NIFTY Options trade : Why and what-if...

[linkon7]

Do you mind if I post some of the Option Trades in RealTime and then give my reasons for it either then or at the end of the day..... I have never traded in Options earlier and all the trades I put up would be Paper Trades unless specifically mentioned to be Real......

The objective is to get the basics right and not to do something silly......

And thanks for the effort you made for that post..... Must have took you about an hour or so.....

Regards

I would love it if u post some of your trades and the reason you took the trade...!

But one advise from my side, make sure you dont do any adhoc trades and then try to damage control by adding more legs. Before the day begins, post your thought process and line of action. What are the possibilities and how u plan to trade each of them... This preparedness will make sure you act in a rational manner and emotions wont take over...!

plan your trade and trade the plan...!

 

[adityasaraf007]

I would love it if u post some of your trades and the reason you took the trade...!

But one advise from my side, make sure you dont do any adhoc trades and then try to damage control by adding more legs. Before the day begins, post your thought process and line of action. What are the possibilities and how u plan to trade each of them... This preparedness will make sure you act in a rational manner and emotions wont take over...!

plan your trade and trade the plan...!

I am doubtful about 1 leg of an Option and you are talking about adding some more legs..... No... Not at all..... It's either a profitable exit or Stop Loss Exit... nothing else.....

What I plan to do is...... I hope you had seen the Thread which I had started earlier "Does Support and Resistance Work"..... I still use horizontal lines and all my reasoning would be based on it...... I plan to enter around those Horizontal Lines with the help of some Candlestick patterns...... Only Long Trades in Options.... Won't Short Options now.... And Stop Loss would be based on Nifty as I have little knowledge about Option Pricing..... If Stop Loss triggers and price sustains against my SL level, I exit.... No second thoughts about it.....

I would also use SMA(20, Close) from time to time.... But this would be for reference and directional bias only..... With very little involvement in Entry and Exits...... However, it would be used for Entries/Exits on some exceptional days.....

Entries would mostly be based on 5min Charts and occasionally referencing to 15min and 47min Charts

Exits would depend on day-to-day basis..... Sometimes I like to trail the SL.... Sometimes I like to exit around my Horizontal Lines..... Sometimes I like to use SMA-20 too...... Basically, this is not pre-defined as of now.... But you would get the feel of it quickly within a short span of time.....

And lastly..... I don't trade everyday..... and even if I do.... I rarely trade continuously from 9-3.30..... Have got other work to do ...... Generally, most of the trades are taken in the 2nd part of the Session

Most of the trades would be for Intraday with some Positional Trades from time to time......

Hope to iron out all the rawness in the basics under your guidance and succeed in this journey.....

 

[linkon7]

I am doubtful about 1 leg of an Option and you are talking about adding some more legs..... No... Not at all..... It's either a profitable exit or Stop Loss Exit... nothing else.....

What I plan to do is...... I hope you had seen the Thread which I had started earlier "Does Support and Resistance Work"..... I still use horizontal lines and all my reasoning would be based on it...... I plan to enter around those Horizontal Lines with the help of some Candlestick patterns...... Only Long Trades in Options.... Won't Short Options now.... And Stop Loss would be based on Nifty as I have little knowledge about Option Pricing..... If Stop Loss triggers and price sustains against my SL level, I exit.... No second thoughts about it.....

I would also use SMA(20, Close) from time to time.... But this would be for reference and directional bias only..... With very little involvement in Entry and Exits...... However, it would be used for Entries/Exits on some exceptional days.....

Entries would mostly be based on 5min Charts and occasionally referencing to 15min and 47min Charts

Exits would depend on day-to-day basis..... Sometimes I like to trail the SL.... Sometimes I like to exit around my Horizontal Lines..... Sometimes I like to use SMA-20 too...... Basically, this is not pre-defined as of now.... But you would get the feel of it quickly within a short span of time.....

And lastly..... I don't trade everyday..... and even if I do.... I rarely trade continuously from 9-3.30..... Have got other work to do ...... Generally, most of the trades are taken in the 2nd part of the Session

Most of the trades would be for Intraday with some Positional Trades from time to time......

Hope to iron out all the rawness in the basics under your guidance and succeed in this journey.....

why the inhibition to short options..?

Lets take a simple example...

u buy 5200 call tomorrow at 105...! you ride it to 125 and u plan to exit as u have captured 20 points...! That's a very linear way of trading as you have caught hold of a winning trade and now taking profit from the table seems to be right thing to do...! But market's are never linear and catching hold of big winners all the time is a tall ask...!

Why not milk this trade for some extra points...?

when u plan to exit the call, why not short 5300 call and make it a spread or why not buy 5200 put and make it a long strangle... why not box it by buying 5300 put...? The opportunity is there all the time...

We wont catch winning trades all the time but when we do, why not make the best use of it...?

Another example...

Say price is approaching a known support... why not short ITM put first and then wait and see if the support is respected. If broken, short the UL and make it a covered put...
if the support is respected then you have a winner... worst case u end in BE...!

 

[sumosanammain]

Linkon, whats the status of the system you were trading, enterprise? hows the old version working, I would like to know. without the new filters and direction filters and all. saw yu active here, hence posted here.

