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

[timepass]

Yeah, a lot of puts being written..

 

[LivetoTrade]

Do Chart Patterns work in Options also?

Take a look at the Blue box, Inverted HnS pattern, small value though.

Or, PE shorts being covered in this price range.

4800 Put

 

[LivetoTrade]

Yeah, a lot of puts being written..

PCR values increasing, buy PE side IV% not decreasing much.

Have read elsewhere that if market is expecting sudden movements, then the IV% of the PCR will remain high.

 

[DanPickUp]

Hi Dan,

If it is not too much to ask for, could you please come up with an illustrative example with actual calculations involving change in PCR, change in IV, change in premiums of Calls/Puts?

the basic idea is to understand interpretation of the combinations.

Thanks

Hi Sudris

I am not clear what you mean by : Calculations ?

Could you please explain a bit more what you have in mind.

DanPickUp

 

[DanPickUp]

PCR values increasing, buy PE side IV% not decreasing much.

Have read elsewhere that if market is expecting sudden movements, then the IV% of the PCR will remain high.

Hi LT

In what connection doe's the Implied Volatility stand with the Put Call Ratio ?

DanPickUp

 

[LivetoTrade]

Hi LT

In what connection doe's the Implied Volatility stand with the Put Call Ratio ?

DanPickUp

Sorry, did not mean to co-relate PCR and IV.

I should have written them as separate sentences.

 

[sudris]

Hi Sudris

I am not clear what you mean by : Calculations ?

Could you please explain a bit more what you have in mind.

DanPickUp

Hi Dan,

Calculation : I thought the word could speak out for itself!

Anyway, just in case if you had missed the quoted post of yours in reply to LT's post

In the former post you had asked LT to combine few other data like PCR, IV and then interpret the result based on the combination rather than just one dimension or parameter which LT had used in his post, the latter link I posted above.


If it still is not clear to you, all I'm asking you to come up with a working example with actual figures, which would practically illustrate how to combine more than one dimension (say, PCR, IV, etc) and try to interpret the possible direction of the futures.

Thank You

 

[sudris]

The effective zone continues to be 4600~4900 ,with 3 strikes on PUT side
and 2 strikes still OPEN.Barring premiums less than Rs.10, in CALL window
we have 22M options and PUT window we have around 28M options (Approx).
So bias is still NEGATIVE.

Hi Columbus,

Although you have been posting the screenshots of Option chain from NSE, I could never clearly understand how you define the range to be 4600 to 4900 and other information in the quote above from your post.

Please shed some light or direct me to any post/link if you have already explained this elsewhere

Thanks

 

[DanPickUp]

Hi Dan,

Calculation : I thought the word could speak out for itself!

Anyway, just in case if you had missed the quoted post of yours in reply to LT's post

In the former post you had asked LT to combine few other data like PCR, IV and then interpret the result based on the combination rather than just one dimension or parameter which LT had used in his post, the latter link I posted above.


If it still is not clear to you, all I'm asking you to come up with a working example with actual figures, which would practically illustrate how to combine more than one dimension (say, PCR, IV, etc) and try to interpret the possible direction of the futures.

Thank You

Hi Sudris

I am clear about the word Calculation. And exactly that made me thinking that you may are on the wrong path of what is meant by combination.

First we observe and then we combine our information to make a conclusion which can improve our odds for the next trade. If you are looking for a method you can add one and two is three and then take the trade build on that information, you are definitely speak with the wrong man.

What I talk here is about the combination of different, various informations like Numbers, Events, General valuation of certain things, Market sentiments and what ever you think is important for you to make a complexer trading decision.

As we here talk about option trading , the conclusion of all that leads me to the option strategy I am going to implement under that circumstances. That is not to compare with future, forex and share day trading. I will give you an example and then my work is done. Fine tuning it in your market is your own work.


- We observe a very high put call ratio ( For ex: 1:2 ) which shows that more calls are bought compare to puts.

- At the same time we also observe very low volatility in an up trending market ( Monthly low or three month low ), which shows that people are careless and expect market only to move up.

- On the other hand we also know, that option expiration is not far away ( Only a few days like 5-2 day ) and we see on the price chart that the market, in which we trade, is on a quit high level. As we also know that market is random, some body has to pay the bills at option expiration. As there are so many calls in the market, some body is interested that the put side is getting bigger.

Now we have all that information and knowledge and we start to combine them to the conclusion: Aha, the chance of a trend reversal or at least for a break back is at the moment quit high. Why ?

- PCR 1:2 = To many calls in the market
- IMV very low and market is in an up move = Change of a break back is getting bigger
- Option expiration is near = Some body is interested not to pay premiums to all this call holders.

What is left ? The Option strategy.

Choose one which you understand and choose one which gives you an advantage in case the odds are granted and the market moves down for a correction.

DanPickUp

 

[columbus]

The effective zone continues to be 4600~4900 ,with 2 strikes on PUT side
and 2 strikes still OPEN.So bias is still NEUTRAL.Next couple of trading days
likely dictate the course of market since the options pertaining to CALL and
PUT side are 13.7M and 14.1M in the EFFECTIVE ZONE.

@sudris,

We have 2 windows CALL & PUT, a zone common to both windows is
Effective Zone, because this small window moves the way market is
moved.