Low Risk Options Trading Strategy - Option Spreads

[AW10]

Did not want to open a separate thread...Please see the attached screenshot of Minifty Option 6000CE July series....look at the prev. close column.

how is this possible?

Agreed that volumes are low...but someone made money.

Why do you want to trade MINI NIFTY options.
Quite possible that 200 priced transaction happened few months back. There is huge difference between bid and ask price (5.75 v/s 18.65) that itself should give u indication that you are getting into instrument which is manipulators instrument.

Better to trade more liquid counters. There are enough opportunities everywhere else.

happy trading

 

[columbus]

I agree with AW10.Always prefer liquid counters, be it F&O or cash.

 

[DanPickUp]

Hi ranger

http://www.cmegroup.com/education/25-proven-strategies.html

Hope you do well. You asked for some kind of source I not can give you as I not have it. Take this as an alternative.

Tc

DanPickUp

 

[rama_1000]

Did not want to open a separate thread...Please see the attached screenshot of Minifty Option 6000CE July series....look at the prev. close column.

how is this possible?

Agreed that volumes are low...but someone made money.

[/URL][/IMG]

I downloaded the Bhavcopy of F&O section of Nifty for 06.07.2011 to cross-check the abnormal (previous close) option price of Rs. 208.25 for Minifty 6000 CE. In fact, on 06.07.2011, not even a single such contract was traded (though the close price is shown there also as Rs. 208.25). Likewise, there is NIL turnover, no open interest in that call option and no change in open interest on that day. Thus, the previous close of Rs. 208.25 was mentioned wrongly on 07.07.2011.

Just out of curiosity, I checked Bhavcopies of several other previous dates. After researching for some time, I found that the aforesaid Minifty 6000 CE July2011 contract was introduced on 29.04.2011 for trading and the aforesaid call price of Rs. 208.25 finds place (as closing price) on the said first day of trading itself, and that too when there was no trading in this contract even on that day!!! Thereafter, I found that the same closing price of Rs. 208.25 is being mentioned in the Bhavcopies of various subsequent days, without there being any trading.

It is seen that the aforesaid call option contract of Minifty was traded for the first time only on 07.07.2011 (a total of 6 contracts with OI of 120).

Therefore, it appears to be a mistake of some default price being accepted by the system on its own. No contract of said call option of Minifty has ever been traded at the price of Rs. 208.25 as verified by me.

 

[comm4300]

I downloaded the Bhavcopy of F&O section of Nifty for 06.07.2011 to cross-check the abnormal (previous close) option price of Rs. 208.25 for Minifty 6000 CE. In fact, on 06.07.2011, not even a single such contract was traded (though the close price is shown there also as Rs. 208.25). Likewise, there is NIL turnover, no open interest in that call option and no change in open interest on that day. Thus, the previous close of Rs. 208.25 was mentioned wrongly on 07.07.2011.

Just out of curiosity, I checked Bhavcopies of several other previous dates. After researching for some time, I found that the aforesaid Minifty 6000 CE July2011 contract was introduced on 29.04.2011 for trading and the aforesaid call price of Rs. 208.25 finds place (as closing price) on the said first day of trading itself, and that too when there was no trading in this contract even on that day!!! Thereafter, I found that the same closing price of Rs. 208.25 is being mentioned in the Bhavcopies of various subsequent days, without there being any trading.

It is seen that the aforesaid call option contract of Minifty was traded for the first time only on 07.07.2011 (a total of 6 contracts with OI of 120).

Therefore, it appears to be a mistake of some default price being accepted by the system on its own. No contract of said call option of Minifty has ever been traded at the price of Rs. 208.25 as verified by me.

thank you for the effort taken to investigate.
good job :thumb:

 

[niftyoptionstrader]

Some Smart money/biggies also make the dumb mistakes like novice traders and blow their account.

I suppose most of those who follow this thread would be familiar with Black–Scholes model for options calculation. The model was first articulated by Fischer Black and Myron Scholes in their 1973 paper, “The Pricing of Options and Corporate Liabilities.” Robert C. Merton was the first to publish a paper expanding the mathematical understanding of the options pricing model and coined the term Black–Scholes options pricing model. Merton and Scholes received the 1997 Nobel Prize in Economics ( Though ineligible for the prize because of his death in 1995, Black was mentioned as a contributor by the Swedish academy)...ok you dont get smarter guys than these...right?

Now recall that Myron Scholes and Robert Merton ( alongwith a peer group of financial wizards) were on the board of Long Term Capital Management , which went belly up in 1998 and Federal Reserve organised a bailout (of $3.625 billion -to avert a global meltdown) that kept it alive till final liquidation in early 2000 !!!

 

[sumeetsj]

Try to trade with long bias, stop loss 5605 in Nifty futures.

Buy Nifty 5600 CE,
Sell Nifty 5700 CE and 5800 CE,

Try to enter near 5600 levels

Name : Long call ladder

Max Profit: between 5700 and 5800

Loss: Above 5900.

(Note: Please do your homework before entering)

Given by Siddharth Bhamre(head Derivative analyst, Angel broking).

