Hi jaywings007 , Though you have already got many answers, here are my views/answers to your questions.
1. generally all trading portal/ software provides only best five buy or sell orders. can we find all the pending order any where? say 20-50-100... so on.?
I don't think as a retail trader we have access to such info. I don't know if big brokers / direct market access members have such privilege or not.
In my view, this list does not show market orders / or stop triggered mkt orders. These orders hit the exchange @ mkt when conditions meet. If we want to read the real happening
at exchange, then we need to focus on tick / time and sales data etc. My views might be limited here cause this is not my area of interest.
2. OI for options are very well understood... that writing increases the OI. but how to evaluate the OI for future..and estimate market movement accordingly. it can be long or short...?
I don't know what do u mean by writing increases OI. If I place order to sell 1lac strike 6000 May Call at 100 rs., that means I am writing so many options.. Will it change the OI of 6000 CAll ? Absolutely not.. cause I need some buyers at 100 rs to take these written piece of paper.. So OI is increased only when txn takes place and asked price.
Similarly, if I try to sell NF may contract at limit price of 5500 when mkt is at 5140 (same as I am trying to write a contract). My order remains in queue and OI has not impacted.
I don't think there is any difference in interpretation of OI for a particular strike of option or OI of futures . Difference is mainly due to strike prices.. In NF, you can trade contract only at current price, whereas in options you can trade contracts at various other strikes. Otherwise, in simple terms, OI is nothing but amount of Sum of (all open Long positions buy positions + all open short position ) in the market /2).
3. generally I go for short strangle (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 strategy pls?
Jaywings, It is upto you to define your strategy. Volatility / mkt sentiment/ liquidity / etc plays role in option's trading price above or below the calculated value as per option pricing model.
By putting in some effort on observations, you might be able to squeeze extra penny / 1 or 2 points here and there.. That is like trying to find arbitrage opportunity. I think biggest difference will come
when u start understanding option synthetics / equivalent option strategy for the one u are trying to use will make difference.
eg - if u are selling 100 points OTM strangle and collecting 400 points, that gives BEP of 500 points on either side. Maybe if you sell ITM options on both side (Short Gut strategy which has similar risk profile as Short strangle ), you might be able to get 3/4 points extra. Though you will have to look at other factors like holding period, margin requirement etc..
4. generally all sites and portals provide option calculators. I never been able to understand the actual application of it. what should be the volatility to be considered? I read often 30%.. i.e 0.3 its OK? can you please alobrate the application of it as a whole.?
Let me give u pointer to figure out yourself whether this question is really worth spending time or not..
- take option calculator and key in some volatility number
- now keep changing volatility in step of 3 or 5.. and see the impact on option price.
(If you want you can share this with others).
Personally, I would use IV as suggest by DanPickUp( volatility that is currently present for ATM strike options), to find price for other options. Keeping in mind that volatility for far OTM option may be different from ATM strike.
In absence of that, as in India, we mainly trade contracts expiring in 1 or 2 months .. i.e. max 40 or 50 trading days.. So you can calculate Historical volatility over last 50 or 100 days and use that as better reflecting of current volatility.
Though books might say to use annual historical volatility (HV) , but I can't digest the reason behind Using annual volatility for next 20 days period. If mkt moves 50% in a year.. does that mean it will move 50% in next 1 month ? Hence I prefer shorter term HV in calculation.
Hope this helps..
Happy Practical Trading.