Make money in risk less option positional trade

[soumyaranjanin]

My call for 5th may 2010 "buy nifty 5100 ce 5 lots at 95 and sell 5000 ce 2 lots at 154 max loss Rs 4500 blw 5000 profit Rs 9000 above 5150 hold 3 days"

 

[vekay]

My call for 5th may 2010 "buy nifty 5100 ce 5 lots at 95 and sell 5000 ce 2 lots at 154 max loss Rs 4500 blw 5000 profit Rs 9000 above 5150 hold 3 days"

soumyaji,

I am a novice in Options trading. I happened to find this post accidentally (quite fortunate . For the call you had given can please explain how are you saying that max loss is Rs.4500 when Nifty is < 5000? My understanding is the differential premium of Rs.8350 I have shelled out of my pocket for this trade + if < 5000 then I assume I will close the trade of selling 5000 ce 2 lots, I'll shell out some money here while 5100 ce buy will get some money which can be subtracted from here though not sure how much. With this calculation, I am unable arrive at Rs.4500 figure.

Thanks & regards, vekay

 

[soumyaranjanin]

soumyaji,

I am a novice in Options trading. I happened to find this post accidentally (quite fortunate . For the call you had given can please explain how are you saying that max loss is Rs.4500 when Nifty is < 5000? My understanding is the differential premium of Rs.8350 I have shelled out of my pocket for this trade + if < 5000 then I assume I will close the trade of selling 5000 ce 2 lots, I'll shell out some money here while 5100 ce buy will get some money which can be subtracted from here though not sure how much. With this calculation, I am unable arrive at Rs.4500 figure.

Thanks & regards, vekay

the projecte loss is not based on the differential trade amount. assuming the volatility in the underlying security is 23% and expected return on nifty is -3% in nifty in the comming 3 days the GARCH method suggests the probable future volatility will be 29.7 % based on this assumption i have derived the max loss. similarly assuming the expected return as +2.5 % i have derived the projected profit. though many other base work i have done using the binomial priceing model but it is difficult to explin in this thread. read some good books you will understand those magical methods.

 

[balaj78]

the projecte loss is not based on the differential trade amount. assuming the volatility in the underlying security is 23% and expected return on nifty is -3% in nifty in the comming 3 days the GARCH method suggests the probable future volatility will be 29.7 % based on this assumption i have derived the max loss. similarly assuming the expected return as +2.5 % i have derived the projected profit. though many other base work i have done using the binomial priceing model but it is difficult to explin in this thread. read some good books you will understand those magical methods.

respected sir,
Can u please tell us when to book profits for ur above mentioned calls ,it will be far more usefull for us.

 

[soumyaranjanin]

respected sir,
Can u please tell us when to book profits for ur above mentioned calls ,it will be far more usefull for us.

i have alread answer this question in this thread however happy to answer again "quite simple . when i mention hold for 5 to 7 day that time you will profit from the time value decay hence hold for that many days and close the strategy all together at the end of your holding period either in profit or loss. when i mention the profit at 5256 lvl is amount RsX and loss at 5275 as amount RsY you must close the strategy once the price will approch to any side of the move. similarly when i mention about intraday you must close the stratgy in intraday basis. the successful option trader has one secret "Manage the risk to the maximum extend and hunt for the best profitable oppertunity at perticular time". just follow the all strategy i have given to you in this month till date and do the back testing. i am confident most of them resulted good gain. since i personally taken those strategy in my real trade. "

 

[soumyaranjanin]

my call for 6th may " buy SBI future 1 lot at 2280, sell 2300 ca 1 lot at 55, 2200 pe 1 lot at 36 max loss Rs5700 below 2160 profit Rs6000 above 2340" hold 5 trading days

 

[soumyaranjanin]

i found this call bit interesting on 6th may 2010 " buy hdil 260ca 5 lots below 9.95 and sell 240 ca 2 lots at 21 max loss Rs 3500 below 235 profit Rs 10000 above 272 hold 5 to 7 days"

 

[soumyaranjanin]

7th may 2010 call buy nifty 5000 ce may 5 lots at 128 and sell 5000 ce june 2 lot at 194 max loss 4000 profit 5000 intraday

 

[vipin.kumar05]

Hi Soumya,

First of all thank you for writing this thread.

Secondly, I have two questions:

1. How are you sure that the 'expected Volatility' given by GARCH is a right one? As per my understanding forecasting volatility based on GARCH model has been discarded by many financial institutions / academicians. That to forecasting a short term change in volatility should be more difficult, unless ofcourse you have developed your own modifications in the GARCH model which is able to do so.

2. Binomial pricing is good for American options, but we can not say that it is a better model than Black scholes.

Please correct me if i am wrong and also if you think that the discussion is not appropriate at this place kindly send me a PM / Mail. my email is vipin dot kumar05 at gmail.

Thank you.

 

[soumyaranjanin]

Hi Soumya,

First of all thank you for writing this thread.

Secondly, I have two questions:

1. How are you sure that the 'expected Volatility' given by GARCH is a right one? As per my understanding forecasting volatility based on GARCH model has been discarded by many financial institutions / academicians. That to forecasting a short term change in volatility should be more difficult, unless ofcourse you have developed your own modifications in the GARCH model which is able to do so.

2. Binomial pricing is good for American options, but we can not say that it is a better model than Black scholes.

Please correct me if i am wrong and also if you think that the discussion is not appropriate at this place kindly send me a PM / Mail. my email is vipin dot kumar05 at gmail.

Thank you.

dear vipin! your questions are quite valid . i hope you must have gone through some blogs where in this kind of arguments are being placed. to answer your 1st question. i am open to say i made some changes in finding the GARCH parameter. traditionally many experts take the help of SOLVER to find the parameters. however i have used the Modified Livenderge method for this. i have not used the maximum likely hood function to find the extrim value.
2. AS for as the priceing of the option is concern the bimonial model is the best method as per my practice in indian market in real trade(whether it is Ameriacan or Europian). you may have different view. if you have any authentic source of information then please share with me.