 

[nik.trader]

I suppose most of those who follow this thread would be familiar with BlackScholes model for options calculation. The model was first articulated by Fischer Black and Myron Scholes in their 1973 paper, The Pricing of Options and Corporate Liabilities. Robert C. Merton was the first to publish a paper expanding the mathematical understanding of the options pricing model and coined the term BlackScholes options pricing model. Merton and Scholes received the 1997 Nobel Prize in Economics ( Though ineligible for the prize because of his death in 1995, Black was mentioned as a contributor by the Swedish academy)...ok you dont get smarter guys than these...right?

Now recall that Myron Scholes and Robert Merton ( alongwith a peer group of financial wizards) were on the board of Long Term Capital Management , which went belly up in 1998 and Federal Reserve organised a bailout (of $3.625 billion -to avert a global meltdown) that kept it alive till final liquidation in early 2000 !!!

"
2 must read books for everyone are "Fooled by Randomness" & "The Black Swan"..both by Nassim Nicholas Taleb (a derivatives trader, philosopher and author who had predicted the crash of 2008)

 

[jyotixxx]

DEAR AW 10,

I AM ALSO TRADING IN OPTION FOR LAST ABOUT 4 YRS AND THOUGH I AM NOT GOOD AT MARKET ANALYSIS, RISK PREDICTION ETC STILL MAKING MONEY MOSTLY USING SIMPLE SPREADS.
I ALWAYS AVOID RISK AND PREFER TO WAIT RATHER THAN TAKING A QUICK WRONG DECISION. FOND OF TAKING SMALL PROFITS IN DOUBTFUL SITUATIONS.THAT IS HOW I CONTINUE TO GAIN WITHOUT MUCH KNOWLEDGE.

I HAD BEEN THROUGH WHOLE OF THIS THREAD AND QUITE IMPRESSED WITH THE KIND OF KNOWLEDGE YOU DO HAVE. THANKS FOR SHARING THEM WITH ALL WITHOUT ANY PERSONAL INTEREST.MY ADVICE IS THAT U SHOULD WRITE A BOOK ON OPTION TRADING AS NO SUCH CONTENT AVAILABLE ANYWHWRE:thumb:.

I HAV SOME DOUBTS ALSO AND HOPE U WILL HELP ME TO CLEAR THEM.

I WILL START WITH A POSITION OF MINE PLACED TODAY::

I AM BULLISH ON TCS AS EVERYONE WOULD BE. IN THE MORNING HOURS I SOLD ONE LOT OF OTM CALL AND IN THE AFTERNOON I BOUGHT LOWER CALL. TILL I PLACED SECOND POSITION I WAS CLOSELY OBSERVING TCS.

POSITIONS ARE AS UNDER:


1. SOLD 1 LOT(250) TCS 1200 CE @ 24.00

2 BOUGHT 1 LOT(250) TCS 1150 CE @ 27.00

CMP OF TCS IS 1146

DIRECTION IS BULLISH
COST OF THE TRADE (27-24)X250= 750
MAX RISK=750
MAX REWARD=1200-1150-3=47X250=11750
BREAKEVEN POINT IS 1153


NOW MY RISK IS ALMOST NEGLIGIBLE, BUT I RISKED IT FOR 4 HOURS WITH A NAKED SHORT. HOWEVER WITH MY LAST TRADING EXPERIENCES I KNOW THAT IF A STOCK JUMPED 4-5% IN THE MORNING OBVIOUSLY THE CALLS WILL WILL BE VERY HIGH IN THE MORNING AND WILL DECAY TILL THE END OF THE DAY.

NOW MY DOUBTS ARE::

USUALLY I SQ OFF ALL POSITION IF I GET AROUND 50-60% OF MAX REWARD. SUPPOSE I AM CONFIDENT ENOUGH LIKE IN THIS CASE WHERE GOOD RESULTS ARE KEY DRIVER FOR TCS FOR NEXT 10-20 TRADING SESSION AND MAX CHANCE OF CLOSING ABOVE 1200 MARK ON EXPIRY IS LIKELY WITH LITERALLY NO RISK.

? CAN I WAIT TILL EXPIRY WITHOUT SQ OFF BOTH POSITIONS IF IT TENDS TO CLOSE ABOVE 1200.
? I NEVER WAIT TILL EXPIRY WITH SPREAD. WHAT ARE ON GROUND DISADVANTAGES.
? ANY OTHER ADVICE ON THIS.


THANX IN ADVANCE

 

[pritam1232007]

krishdwi, DJ has answered to you question. My 2 cents of addition of this
1)On expiry day, All In the money options are forcefully excercised by Exchange after market close. So even if you have not placed order to close your trade, at the end of the day settlment, it will be closed for you.

2) If settlment price is < 4100, then yr option is Out of money and worth ZERO.
If settlement price is >4100 then there are 2 cases, a) if <4154, then say 4135, then exchange will credit your acct with 35 rs but u still loose on trade because u paid 54 for this.
b) if settlment is say 4180, exchange will credit 80rs to yr acct. that means you made profit of 80-57 = 23 rs. on this.

Hope this clarifies your doubt.

Happy Trading

hi, what if i short nifty 5000 call and nifty price go above 5500 or below 4500.