Day Trading Stocks & Futures

[Riskyman]

@against_tides Forgot to mention that IVs will continue to increase as days to expiry reduce.

 

[travi]

@against_tides Forgot to mention that IVs will continue to increase as days to expiry reduce.

ye debatable hai, can be the opposite but this one is based on market dynamics.

 

[lemondew]

I think options behave like futures only.

if you buy futures next month expiry is dearer than this month expiry.
Similarly next month ITM calls would be more expensive than this month

If you sell futures next month expiry gives more premium to us and hence is more beneficial. Similarly next month itm puts should be cheaper than this month ITm puts

provided we assume next month has more premium than this month.

I think costliest should be deep In The Money with the NEAREST expiry because it has only intrinsic value left with no premium. So the cheapest option becomes the costliest option in the other leg.

 

[against_tides]

Lets say Nifty is trading at 11800 with a bullish bias. You want to buy a call option. Lets say below is what the IVs look like.

Strike IV
-- ---
11700 13.0
11750 13.5
11800 14.2
11850 15.0
11900 14.8
11950 15.4

You can see that 11700 and 11750 are in the money so the IVs are lower as compared to IV of 11800 atm. ATM and above OTMs will have higher IVs.. Ideally you should buy ITMs. But if you are looking to buy OTMs then you have to hand pick a strike that has the least IVs. If you are lucky you can find a close by strike which is slightly mispriced.
In the above example you can see 11900 ce is at 14.8 which is less than 11850's IV of 15. So you are marginally better off there.

Thanks bhai...
thinking going trading in options as each lot of futures trade cost approx 170 rs..

 

[lemondew]

Costliest option would be that whose premium or IV has increased the most. When suddenly a buyer buys a particular strike price many times its price can increase more than the price of the next strike which is more favourable.

how can one identify the costliest and cheapest option for nifty at a particular point of time

 

[against_tides]

Costliest option would be that whose premium or IV has increased the most. When suddenly a buyer buys a particular strike price many times its price can increase more than the price of the next strike which is more favourable.

I think the formula for IV is not open..hence a lot of debate...

 

[Riskyman]

ye debatable hai, can be the opposite but this one is based on market dynamics.

Yes. I should mention " IVs for OTMs will continue to increase as days to expiry reduce"

 

[lemondew]

Well about half a decade back when i started trading i did options. I wrote a thread on that. May be you can check it. While these days I dont trade options. But may be if I have to i will sell options with high IVs when I think it is extended.

St had written back investors buy in U and sell in inverted you. One can sell OTM calls in inverted u and OTM puts in Us when IVs are high.

I think the formula for IV is not open..hence a lot of debate...

 

[lemondew]

heres the link to it

https://www.traderji.com/community/threads/options-price-and-premiums.102097/

Well about half a decade back when i started trading i did options. I wrote a thread on that. May be you can check it. While these days I dont trade options. But may be if I have to i will sell options with high IVs when I think it is extended.

St had written back investors buy in U and sell in inverted you. One can sell OTM calls in verted u and OTM puts in Us when IVs are high.

 

[Riskyman]

Thanks bhai...
thinking going trading in options as each lot of futures trade cost approx 170 rs..

Mat karo bhai... First study options. Learn all the theory you can about options. Then spend another few months watching how options behave in the real world as compared to your theory. Paper trade a bit and then step into the real world of options. Catch hold someone experienced to mentor you regularly. This is the best way to go . Nanga punga options trade karoge tho you wont even have a chaddi left to save.

Option trading looking rosy. 1 rupee dalo aur 10 rs nikalo.... Aise kabhi kabhi hota hai. Learn to write options. You can make regular income. I will admit buying options should also be a part of a traders arsenal but if you cannot discern trend then better stay away from naked buying.