Low Risk Options Trading Strategy - Option Spreads

[MaxX]

Interesting Topic

I use short strangles too when within a channel (We are currently in an old monthly channel).. The OTM options are sold just above and below the channel (this channel is about 700 pts wide). At the extremes of the range I cover the winning side and write more options on the other side.. In case the channel breaks I am out. Been working out very well for me from the past many months since we have been in the channel!

 

[MaxX]

Hi AW10,
can you please suggest how to get good pricing of option while entering.. any stratagy pls?

I would also like some help on this issue. Many times options esp. next month have low liquidity. I use ODIN and have to babysit the execution putting small orders all day .. because if I put a big order people try to put their order just before mine making it difficult for me to get good fills. Also if I am doing a short strangle I want both sides to be executed around the same time adding to the hassle.

Is there any automated execution mechanism available with any broker or any software that would execute large orders in a smart way?

 

[DanPickUp]

I would also like some help on this issue. Many times options esp. next month have low liquidity. I use ODIN and have to babysit the execution putting small orders all day .. because if I put a big order people try to put their order just before mine making it difficult for me to get good fills. Also if I am doing a short strangle I want both sides to be executed around the same time adding to the hassle.

Is there any automated execution mechanism available with any broker or any software that would execute large orders in a smart way?

Hi

About how many lots you are talking ?

It is the same all over the world. In some markets you can give orders with 100 lots and nobody cares. In other, illiquid markets, you are lost with such orders.

If you are a retail trader, better do not get greedy. Market makers have to feed there families and they are not interested to pay there money for your profit.

I mean, if you are a bigger boy, you should have connections to the exchange. If you are not so big, then you may forget about that and you may have some friends in a brokerage office or in a bank. If not, then you know what kind of trader you are and like I say before, as a retail trader you have to take what you get. Sounds bad, but all retail traders have to fight that little pig.

Other traders may have other experience.

Take care

 

[MaxX]

Hi

About how many lots you are talking ?

It is the same all over the world. In some markets you can give orders with 100 lots and nobody cares. In other, illiquid markets, you are lost with such orders.

If you are a retail trader, better do not get greedy. Market makers have to feed there families and they are not interested to pay there money for your profit.

I mean, if you are a bigger boy, you should have connections to the exchange. If you are not so big, then you may forget about that and you may have some friends in a brokerage office or in a bank. If not, then you know what kind of trader you are and like I say before, as a retail trader you have to take what you get. Sounds bad, but all retail traders have to fight that little pig.

Other traders may have other experience.

Take care

Yep.. around that. I'm a retail trader not a big(er) boy.. Execution is not a problem at all in near month options, more of an issue with far month options esp as I sell options not very close to the current price.

Anyway big boys also have to deal with the same orders/liquidity issues on the other side don't they.. from your post it seems that they have some major advantage other than just probably some order execution software.

Anyways are there really any market makers who provide both side liquidity for options in India? I'm asking this because esp. in morning times I see only bids on some options (for eg. 4500 put June today morning) and 0 sellers..

 

[DanPickUp]

Yep.. around that. I'm a retail trader not a big boy.. Execution is not a problem at all in near month options, more of an issue with far month options esp as I sell options not very close to the current price.

Anyway big boys also have to deal with the same orders/liquidity issues on the other side don't they.. from your post it seems that they have some major advantage other than just probably some order execution software.

Anyways are there really any market makers who provide both side liquidity for options in India? I'm asking this because esp. in morning times I see only bids on some options (for eg. 4500 put June today morning) and 0 sellers..

Max

Did you once have a look at that :

http://www.traderji.com/beginners-guide/39632-come-into-traders-den-19.html#post430223

As retail traders, we do not have a chance to compare with them. They do that in a minute and we have to ask for the bid and then we have to wait for the execution and then we have to ask again for the bid ans so on.

In that time, they already save and we still have to run behind the execution.

Take care

 

[sumitdasjoshi]

why you get angry keep it cool dan you are a good pesion plz countribute you knowleage why look for some one else to judge you, i think you are smart and you can judge your self .

 

[DanPickUp]

why you get angry keep it cool dan you are a good pesion plz countribute you knowleage why look for some one else to judge you, i think you are smart and you can judge your self .

Sorry and thanks, I already deleted the rest.

 

[rrmhatre72]

Interesting Topic

I use short strangles too when within a channel (We are currently in an old monthly channel).. The OTM options are sold just above and below the channel (this channel is about 700 pts wide). At the extremes of the range I cover the winning side and write more options on the other side.. In case the channel breaks I am out. Been working out very well for me from the past many months since we have been in the channel!

Hi Max,

Pls explain this with actual values(examples) for better understanding for new tradeds like me.
Thanks in advance.

 

[jaywings007]

Hi jaywings007

Question Nr 3 was :

""generally I go for short stangle (in the money) with total credit of approx 400 points of nifty. can you please suggest how to get good pricing of option while entering.. any stratagy pls?""

Hi

You say you go in general for short strangle. A short strangle means, that your market outlook is in general for a sideways market. You also expect the market to have a low volatility. Is this correct ?

If not, you trade the wrong strategy.

Short strangle are traded from advanced traders, because the risk which is taken, is uncapped. Are you an advanced trader ?

If so, what is unclear for you or what do you mean by : get good pricing of option while entering ?

You sell calls and you sell puts to have a short strangle.

Some sell with limit orders and some prefer with market orders. It is all after you how you want to trade. For your question is no best or worst.

There is only a clear trading plan or your guts. What do you prefer ?

The trading plan includes a stop/loss, where you clearly in advance know, how much money you maximum are willing to lose on that options, in case the market is not going to do, what you expect.

Take care

( By the way, a short strangle is made out of otm options and what here is discussed, is in pro language a short guts, because jaywings007 uses itm options )

Thanks DanPickUp

Not really, I dont consider always that market will remain sideways. but I keep in mind two things while going in to short strangle of +&- 100/150 stike price i.e
(1) I want to earn TV of option.. where my target of both option TV is 100 to 150 pts while selling. (not the full profit of 100 to 150.)
(2) I cover this stangle with either future buy/sell or option buy for any one side movement.

Hope I am clear.

what do you mean by "advanced trader"? If somthing special about this term. please educate me.

also I am expecting your views/ reply for my other questions. (ofcourse at your time)

regards

 

[simple_trader]

5100 call and put is down by 40+ points. Shows how risky is to buy option. !!