Low Risk Options Trading Strategy - Option Spreads

[sibumajumdar]

well i have one sowftwere called option oracles from there i find out this

Dear Sumit, Recently i dn loaded Option Oracle & hoadley.net/options but unable to proceed further. Can u or some other member help me in this regard? I need little initial guidance. Thanks....SLM uncle

 

[DanPickUp]

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[AW10]

Hy adshant

I am not clear what you ask here for free.

AW10, please stop me now. You know, we are friends and some times I get more than mad about the the way I feel...
..........
.........

Hey Dan. I know you very well and I know how much it disturbs you when people take me forgranted, or ask me too much. Appreciate your concern for me and my time.
I also know your temper as well.

Luckily adshanth has understood it well and had been modest in his reply otherwise, it could have gone out or proportion. Sorry, I did not spend much internet time on weekend hence saw the thread today.

Anyway, let bygones be bygones and move on to next trade/ post.

Adsanth / others, due to other committment, I am not able to reply your post/queries today..but will come back to them shortly.

Happy Trading

 

[rkkarnani]

Hy sibumajumdar

Surely a big help is a good option download program ( I use Opvue6 ) which gives you the whole option chains in horizontal ( all months ) and vertical ( all strike ) ways.

It takes some experience to see that, but after time it goes better and better.

During the day, when all prices are moving, it is to difficult.

After market closing, or better before market opening, you check the latest prices and compare them from strike to strike and from month to month.

Concentrate only on one market, so you get a feeling for that with the time.

I do that with option on futures. Do not ask me about option on stocks. Never traded them.

IMO it is not useful for your kind of trading. It makes sense, when implementing strategies, where you leg in and out.

You do credit spreads on the Nifty and you do not need that. Even not sure if you would get so much options prices to do such stuff.

Take care

DanPickUp

Dan, Did u mean to say that You do that with Options on "Indices" futures and not stocks futures!!!>>>>

 

[AW10]

Yes, RKK, In US mkt, there are Options available that uses S&P 500 Future / DOW future as underlying, instead of using SPOT as underlying..
Just another product of financial engg.. called derivative of derivative..

Happy Trading

 

[pkusingh]

View attachment 14106

Hy sibumajumdar

Surely a big help is a good option download program ( I use Opvue6 ) which gives you the whole option chains in horizontal ( all months ) and vertical ( all strike ) ways.

It takes some experience to see that, but after time it goes better and better.

During the day, when all prices are moving, it is to difficult.

After market closing, or better before market opening, you check the latest prices and compare them from strike to strike and from month to month.

Concentrate only on one market, so you get a feeling for that with the time.

I do that with option on futures. Do not ask me about option on stocks. Never traded them.

IMO it is not useful for your kind of trading. It makes sense, when implementing strategies, where you leg in and out.

You do credit spreads on the Nifty and you do not need that. Even not sure if you would get so much options prices to do such stuff.

Take care

DanPickUp

Well said. Thanks.

Let me explain little more. I have calculated implied vol of diffrent strikes before budget and after budget. Please find the attached excel sheet.
Strike 25/02/2010 26/02/2010
4700 31.82% 26.22%
4800 31.11% 25.68%
4900 30.18% 24.79%
5000 29.73% 24.63%
5100 28.98% 24.60%
You can clearly see the diffrence.

So before budget(25/02/2010) ATM vol was around 25%, That mean mkt was expecting that next day nifty future will be in the range of 4737 to 5000with 95% chance.

As expected after budget ATM vol got reduced to 21%.

Now here you have to take you view. If you think the market expectation(5000-4863=140pts up or 4863-4737=126pt down) is high then you can sell out the money calls and out the money puts and square off next day.

Or if you think 140pts is too less ,there is more then 5% chance that mkt can move 200pt-300pt up or 200pts-300pts down , then you can buy ATM call and put for one day.

You can also see in the spreadsheet that P-C is almost K-S both day and for all strike, so there is no arbitrage.

where,

P=put price
K=strike
S=future
C=call

So the bottom line is you can't say like this , "Hey tomorrow is the budget
day Something big is going to happen , let buy call and put both ,at the end we will definitely make some money".....Not true.

First you have figure out what market is expecting...If market expection is bigger then you, then you can loose money.

 

[DanPickUp]

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[rkkarnani]

Yes, RKK, In US mkt, there are Options available that uses S&P 500 Future / DOW future as underlying, instead of using SPOT as underlying..
Just another product of financial engg.. called derivative of derivative..

Happy Trading

Thanks !AW.... where would many of us be without selfless ppl like you.

Sorry Dan, Wrote with Indian mkt inview!! I was sure ypu meant Indices as here we have only future on Indices or stocks none else. What AW has written is new to me!! Thanks for this NEW info for me!!!

 

[pkusingh]

Hy buddy

You always speak " I say this and I say this ".

I mean, I was reading now twice my posts and I do not see any stuff I said about the Indian market, what you want to put in my mouth.

Your interpretation is the interpretation about a certain situation in India market. Did I say, I trade the Indian market ? Even the excel you show is as tiny as most information are about options in India.

Did I ever say, I am looking for an arbitrage trade ? No I did not. I told, that I was looking for good options which give me a bigger potential then other options do. It shows me, that the way you think, you never implemented any advanced option trading strategies in the states.

I do not know, what you trade and I am not interested in what you may trade. AW10 trades the Indian market and he knows about the different between the states and India. The information on options on future is not really given in India. In the states it is huge and and I have hunderts of options available on any future like the bonds, sugar, Dow Jones and many many more.

If you trade more advanced option strategies like condors, butterfly. back spreads. ratios. all kind of synthetic option strategies on options on futures in the states, and you like to make a trade, which cost you as less money as possible, you will take your time to search for possibility's.

It is called, making a trading plan !

Even if I have found some attractive options, I have to place my orders and if they are not filled like I calculated or saw them, I then have to change part of my trading plan.

I talk here as a retail trader and not as a hedge fund manager or fond manger with millions.

You always try to argue about arbitrage. If you like to do arbitrage, try it. But with so little tiny informations about options prices you have in India, it is probably not even worth to think about it.

I do not trade this arbitrage trades you try to argue with me. I trade advanced option strategies on futures in the states and before I implement, I search for good options, which have good win potential in case the market moves in my direction.

By the way , was now editing a few times, because we spoke about two different things. With this post it should be cleared, at least for me and we can go back to what this thread is :

About credit spreads

Take care

DanPickUp

I am sorry Dan. You misunderstood me. In my last post I haven't said anything to you. There was nothing specific to do with you or your comment. I was talking about a very specific and simple thing, the volatility smile before budget and after budget. I guess you misunderstood because I quoted your comment and I used the word "you" in my post, and you thought it was for you. I know you will not trust me, but it was not for you. Sorry for my bad writing skills. I know you don't trade Indian market. If you will read my post again you will find that there was sentence that was linked to you.

I was just trying to argu that why sometime buying both call and put, before any big event day is not a good strategy.

And also I was not try to argue about arbitrage.

Sorry again and don't worry I m not going to post anything anymore.


Take Care.

 

[DanPickUp]

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