy or sell per order in Bank Nifty is 900), since 1 November 2022.

He had posted the screenshot with a tweet saying that the trade helped him fully cover expenses for his Maldives trip.

Over the last few years, several financial influencers have mushroomed on various social media platforms dealing in options trading. This comes amid growing retail investor participation in options trading. Individual investors accounted for one-third of the share in index options turnover at the end of financial year 2021-2022 (source: NSE). Six years ago, the share was just 22%.

As a retail investor, one should know how navigate the social media maze where there are several influencers posting pictures of their lavish lifestyles, screenshots of big profits (not necessarily genuine) in the hope of tempting investors to join their training courses.

What not to expect?

Mumbai-based options trader Azhar Jafri, who is an IIM Bangalore-Alumnus and currently pursuing his PhD from IIT Bombay, says there are some genuine training courses out there, but investors should be suspicious of courses that promise to double their money in one month or offer quick gains. Jafri doesn’t offer any courses or advisory, only trades in his individual capacity.

If you are completely new to trading in stock markets, you can opt for a training course, to just understand the basic concepts of futures and options (F&O) markets. But don’t expect these courses to turn you into trading experts overnight. Better to look for courses from regulated institutions, especially when you are starting out (more on that later).

Several of the training courses offered by social media influencers are courses on technical analysis.

“Technical analysis can help somewhat, but what really matters is risk management and your mental ability to deal with market volatility. If there is a big loss or period of no profit, can you still stabilise yourself mentally? If there is a profit, can you hold onto your profit and not exit with small gains? No training course can teach you this. You can only learn this after years of experience in stock markets,” points out Abid Hassan, co-founder and chief executive of options trading platform Sensibull.

Risk management or money management in options is only possible if one has large trading capital. Those trading with small capital are unable to absorb losses, as well as stay with a winning trade if the capital committed is a large percentage of their portfolio.

Experts say that when buying options, the exposure should not be more than 1-2% of one’s portfolio and when options selling it should not be more than 10-15%.

So, to allocate meaningful capital on a trade and limit exposure at the same time, large capital is needed. Further, unlike buying options, where loss probability is high, selling options requires higher capital.

 Where you should begin?

Chennai-based algo-trader Jegathesan Durairaj, who runs a training course, says he recommends investors to first go through NSE’s book on options strategies, where they can get a basic understanding of what options are in the first place.

This book is freely available on the internet and one can access it on this link.

“Then I suggest them to go give NISM (National Institute of Securities Markets) Series-VIII Equity Derivatives Certification Examination. For 1,500 you get a book by NISM, which can further improve your knowledge on options trading,” he adds.

Jafri recommends ‘The Bible of Options Strategies: The Definitive Guide for Practical Trading Strategies’, a book by Guy Cohen.

Hassan says Zerodha’s Varsity is also good source for beginners looking to understand how options trading works.

What should investors do? 

Options are a complex subject and require a lot of learning and patience. However, this should not discourage one from learning more about it, but know about the risks before venturing into it and check if these risks are within your own risk-tolerance levels.

Most courses by social media influencers may not go into the depth of options trading or various dynamics of the options market, whether it is Option Greeks (delta, vega, theta, gamma, and rho) or the Black-Scholes pricing model.

So, try and stick to regulated institutions like NSE and NISM. And don’t get carried away by high-end lifestyle pictures of the influencers or their success stories. Trading income may not be the only income stream for them. Steer clear of influencers that assure quick returns or fixed income streams from their option strategies or training courses.

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