General Trading Chat

[Taiki]

@ Taiki,

Let us see how we roll over the positions. In Nifty futures, the nect month contract is at premium to the current month contract. So the simple and straightforward way is close current months long position and open long position in next month contract at higher price because of the premiums. Though we have to par extra by way of premiums,over a long period sometime we will be long and paying premium, sometimes we will be short and receiving premiums...so it evens out. And if you calculate 30-40 or even 70 points premium on 8300 Nifty it is less than 0.5-0.75 % per month or 6-9 % per annum...it is the cost of doing business ....

Now I will tell you another way which is not all that straight, it is tricky. I normally roll over my long positions over a period of 2-3 days. Suppose I am rolling over longs position, then I will look for some pivot high break and then will buy next months contract and then when the market goes up by 10-20 points, I sell the current months longs. Here we are increasing our risk, so do it with 20 % position at a time and with stoploss .So in 4-5 trades you can roll over the entire position. The pivot low break also can be used...sell the current month longs and then 10-20 points down ,buy the next months contracts....we can save 10-20 points in this but it comes with added risk and that needs to be understood.This is the reason we roll over in lots of 20 % so if any trade is stuck up, we can keep stoploss and the full position is not at stake.

My Interactive Brokers terminal gives me charts for different months contracts ...so after the roll over, we then follow the stoploss of next months contract chart...normally premiums dont collapse till 10-12 days but if it does, we have to trade with our stoploss 30 points higher in the next months contracts....

If you go long in the slightly deep In The Money puts the premiums will fluctuate very close to the futures price fluctuations and you can capture most of the downtrend through buying puts.

I tried to answer all your doubts...if anything further, feel free to ask.

Smart_trade

Thank you brother,

Clear on roll over part. Since currently I am going long only on cash market its not a problem. Will start observing and paper trading the future contract for 3-4 months, to understand the roll over concept.

About going long on slightly deep ITM put option, what I have observed in few stocks are more the stocks fall, the more the put strike appreciates (deeper ITM) and more it becomes illiquid. The bid - ask spread gets wider and you may/may not get desired buyers to close your position (Even the backtesting may not give accurate results with options). ANd there is also risk of not being able to close the ITM strike on expiry, and then being charged with heavy brokerage.

Regards
Taiki

 

[LivetoTrade]

Now I will tell you another way which is not all that straight, it is tricky. I normally roll over my long positions over a period of 2-3 days.

Smart_trade

This picture agrees to your view

 

[Smart_trade]

Thank you brother,

Clear on roll over part. Since currently I am going long only on cash market its not a problem. Will start observing and paper trading the future contract for 3-4 months, to understand the roll over concept.

About going long on slightly deep ITM put option, what I have observed in few stocks are more the stocks fall, the more the put strike appreciates (deeper ITM) and more it becomes illiquid. The bid - ask spread gets wider and you may/may not get desired buyers to close your position (Even the backtesting may not give accurate results with options). ANd there is also risk of not being able to close the ITM strike on expiry, and then being charged with heavy brokerage.

Regards
Taiki

Yes when the market goes too much away from the strike price, the liquidity and bid/offer spreads could be a problem in stocks. Try rolling down the strike price also...meaning closing ( profit taking ) on further away strike puts and going long on near the market puts , it may help to some extent plus it puts some profits in the pocket.

ST

 

[ananths]

India VIX sharply dropped today by ~9% (from 18 to 16) and market moved up. On 6th VIX increased sharply and market was down.

So this could be used as an indicator to understand the direction of the market?

Source:- http://www.nseindia.com/products/content/equities/indices/india_vix.htm
Volatility Index is a measure of market’s expectation of volatility over the near term. Volatility is often described as the “rate and magnitude of changes in prices" and in finance often referred to as risk. Volatility Index is a measure, of the amount by which an underlying Index is expected to fluctuate, in the near term, (calculated as annualised volatility, denoted in percentage e.g. 20%) based on the order book of the underlying index options.
India VIX is a volatility index based on the NIFTY Index Option prices. From the best bid-ask prices of NIFTY Options contracts, a volatility figure (%) is calculated which indicates the expected market volatility over the next 30 calendar days. India VIX uses the computation methodology of CBOE, with suitable amendments to adapt to the NIFTY options order book using cubic splines, etc.

 

[Taiki]

Yes when the market goes too much away from the strike price, the liquidity and bid/offer spreads could be a problem in stocks. Try rolling down the strike price also...meaning closing ( profit taking ) on further away strike puts and going long on near the market puts , it may help to some extent plus it puts some profits in the pocket.

ST

RIght, This can be a better approach. Atleast its better than not being able to trade at all in down trend.

Thank you for the answers bro.

Regards
Taiki

 

[Smart_trade]

India VIX sharply dropped today by ~9% (from 18 to 16) and market moved up. On 6th VIX increased sharply and market was down.

So this could be used as an indicator to understand the direction of the market?

Source:- http://www.nseindia.com/products/content/equities/indices/india_vix.htm
Volatility Index is a measure of market’s expectation of volatility over the near term. Volatility is often described as the “rate and magnitude of changes in prices" and in finance often referred to as risk. Volatility Index is a measure, of the amount by which an underlying Index is expected to fluctuate, in the near term, (calculated as annualised volatility, denoted in percentage e.g. 20%) based on the order book of the underlying index options.
India VIX is a volatility index based on the NIFTY Index Option prices. From the best bid-ask prices of NIFTY Options contracts, a volatility figure (%) is calculated which indicates the expected market volatility over the next 30 calendar days. India VIX uses the computation methodology of CBOE, with suitable amendments to adapt to the NIFTY options order book using cubic splines, etc.

I was monitoring premiums of 8300 straddle...it was 290 yesterday...and came down to approx. 240 today as the fear of crash subsided.

ST

 

[LivetoTrade]

India's sovereign rating upgrade likely in 2015: Deutsche Bank report

Read more at:
http://economictimes.indiatimes.com...ofinterest&utm_medium=text&utm_campaign=cppst

 

[sudoku1]

I was monitoring premiums of 8300 straddle...it was 290 yesterday...and came down to approx. 240 today as the fear of crash subsided.

ST

or say hopes of a rebound increased ;-)

 

[Smart_trade]

or say hopes of a rebound increased ;-)

Fear of loss is a much stronger stimulus than hope of profits.

Smart_trade

 

[Somatung]

or say hopes of a rebound increased ;-)

Well, I hope you do not trade on hope.