Day Trading Stocks & Futures

[headstrong007]

How does one calculate option chain resistance?

Not easy, you have to monitor it every day and keep track record of three things,

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What I observe,
1. No of highest Oi in 5 strikes both PE and CE both Nifty and Bank Nifty every day EOD. And in market time too.
2. How Oi changes EOD.
3. Where is the max pain.

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Highest Oi strikes tries to act as option chain support and resistance many times and price tries to go near max pain during near to expiry.
But you can see the greater picture only when u analyse the strikes and compare it day to day basis EOD. You can see the greater picture when u can combine option chain with volumes, OI and prices of futures too (secret trick).

 

[afin]

Look at 10200 strike puts. Has the highest OI means Support. Look at calls, you will see 10500 having the highest OI. You will also see 10600/700/800 significant OI and volume. High call writing indicates a bearish market. High put writing indicate bullish market. View attachment 29170

so in tihs case, we have multiple levels of resistance?

 

[Riskyman]

If you see 10500 puts , you will see significant number of puts there. But the market broke that support and went down. The OI for that strike may have been much higher in the morning Not sure why it wasnt wound up. Those are probably the guys who are hoping the market will reverse

 

[Riskyman]

so in tihs case, we have multiple levels of resistance?

Not really. 10500 at the moment. Those guys writing calls at higher levels are pocketing premiums. If Nifty crosses 10500, then those higher strikes may offer resistance as a lot of selling has happened there.

People are even selling 11000 ce at 13 rs. Its easy sure shot money

 

[sanju005ind]

What do you expect from a market trading at 28-28.5 P/E to do? How long can it sustain at such high levels? Obviously, people should not cry now as they should have booked profits and stepped aside. Moreover, was this market even fundamentally strong? I doubt it given that our banks are in doldrums, no capex for years. Demon, GST etc sucked the juice out of the economy. How long can one lie and paint a rosy picture. This should have happened long ago. Falling from higher is only more painful.

Apart from some intermittent bounces here and there, I dont see much upside at all. In another 2 months we finish the year. From Jan onwards all the election hoopla will begin and the market will be even more careful. Imagine, what will happen if BJP doesnt form a majority government (assumptions only for the sake of discussion). This market may simply collapse 20-30%.

This is the same thing i was telling since before.
http://www.traderji.com/community/threads/general-trading-chat.96368/post-1275522

 

[SarangSood]

If we analyse option chain, 10500 PE has highest OI, and below that fragmented OI only. Bears have the edge so 200 pt swift fall. Still no big support exists due to Nifty Option chain below 10500.
Now, overconfident 10500 put writers are facing the heat.

But what if 10500 put writers have hedged their positions with Nifty futures from the starting? They would be in very good profit.

 

[jonty47]

What a day, the downwave keeps completing targets by the hour instead of days.
Nifty last major support 9962(close and low of march series)and 10154 a minor one.

 

[TraderRavi]

What a day, the downwave keeps completing targets by the hour instead of days.
Nifty last major support 9962(close and low of march series)and 10154 a minor one.

who knows once these lower level attained panic spreads and instead of halting fall becomes more furious.

 

[headstrong007]

But what if 10500 put writers have hedged their positions with Nifty futures from the starting? They would be in very good profit.

If you can compare the combined Oi of varoius options strikes with futures you can easily see the greater picture -
most of the options writers don't hedge their positions with futures but they usually changes the strikes smartly or trapped (overconfident and beginners).

If most of options writers tries to hedge their positions smartly with futures, then future oi, volume and liquidity will significantly increase, unfortunately that's not the case in Indian Market. Only a few option writers are doing that.

 

[headstrong007]

who knows once these lower level attained panic spreads and instead of halting fall becomes more furious.

We must understand, why bear market falls are much sharper than bull market rally. We can see just within two day 150 point value erosion from one of the best stock Reliance too.

We must understand the reason, when investors faces sudden losses in some stocks in their portfolio, its is common psychology that they want to cover that loss instantly by liquidating another profit making stock like Reliance as quickly as possible.

So, the fall in Reliance is actually the side effect of bear market. A lesson how a good stock can also fall into bear market trap easily.

For investors also it's all about managing the portfolio, maintaining the stop losses and booking partial profit or full profit and enter again in lower level. Investing also needs the intelligence.
Just putting the money for long term is not enough, investors must know when to book profit and when to remain in cash.