A Beginner's way to trade options.

[DanPickUp]

Hy kvram

You wrote:

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dear aw10, plz guide me, as i am holding old shares in my dp since long ,as i am following thread as the shares are A group like h honda ,acc like sufficient to get margin funding to sell calls,or write calls as i would like to write every month for premium . as i like to seek your advise ,like banks, mtnl,etc less volatile stocks plz suggest me as I am thankful to you.as I can bear less risk and even less reward also OK as my age doesnt permit ,my idea is to have some income from idle holding since 2decades, tHANK YOU SIR.

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Are you willing to learn ? Are you willing to study ?

You have been willing to buy those stocks, and then ?

How much time and money did you spend to learn your job to make the money you spent in to this shares ?

How much time did you spend in education in the financial market before you bought this shares ? Are we clear ?

So, there is a lot of stuff around in traderji to learn any basics of what ever.

You can go to the thread about mentors in the beginners guide. Or maybe you think, you already in a higher level, why not choose some thing from the place you already in : Low risk option strategies.

But you have to be willing to learn!

Age does not give you any guaranty for success against the people you trade. They do not care about your age, they care, how much money they can make. If you do not understand that, it is all in the thread from : Low option strategies. But you have to read it. And if you even need some more information, go to the Holy Grail.

And you may have to think about Collars. But I did not mention that.

Take care

Regards and good trading

 

[eswar001]

Hi,

I bought nifty option puts at strike price 4800 (Rs-80 ) of September 24th 2009.

Please tell me is it good to keep few more days or its better to sell it now.

Is this market is going to come down in this month?, because from last six days it is continuously increasing.

Need your valuable opinion on this.

 

[lazytrader]

I would say hold although nifty has broken above and held 4800, that's pretty much all it has done in the past few days. Give it 3-4 days but if nifty doesn't fall below 4800 by next friday then better to book loss. If it moves above 4900 and moves up then based on the momentum you'll have to reanalyse.

 

[DanPickUp]

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[simu2004]

Strategy for Hedging

Please guide on below strategy on hedging.

Buy Futures at CMP (4975) with the stop of 4900,and
Sell 5000 call (oct) for close to 170. and hold till expiry. or sq off when you see a good profit.

Will it be any good irrespective of which way the market moves ?

I am just looking for a simple strategy which should have
- Limited Loss/Gain
- No need to monitor NIFTY all through the day

I am already following AW10 thread on spreads.

 

[AW10]

Re: Strategy for Hedging

Please guide on below strategy on hedging.

Buy Futures at CMP (4975) with the stop of 4900,and
Sell 5000 call (oct) for close to 170. and hold till expiry. or sq off when you see a good profit.

Will it be any good irrespective of which way the market moves ?

Hi Simu2004..

For the 2 trading constraint that you have, option trading can meet your purpose. Problem will be that there are too many strategies you can create with Options and if right strategy is used in wrong market condition, result will not be that good.. Hence Most important is to understand the current market condition.. and then pickup a strategy that fits this condition.

The strategy that u are mention here is nothign but Covered Call strategy. In standard covered call, u buy a stock and sell calls at higher strike price.
Here instead of stocks, u are trying to use Future.

So if you understand covered call well, u will get the answer of your question. I have written on covered call in the past.. Please search the forum for "Covered Call" posts so that u get more practicle info on this. Here are some of my posts but you will get lot more input from discussion on those threads.

http://www.traderji.com/options/24505-my-option-calls-2.html#post237628
http://www.traderji.com/options/7082-covered-call.html#post240104
http://www.traderji.com/options/26287-questions-covered-call.html#post271789

Happy Trading

 

[Flock]

No, does not look like it to me though I am a novice at options. Looks more like limited gains and unlimited risk (in theory)

If Nifty ends up above 5000 on expiry, your gain will be 170 + 25 (points)

If Nifty ends up below 4805 (4975 - 170), your loss will be 4805 - expiry price.

 

[simu2004]

Re: Strategy for Hedging

Hi Simu2004..

http://www.traderji.com/options/24505-my-option-calls-2.html#post237628
http://www.traderji.com/options/7082-covered-call.html#post240104
http://www.traderji.com/options/26287-questions-covered-call.html#post271789

Thanks a lot, for your words of wisdom and efforts to provide me these links.

No, does not look like it to me though I am a novice at options. Looks more like limited gains and unlimited risk (in theory)

If Nifty ends up above 5000 on expiry, your gain will be 170 + 25 (points)

If Nifty ends up below 4805 (4975 - 170), your loss will be 4805 - expiry price.

Thanks Flock, things seem so simple with you guys around.

 

[AW10]

hi all ST,LT and others ..my options business is rockin thanks to ur inputs ....i trade well...now one major concern i found when i looked at active calls..was

i trade in NIFTY calls only and that too buy.

This is strategy of buying only call works in bullish market. Hope you have your strategies to handle bear market situation. Otherwise, buy call approach will hurt you in those situation.

now my doubt

now 25march 2010 is being traded i didnt get logic behind it.

now it is traded at strike of 4800 call 250 rs somethin..now my point is that if markets blasts more than 6000 around januray..how will that 4800 call will be present becos acc to market only 4 strikes less and greater than current markets are open..so when markets reach 6000 how will that current 4800 be present ..what nifty does with it.....

Trading in Far month expiry contracts is allowed at NSE. Many a times, it is brokers who don't list them in selection of instrument on order placement screens and hence we can't trade them. If you buy 4800 25-Mar-2010 call at 250, and if mkt goes up, this call will certainly be worth lot more..and hence u make money on it. So if nifty goes to 6000, your 4800 option will be worth atleast 1200 (i.e. 6000- 4800) or more.

I don't know from where u got that only 4 strikes +/- spot is allowed to trade. (Maybe your brokers limitation). As far as I know, there is no such restriction. Only limitation is NSE has a band (much wider then 4 strikes) beyond which they don't allow the strikes for trading (u can't trade nifty 6000 or nifty 2200 strikes).

and also other thin i wanted to start in stock options buyin only but problem is of liquidity suppose i purchased at lower premium and stock rose so premium increase now i want to sell but many times there is no one buyer....and my order just remains pending...what to do if this continues till last thrusday...will i get ne profit or not.......what happens to my such option buy if it is in money and if it is out of money..if i am not able to square off whole month due to less liquidity

You are right, low liquidity is challange in trading stock options. In that case to close your position, you will have to excercise the option. You can squareoff cause there is no other person available to trade against your position.
Other option will be to adjust your Long Call position and sell higher strike calls against it and covert this into Spread position. That way you will lock atleast some profit. But if market falls from there, you will be hurt.

Best choice is to stay away from stock options or trade only liquid stock options like Reliance etc.

Happy Trading

 

[loganathan]

jamit,
Thanks for the link. hope every one gets benefitted .