How to Make Money Trading Derivatives: An Insider's Guide

Author: Ashwani Gujral Categories: Options, Futures & Commodities, Technical Analysis

Quick Summary

A pioneering guide to trading Indian futures and options covering technical analysis (ADX, oscillators, Fibonacci, candlesticks), day trading and swing trading setups, cash-futures arbitrage strategies, options pricing and Greeks, vertical spreads, straddles, covered calls, and critical money management rules. Based on the author's experience as a full-time trader of Indian derivatives since 1995.

Detailed Summary

Ashwani Gujral's How to Make Money Trading Derivatives (first published 2005, 3rd edition 2012, Vision Books) was one of the first books to specifically address trading Indian futures and options markets. The author, who holds an MBA from Georgetown University and has traded derivatives since 1995, brings practical insider experience to a market that was then still relatively new.

The book spans three pillars: charting and entry techniques, money and trade management, and trading psychology. Chapter 1 introduces the Indian equity and derivatives markets, distinguishing between traders and investors and outlining the aspects of successful trading.

The technical analysis coverage (Chapters 2-4) begins with the ADX indicator as the primary tool for determining whether a market is trending or trading. Oscillators (stochastics, RSI, MACD), Fibonacci methods, and candlestick charting are covered as complementary tools. The application chapters demonstrate swing trading setups including successful retests and bull/bear flags, along with support and resistance diagrams for swing traders.

Chapter 5 specifically addresses day trading rules and setups for the Indian market, including specific entry patterns and intraday risk management rules. Chapter 6 introduces cash and futures arbitrage, explaining why the cost of carry varies with market sentiment and how to exploit discrepancies between spot and futures prices for risk-free (or near risk-free) returns.

Chapters 7-9 cover options comprehensively: key concepts, the Greeks (delta, gamma, theta, vega), factors affecting option prices, vertical spreads (bull call, bear put), rolling strategies, straddles, and covered call writing. The covered call chapter is particularly practical, demonstrating how to generate monthly income from stock positions, including position selection criteria and follow-up strategies.

The money and trade management sections cover risk per trade, position sizing, and the discipline required to follow rules consistently. The book's value lies in its specificity to Indian markets while teaching universal derivatives trading principles.