Morning Update at 0800hrs for Intraday Market Level

[cmak]

Option trading can provide a great range of possibilities for those who risk to become a participant of the market. However, even if you believe that option trading is not for you, do not neglect this article as it will explain some most important terms of option trading vocabulary.

First of all, let us consider the world option. Basically, it is a contract upon conclusion of which you may choose (opt) what to do with an asset (usually, block of stocks) underlying it.

Look at the following example: you are about to buy a violin for your daughter who takes music classes. Having studied the offerings, you pick an instrument from a flea market. It costs $50. Yet you cannot decide for sure whether to buy it or not. So you conclude a contract with the owner giving you an opportunity to purchase it by the end of a set term (say, a week, though in reality it is usually about 3 months) for these $50 (the strike price). We pay $5 for this option. In option trading, option's total cost , the premium, is determined by such factors as the asset price, strike price and time remaining until expiration. Now you are the option holder and have the right, but not the obligation to buy it within the agreed period of time.

Two days later, it is discovered that the violin used to belong to a great musician and is of great cultural value. Its price immediately soars up to $500. As you have the option to buy it for $50 you quickly exercise it. The former violin owner (the writer) is obligated to sell it now. Your profit here equals $445, which is $500 - $50 (strike price) - $5 (option price). Your call option (in option trading call is another word for buy) is in the money. Should the violin turn out to be a low-quality fake, you wouldn't have to purchase it, losing only $5 at that.

On the other hand, you could have bought a put option to sell your house for $50,000. In case taps were running, the roof leaking and the floor creaking in a month, the price would naturally fall. Yet the buyer would have to pay $50,000 for it anyway.

The above may be too blatant examples, but they explain the nature of option trading for beginners to get some basic idea.


THIS IS BASIC IDEA, CAN ANYBODY EXPLAIN IT BETTER?

Well said Pranay...
Simple answers are always better than too technical ones.
Thanks...
CMAK

 

[phukkad]

Hello Pranay

How do you know that Cipla etc that you mentioned are being held by operators? Rather how does one get to know whether a scrip is in operator control?

look forward to hearing from you...

thanks

 

[pranayk]

Chart Analysis for 17th Sept 2009

 

[Prabhan]

Chart Analysis for 17th Sept 2009

Hi Pranay,
No analysis today???

 

[findvikas]

Hi Pranay,
No analysis today???

I think this is a good learning exercise for you & others to analyze it before he comments ...

US closed 1.5% up, breaking all barriers once again, Asia is expected to open strong with +ve sentiment all over. Advanced TAX numbers are showing good signs all around and coming data over the month should be very good so there is no doubt about valuations of Indian markets.

looking at the chart it is giving very strong signals and this being daily chart talks about September expiry which is seen above 5000 only... may be around 5175... a close below 4800 can bring some negative energy but I cannot see any negative news coming from anywhere.

If you look at only September, then it might hit 5025 today and should find support around 4920 where it has been testing again and again today... before flying to 4965...

 

[findvikas]

Given the above Cup & handle chart... normally you see a big rally after a C&H formation

 

[pranayk]

MARKETS FOR 17 SEPT 09

MARKETS LOOK EXTREMELY BULLISH HAVING DECISIVELY BREACHED THE NECK LINE OF THE "CUP & HANDLE" AROUND 4750 LEVELS & NIFTY IS ALL SET TO TEST MINIMUM LEVEL OF 5500+ LEVELS IN COMING MONTHS WITH HURDLES AROUND 5060, 5135,5166 & 5300 LEVELS. NIFTY IS LIKELY TO PAUSE AROUND THESE HURDLES FOR SMALL CONSOLIDATIONS BEFORE TESTING & BREACHING OLD HIGHS OF 6357 BEFORE END OF THIS YEAR. INVESTORS & TRADERS MUST MAKE FULL USE OF ANY INTRADAY OR 2 OR 3 DAYS OF CORRECTIONS TO GO LONG FOR GOOD GAINS IN COMING DAYS.

FOR INTRADAY TRADING ON THURSDAY, TRADERS MAY AGAIN GO LONG WITH 4940 AS SUPPORT LEVEL. THERE IS EVERY POSSIBILITY OF CROSSING 5000 NIFTY LEVELS ON THURSDAY AFTER WHICH THERE MIGHT BE A PROFIT BOOKING OR A MINOR PAUSE. MAKE FULL USE OF THIS PROFIT BOOKING TO ADD LONG POSITIONS BY END OF THE DAY. THE CHART PATTERNS OF LONG TERM, MEDIUM TERM & SHORT TERM INDICATE MEGA BULLISH CONDITION IN INDIAN MARKETS THAT SHOULD SEE NEW ALL TIME HIGHS BEFORE THE END OF THE YEAR. THE CHART PATTERNS OF MOST OF THE WORLD MARKETS HAVE ENTERED THE MEGA BULLISH PHASE THAT MAY SEE ACCELERATED MOMENTUM IN COMING DAYS.

TRADERS & INVESTORS MAY HAVE 4900 LEVELS AS THE CLOSING SUPPORT LEVELS FOR NIFTY AND SHOULD REMAIN LONG AS LONG AS NIFTY DOES NOT DECISIVELY CLOSE BELOW 4900 LEVEL. CONSTRUCTION, BANKS, PHARMA & CEMENT STOCKS ARE LIKELY TO SEE SHARPEST MOVE IN COMING FAYS. ACCUMULATE BIOCON & CIPLA, SUZLON, HCC, HDIL, CAIRN, UNITECH & ACC FOR LONG TERM INVESTMENT. OPERATORS WILL TAKE THESE DOWN TO LOWER LEVELS TO BREACH THE SUPPORT LINE IN ORDER TO LIQUIDATE WEAKER HANDS TO SUDDENLY LIFT IT ON A PLANTED NEWS. ACCUMULATE METALS & TECH SECTOR STOCKS ALSO FOR VERY GOOD GAINS IN THE LONG TERM.




Sorry for the delay
I was busy with Puja preparation.

Thanks

 

[findvikas]

Pranay... can you please comment on my analysis here...

http://www.traderji.com/futures/33198-niftys-target-can-you-also-see-what-i-see-next.html

 

[pranayk]

morning update at 8 am 17 sept 09

the new bullish momentum in world markets have taken dow up by another 108 points & most likely dow will test 10000 mark by end september. European markets were up by 1.5% to 2% with uk ftse rising by 1.6%. Brazil continued with its upward momentum by rising nearly 2%.asian markets have opened bullish & will close strong as most of the asian markets have got into bullish momentum after the pause.

For indian markets expect another gap up opening near the 5000 levels & the bullish momentum may take it towards 5015 to 5025 levels. The break out of the cup handle formation will take nifty to much higher levels in quick time. So, traders may have quit point around 4940 nifty levels & trade on the long side on any intraday correction within the flat formed after the gap up opening.

 

[Prabhan]

Hi Pranay,
Dint understand this point. Can you please explain me.

morning update at 8 am 17 sept 09
So, traders may have quit point around 4940 nifty levels & trade on the long side on any intraday correction within the flat formed after the gap up opening.