Gamma based range & trade

[Options_Trader]

Nifty breaks 6715 and moves down towards 20ema(6655).20ma cross 20ema today..as expected..

Resistance seen at 6720-6750 on the top now and nifty expected to move down towards 6656/6626...

Gamma range for May series as of now is 6300-6785-7270..

What do you exactly mean by gamma range? Sorry, could not find it.

 

[umash2000]

What do you exactly mean by gamma range? Sorry, could not find it.

Delta ranges between 0-1.Gamma is seen within Delta and ranges between 0.03-0.07 to 0.97-0.93.Thus,even when nifty move past 0.93/0.97 on upside or 0.07/0.03 on lower side would lose momentum or would become static as Gamma would be zero there.

The idea of this thread is to capture the broad range for the series using Gamma
& IV of last day of previous expiry and Close..Nifty is expected to trade within the range & extremes are not expected to be breached..

Further,the midpoint of this range play a critical role of trend decider.Nifty above this would be positive and below it would be negative.MACD divergence tick(macd histogram),MACD divergence cross(macd line crossing signal line) & MACD would determine the position of nifty above or below the midpoint..

Hope the contents are not too loaded??

 

[Options_Trader]

Delta ranges between 0-1.Gamma is seen within Delta and ranges between 0.03-0.07 to 0.97-0.93.Thus,even when nifty move past 0.93/0.97 on upside or 0.07/0.03 on lower side would lose momentum or would become static as Gamma would be zero there.

The idea of this thread is to capture the broad range for the series using Gamma
& IV of last day of previous expiry and Close..Nifty is expected to trade within the range & extremes are not expected to be breached..

Further,the midpoint of this range play a critical role of trend decider.Nifty above this would be positive and below it would be negative.MACD divergence tick(macd histogram),MACD divergence cross(macd line crossing signal line) & MACD would determine the position of nifty above or below the midpoint..

Hope the contents are not too loaded??

They are loaded all right. Can I ask if you are profitable using this method?

 

[umash2000]

They are loaded all right. Can I ask if you are profitable using this method?

This concept is new and seems to be successful for past 3 series & seems to be okay for another 3-4 mths prior also..

What you get is broad range within which is nifty expected to trade & its midpoint.Do you think whether this data would be useful for setting up profitable trades? If you think so,how would you trade?

 

[Options_Trader]

This concept is new and seems to be successful for past 3 series & seems to be okay for another 3-4 mths prior also..

What you get is broad range within which is nifty expected to trade & its midpoint.Do you think whether this data would be useful for setting up profitable trades? If you think so,how would you trade?

Depends on how broad the range is. Can you give some figures,
Upper range
Lower range
Mid point

 

[umash2000]

Broad range for May series is 6510-6950-7390..

 

[Options_Trader]

Broad range for May series is 6510-6950-7390..

If you go for a calender spread of 6900-6950, it will be a profitable for your range.

If you have taken the effort of calculating this range, you probably are writing OTM options. If that is the case, what do you do if the underlying reaches the strike price of the written option price.

 

[umash2000]

If you go for a calender spread of 6900-6950, it will be a profitable for your range.

If you have taken the effort of calculating this range, you probably are writing OTM options. If that is the case, what do you do if the underlying reaches the strike price of the written option price.

This is a paper trade taken on 24th Apr 2014.
Sell 6500 put @ 105:-9
Sell 7400 call @ 69:+17

Breakeven point is 6326 & 7574..Thus,if nifty sustains within 6500-7400 range,full profit of 174.Profit would still be there if nifty breaks the broad range but sustains the 6326 & 7574.Thus,feel no further legs required.

However,if nifty comes closer to strike prices or even breaches,one more leg of put buying could be added(Insurance as Somatung puts it..)

 

[Options_Trader]

This is a paper trade taken on 24th Apr 2014.
Sell 6500 put @ 105:-9
Sell 7400 call @ 69:+17

Breakeven point is 6326 & 7574..Thus,if nifty sustains within 6500-7400 range,full profit of 174.Profit would still be there if nifty breaks the broad range but sustains the 6326 & 7574.Thus,feel no further legs required.

However,if nifty comes closer to strike prices or even breaches,one more leg of put buying could be added(Insurance as Somatung puts it..)

Hmm, so you lose some profits, but no risk. Your strategy only faces risk from a black swan event i.e. an event like Dow jones crash of 22%. That is a very rare event, but can take you out. It is advisable to be long a put at least at 6000. You sleep soundly.

 

[Somatung]

Hmm, so you lose some profits, but no risk. Your strategy only faces risk from a black swan event i.e. an event like Dow jones crash of 22%. That is a very rare event, but can take you out. It is advisable to be long a put at least at 6000. You sleep soundly.

http://www.traderji.com/trading-diary/88670-nifty-options-trading-raj-460.html#post961556

http://www.traderji.com/trading-diary/88670-nifty-options-trading-raj-460.html#post961655