 

[bthakwani]

why the inhibition to short options..?

Lets take a simple example...

u buy 5200 call tomorrow at 105...! you ride it to 125 and u plan to exit as u have captured 20 points...! That's a very linear way of trading as you have caught hold of a winning trade and now taking profit from the table seems to be right thing to do...! But market's are never linear and catching hold of big winners all the time is a tall ask...!

Why not milk this trade for some extra points...?

when u plan to exit the call, why not short 5300 call and make it a spread or why not buy 5200 put and make it a long strangle... why not box it by buying 5300 put...? The opportunity is there all the time...

We wont catch winning trades all the time but when we do, why not make the best use of it...?

Another example...

Say price is approaching a known support... why not short ITM put first and then wait and see if the support is respected. If broken, short the UL and make it a covered put...
if the support is respected then you have a winner... worst case u end in BE...!

thanks for these helpful lines... simple and easy to understand...

 

[linkon7]

Linkon, whats the status of the system you were trading, enterprise? hows the old version working, I would like to know. without the new filters and direction filters and all. saw yu active here, hence posted here.

Enterprise old version is doing well...!

The new version needs some work on the OBR rules. Problem is the low range that we are getting. They are trying to incorporate india vix into the equation. targets are getting small...! Maybe, they 'll have a a official release by end of this month....!

 

[adityasaraf007]

why the inhibition to short options..?

Lets take a simple example...

u buy 5200 call tomorrow at 105...! you ride it to 125 and u plan to exit as u have captured 20 points...! That's a very linear way of trading as you have caught hold of a winning trade and now taking profit from the table seems to be right thing to do...! But market's are never linear and catching hold of big winners all the time is a tall ask...!

Why not milk this trade for some extra points...?

when u plan to exit the call, why not short 5300 call and make it a spread or why not buy 5200 put and make it a long strangle... why not box it by buying 5300 put...? The opportunity is there all the time...

We wont catch winning trades all the time but when we do, why not make the best use of it...?

Another example...

Say price is approaching a known support... why not short ITM put first and then wait and see if the support is respected. If broken, short the UL and make it a covered put...
if the support is respected then you have a winner... worst case u end in BE...!

Wow..... I never imagined Options like this before..... Would definitely like to explore this once I get comfortable with Options..... As I have mentioned earlier, I have never traded Options, not even on paper.......

And the example of shorting ITM Put around a known Support...... Who says Options are risker.... It's risky only if you don't know what you are doing ..... And so the same applies to Futures and even Equities

 

[adityasaraf007]

And now I even understand the plight of Option Sellers....... All your positions are completely hedged and with probably even smaller risk than Long Positions and still the exchange demands the margin for a complete lot of Futures........ When will they grow up?

 

[adityasaraf007]

Here is the 15min Chart of Minifty as of Friday showing the present status of Horizontal Lines.....

I forgot to mention.... would also use NR4-2 (Two Consecutive NR4 Days), NR7 and IB (Inside Bar) on Daily TF..... and IB (15min, 47min) around Horizontal Lines for Intraday Trades.....

Since, last Friday was an NR7 Day..... with High and Low around the Horizontal Lines..... Keeping an eye on 5220 and 5160 for entries on either side.....

Those small white dots on the chart represent Inside Bars on that particular TF...... Stoch is present on the chart for those whose prefer it..... I rarely watch it..... But in the coming time, I want to watch out for Divergence and how they play out (without taking any trades on them)

Regards

 

[DanPickUp]

Hi adityasaraf007

Regarding learning about options: Linkon has beautifully and truly explained how to trade them. The strategies he has mentioned are simple and very powerful strategies. Trading them through leg in is the way it has to be done. Prerequisite is to understand each one of this strategies and here I want to chop at:

If you want to learn about options and options strategies and not loosing to much time on it, as you can learn endless about options strategies especially when it goes in to synthetic strategies with many legs like for example: Long call synthetic straddle which you then convert in to synthetic back spreads and other exotic stuff , stay with the strategies Linkon has mentioned.

Concentrate learning and understanding only them:

- Call and put credit spreads
- Long and short strangles
- Box
- Covered put and call

Look and trade them first as one strategy, means do not leg in. This already will take enough time to understand, but you will progress much quicker in that way as you would when trying to learn to many different strategies.

Many stay away from options or get frustrated because of this many possibility's they offer. People feel overwhelmed and feel standing in front of a mountain, where the top not can been seen.

Reducing it to a few strategies means reducing the mountain to a small hill.

Other things to learn:

Itm, atm, otm - Just print it out from any page and keep it in front of you.

Four greeks - delta, gamma, vega, theta - Just print it out of any page and keep it in front of you.

Now you print out the above mentioned strategy.

With this few pages you make your private little booklet, which you have with you when trading options. If any question occurs specifically about any subject which belongs to your option strategy, it is very easy to get your answer with this booklet. When I started option trading, my mentor gave me such a small booklet. It was my personal options bible.

Just some thing to motivate you and may others to learn about options.

Tc

DanPickUp