A Question to AW10 and other Option Spreads Maestros

[OptionQuant]

TA Newbie,

I have a reasonably busy day, and do not have the time to look at intraday charts. So I have decided to be a positional player. I am not trying to make the greatest gain. I'm only trying to get a good enough return.

I don't see muself leavinhg my occupation and being a full time trader. I like my work a lot, and it sustains me (emotionall) despite its frustrations. Looking at Options trading to make some decent extra money. So intra day charts is a no-no

 

[OptionQuant]

AW10,

Today, Aug 24, 2011 was an NR7 day. Yet I did not act. Reason:the VIX was too high. Is that OK?

 

[jallanankit]

AW10,

Today, Aug 24, 2011 was an NR7 day. Yet I did not act. Reason:the VIX was too high. Is that OK?

Hi to all...

I have read the thread and now I wish to share some things..

I know a system which on backtest gives 200 points per month.. Now the points are:

The Strike rate is around 50 %

If i happen to trade all IN THE MONEY options using the BUY/SELL NIFTY levels, do u think it will b a good strategy for making money.. (options are entered into only because of the advantage of lower investment)..

Secondly, as u say, that today was NR7 day, the system just mentioned today as Inside Bar Day but not as a NR7 day

 

[AW10]

On Nifty Futures, it is NR7, but not on spot.

inside day on both provided you are not doing research and call 1.5 tick (65 yesterday and 67 today) as break.

Moreover, we are seeing inside week, Narrow week too. The range so far is 157 points.
Quite anticipated market action after few wide range weeks, strong trend recently.
Market does go into silence, sideway mode before making new move (until we see V reversals). In current economic environment, bulls are not in hurry to buy and bears have already been rewarded.

Moreover market is waiting for new gifts from Ben Bernanke on Friday when he speaks at Jackson Hole. If you recall, that's where he unveiled QE2 and market went into speculation drive. So I will not expect much action in remaining 2 days of the week (disclaimer - market can always get me wrong).

Happy trading

 

[AW10]

AW10,

Today, Aug 24, 2011 was an NR7 day. Yet I did not act. Reason:the VIX was too high. Is that OK?

What does your strategy/system say?
High vix doesn't mean that u stay away from market. That is dream period for option writers. If you are trading spread type of strategy, then effect of high vix get compensated to some extent as you buy high price options and also sell high priced options.

Please do challenge the your beliefs while defining your system. There is lot of crap floating around on the net and not trading options during high vix period is one of them.
Personally I don't agree with this. I look forward for high VIX period.
IMO, you can trade all types of market conditions provided you have developed system to trade them. If not, then better to stay away and preserve the capital.

happy trading.

 

[jallanankit]

AW10,

PLs comment on the strategy of trading options given 200 points amonth with around 50% strike rate

 

[OptionQuant]

Hi to all...

I have read the thread and now I wish to share some things..

I know a system which on backtest gives 200 points per month.. Now the points are:

The Strike rate is around 50 %

If i happen to trade all IN THE MONEY options using the BUY/SELL NIFTY levels, do u think it will b a good strategy for making money.. (options are entered into only because of the advantage of lower investment)..

Secondly, as u say, that today was NR7 day, the system just mentioned today as Inside Bar Day but not as a NR7 day

I dont get you. Nift SPOT was NR7 - it had the least range (Hi-Lo) in 7 days. Is it not??

 

[jallanankit]

I dont get you. Nift SPOT was NR7 - it had the least range (Hi-Lo) in 7 days. Is it not??

The system abt which i m talking said tht i was Inside Bay day and not NR7..

 

[AW10]

Hi to all...

I have read the thread and now I wish to share some things..

I know a system which on backtest gives 200 points per month.. Now the points are:

The Strike rate is around 50 %

If i happen to trade all IN THE MONEY options using the BUY/SELL NIFTY levels, do u think it will b a good strategy for making money.. (options are entered into only because of the advantage of lower investment)..

Secondly, as u say, that today was NR7 day, the system just mentioned today as Inside Bar Day but not as a NR7 day

Jalanankit, As your post does not have all the info, it is difficult to comment. But using following equation, you shd be able to find out yourself.

You need to ensure that simple expectancy equation is working out in your favour, else you are better off putting your money in cash or FD.
Expectancy = (winning % * average profit per trade) - (lossing %*average loss per trade)

infact, if you take into consideration brokerage, stt etc, you need better strike rate then 50%.
Personally, I take conservative route and analyse my backtest by removing top 2 or 3 exceptional profitable trades and take into consideration all losses. If strategy is profitable after that in my expected return level, then accept it else improve/discard it.

hope this helps. happy trading.

 

[jallanankit]

Consider this situation..

U trade in 30 calls(buy or Sell) and end up with +200 points nifty.. This info is without brokerage and taxes..

Next the thing is that if u happen to calculate avg profits per trade it comes to 7 points profit(7points*30 trades = 210 points)

Wat i am asking u is if we trade all NEAR ITM calls as per the BUY/SELL signals and as per 30k is investment in one lot of nifty and if we enter into say 6 to 7 lots of options for every one lot of nifty(making the investment value to 30K in options), will it not fetch better results..