Understanding Option Scalping

Option scalping is about making lots of fast trades to catch small price movements, often holding positions for just a few minutes. You need to watch the market closely, time your trades well, and stay calm to avoid impulsive decisions. BANKNIFTY options are great for this because they move a lot and have plenty of trading activity, giving you many chances to trade.

Core Strategy Components

This strategy uses clear rules to manage your trades, risk, and profits, making it easy to adjust for different lot sizes and capital amounts. Here’s how it works:

1. Initial Setup

  • Capital: Start with ₹2,00,000, but you can adjust based on what you have.
  • Option Premium: Pick options with a premium around ₹400 per contract for good trading activity, though this can vary (e.g., ₹300–₹500).
  • Position Size: Start with a small number of lots to keep your total contracts around 100, so your risk stays close to ₹400.

2. Position Sizing

Options are traded in lots, and the lot size for BANKNIFTY options in 2025 is 30 contracts per lot, according to NSE updates. To get close to 100 contracts:

  • If the lot size is 30, calculate lots (N) as 100 ÷ 30 ≈ 3.33, so start with 3 or 4 lots.
  • For 3 lots: 3 × 30 = 90 contracts, risk = 90 × ₹4 = ₹360.
  • For 4 lots: 4 × 30 = 120 contracts, risk = 120 × ₹4 = ₹480.
  • Start with 4 lots if you’re okay with slightly higher risk and can afford the premium.

3. Risk Management

  • Stop Loss: Risk ₹4 per contract to keep losses small.
  • Total Risk per Trade:
    • 90 contracts = ₹360.
    • 120 contracts = ₹480.
  • Trade Limits: Don’t do more than 25 trades (50 orders, including entries and exits) per day to avoid overtrading.

4. Position Scaling

Increase your position as you make profits (tracked by Mark-to-Market, MTM):

  • Start with 4 lots (120 contracts if lot size is 30).
  • Double to 8 lots (240 contracts) if MTM profit goes above ₹5,000.
  • Quadruple to 16 lots (480 contracts) if MTM profit goes above ₹10,000.
  • Go back to 4 lots if MTM on 8 lots drops below ₹3,000 from its peak.

5. Stop Trading Triggers

To avoid big losses, stop trading if your MTM drops from its peak by:

  • ₹2,000 for 4 lots.
  • ₹2,400 for 8 lots.
  • ₹4,800 for 16 lots.
    This helps you take a break and rethink during tough market conditions.

6. Entry and Exit Criteria

  • Chart Setup: Use 1-minute candlestick charts with support and resistance levels on platforms like TradingView.
  • Put Options: Buy on swing lows or failed breakdowns at support, with a ₹4 stop loss and a profit target of at least ₹8 per contract.
  • Call Options: Buy on swing highs or failed breakouts at resistance, using the same risk and reward setup.
  • Exit Strategy: Take profits on sudden price spikes (e.g., up to ₹50 per contract) or exit if the price action weakens.

7. Tools and Techniques

  • Trading Platform: Use TradingView for live charts and analysis.
  • Option Selection: Choose BANKNIFTY options with good liquidity (e.g., premiums around ₹400).
  • Market Monitoring: Keep a close eye on the market to spot opportunities like failed breakouts or breakdowns for better entries.

Strategy Summary Table

Aspect Details
Capital ₹2,00,000 (can adjust)
Option Premium ~₹400 per contract (can vary)
Lot Size (2025) 30 contracts per lot
Initial Lots 3–4 lots (90–120 contracts)
Total Contracts 90 (3 lots) or 120 (4 lots)
Risk per Contract ₹4 (stop loss)
Total Risk per Trade ₹360 (90 contracts) or ₹480 (120 contracts)
Position Scaling - Double to 8 lots at ₹5,000 MTM
- Quadruple to 16 lots at ₹10,000 MTM
- Back to 4 lots if MTM on 8 lots < ₹3,000
Stop Trading Triggers - 4 lots: ₹2,000 drop
- 8 lots: ₹2,400 drop
- 16 lots: ₹4,800 drop
Trade Limit 25 trades (50 orders) per day
Chart Type 1-minute candlestick with support/resistance
Entry Criteria Swing highs/lows, ₹4 stop loss, ≥₹8 profit target
Tools TradingView for charting


Adjusting for Lot Sizes

To make the strategy work with any lot size:

  • Lot Size (L): Check the current lot size (e.g., 30 for BANKNIFTY in 2025).
  • Initial Lots (N): Aim for 100 contracts by calculating N = round(100 / L), e.g., 3 or 4 for L = 30.
  • Total Contracts: Multiply N × L (e.g., 4 × 30 = 120).
  • Total Risk: Multiply total contracts by ₹4 (e.g., 120 × ₹4 = ₹480).
  • Scaling: Double N at ₹5,000 MTM, quadruple N at ₹10,000 MTM, and go back to initial N if MTM on doubled lots drops below ₹3,000.

Managing Margins

You need enough capital for the premium (N × L × P, where P is the premium per contract) plus extra margins set by your broker (usually 20–30% of the contract’s notional value).

  • Example: For 4 lots, lot size 30, premium ₹400, the cost is 4 × 30 × ₹400 = ₹48,000.
  • If premium is ₹2,000, cost = 4 × 30 × ₹2,000 = ₹240,000, which is more than ₹2,00,000, so reduce to 3 lots (cost = ₹180,000).
    Check exact margin rules with your broker, as they depend on the contract value and exchange guidelines (NSE Derivatives).

Importance of Discipline

Scalping can be stressful because it’s fast. To succeed:

  • Stay Calm: Don’t chase losses or make rash trades.
  • Follow Rules: Stick to stop losses, trade limits, and scaling steps.
  • Have a Plan: Keep your trades structured to avoid overtrading.
    Being disciplined helps protect your money and keeps your trading consistent.

Considerations for 2025

  • Lot Size: BANKNIFTY options are 30 contracts per lot in 2025, per NSE updates.
  • Market Changes: Test the strategy in a demo account, as market conditions like volatility may differ from past years.
  • Premium Costs: Adjust your lots if premiums are high (e.g., ₹2,000) to fit your capital.
  • Rules Updates: Keep an eye on SEBI and NSE for changes to lot sizes or margins (Groww Blog).

Conclusion

This simple option scalping strategy helps you trade BANKNIFTY options by adjusting to different lot sizes, like 30 in 2025, and keeping risk under control. It uses fixed profit targets and risk limits to stay consistent, while discipline ensures you don’t overtrade. Make sure you have enough capital for premiums and margins, test the strategy in a demo account, and check with your broker for exact margin rules. With careful practice, this strategy can help you navigate the fast-moving options market successfully.