NIFTY Options Trading by RAJ

[arcus]

This is interesting.. .somehow the kind of swings that we are seeing makes me wonder if its a result of Algo trading... most of the massive jumps in trading have been at well identified S/R... but previously we wouldnt swing back this violently... somehow looks like at key levels all the orders came rushing through.. maybe what you have been successfully following is one way to beat the algo traders..join the party once the S/R's are broken for quick gains

In Quantum Mechanics, due to the uncertainty principle; we can only tell the probability of where we can find the electrons or other subatomic particles.

Similarly, I feel drawing channels (and other technical tools) helps us to find the most probable area of where the price would fluctuate in a given time period.

Its more likely to be in the channel than outside the channel until the trend reverses. I think that is also the basis behind which John Bollinger devised the Bollinger Bands; to find 95% of the price action within the bands.

 

[whisky]

Raj, What about BankNifty?

 

[Option.Trader]

Arcus, just thought of picking your brains on TA at this hour...
With Algo trading, I think TA has come down to Self fulfilling prophecy... the definition in Wiki which is shown below sounds so familiar with our markets behaviour
All quoted from Wiki

"A self-fulfilling prophecy is a prediction that directly or indirectly causes itself to become true, by the very terms of the prophecy itself, due to positive feedback between belief and behavior

In other words, a positive or negative prophecy, strongly held belief, or delusion—declared as truth when it is actually false—may sufficiently influence people so that their reactions ultimately fulfill the once-false prophecy.

2 examples when a woman falsely believes her marriage will fail, her fears of such failure actually cause the marriage to fail.
- A rumour on Bank insolvency causing people to withdraw from the bank will ultimately result in Bank run and cause insolvency further on...

The parable tells us that public definitions of a situation (prophecies or predictions) become an integral part of the situation and thus affect subsequent developments. This is peculiar to human affairs. It is not found in the world of nature, untouched by human hands. Predictions of the return of Halley's comet do not influence its orbit. But the rumoured insolvency of bank did affect the actual outcome. The prophecy of collapse led to its own fulfilment"

With Algo trading, TA reduces to people's belief about levels, when fundamentally nothing has changed with say Indian markets which were at 6100 levels a month back and now.. but people did drive the market upto that level and now brought it down as everyone had the levels more or less agreed upon leading to this frenzy

Just some thoughts on Behavioral Finance which sounds interesting... you can safely ignore if you wish to

 

[arcus]

Arcus, just thought of picking your brains on TA at this hour...
With Algo trading, I think TA has come down to Self fulfilling prophecy... the definition in Wiki which is shown below sounds so familiar with our markets behaviour
All quoted from Wiki

"A self-fulfilling prophecy is a prediction that directly or indirectly causes itself to become true, by the very terms of the prophecy itself, due to positive feedback between belief and behavior

In other words, a positive or negative prophecy, strongly held belief, or delusion—declared as truth when it is actually false—may sufficiently influence people so that their reactions ultimately fulfill the once-false prophecy.

2 examples when a woman falsely believes her marriage will fail, her fears of such failure actually cause the marriage to fail.
- A rumour on Bank insolvency causing people to withdraw from the bank will ultimately result in Bank run and cause insolvency further on...

The parable tells us that public definitions of a situation (prophecies or predictions) become an integral part of the situation and thus affect subsequent developments. This is peculiar to human affairs. It is not found in the world of nature, untouched by human hands. Predictions of the return of Halley's comet do not influence its orbit. But the rumoured insolvency of bank did affect the actual outcome. The prophecy of collapse led to its own fulfilment"

With Algo trading, TA reduces to people's belief about levels, when fundamentally nothing has changed with say Indian markets which were at 6100 levels a month back and now.. but people did drive the market upto that level and now brought it down as everyone had the levels more or less agreed upon leading to this frenzy

Just some thoughts on Behavioral Finance which sounds interesting... you can safely ignore if you wish to

When the cause leads to an effect which inturn accentuates the cause, it leads to a positive feedback mechanism or what you are referring to as "self fulfilling prophecy". The markets operate on this feedback loop.

The markets are made up of a herd of humans who are inturn governed by emotions and logic.

The human emotions of greed and fear among others almost always take over logic (the primitive limbic system controlling the more evolved prefrontal cortex?) and make us prone to take irrational decisions. This becomes all the more prominent during times of booms and crisis.

These emotions have a tendency of feeding on itself. Fear causes more fear and more fear and so on. This is a positive feedback loop in operation which can be called a "self fulfilling prophecy" as well.

Technical analysis is a way to try to capture and analyze these emotions on paper. What you will obviously get is a graph which shows the collective emotions of the herd.

Since you raised the topic of behavioral finance, I have a very interesting documentary I watched a few months back which I would recommend

 

[Happy_Singh]

Hello

Considering Max Pain, OI, COI, Vol, maybe Pivots and other tools discussed on this thread . . .


what will be the options selling strategy/ideas for today i.e the expiry day . . .


What are the strike price for NF & BNF that would have low probability to get into money if we are thinking of using short straggle . . .



Thanks



Happy

 

[healthraj]

Hello

Considering Max Pain, OI, COI, Vol, maybe Pivots and other tools discussed on this thread . . .


what will be the options selling strategy/ideas for today i.e the expiry day . . .


What are the strike price for NF & BNF that would have low probability to get into money if we are thinking of using short straggle . . .



Thanks



Happy

For NIFTY go for Selling 5300PE-5300CE Pair and for BNF it would be the 8800 Pair. Sell near 5300 and 8800 and Get out if it makes a 1% move on either side. Keep an Eye on INDIAVIX. For you to make money in Credit spreads the VOLT has to drop. This morning VIX was down by 4% now it is down by .5%.

NIFTY 5300 Pair trading at 60. BN 8800 Pair trading at 175

 

[healthraj]

As per OAT, the MAX Pain is at 5400. The current trend is down with the sell taken from 5348 SPOT. The next support / Resistance will be 5280. The pivot is at 5300. Since the overall Trend for Today is Bullish and the global markets are looking bullish, I hope we can play between 5340 and 5280. 40 points above the pivot and 20 points below the pivot. I hope it will bounce at 5280.

As per the OAT, The intraday Low Pivot is 5198 and the High is 5404. With the MAX Pain at 5400, Hope 5404 today will be met.

 

[Happy_Singh]

For NIFTY go for Selling 5300PE-5300CE Pair and for BNF it would be the 8800 Pair. Sell near 5300 and 8800 and Get out if it makes a 1% move on either side. Keep an Eye on INDIAVIX. For you to make money in Credit spreads the VOLT has to drop. This morning VIX was down by 4% now it is down by .5%.

NIFTY 5300 Pair trading at 60. BN 8800 Pair trading at 175

Hi raj

Thanks for inputs

Here is what i have done . . .

Nifty:

1) Short Straddle 5300 @ 74 (legged into it first shorted CE then PE) CMP aprox 60 . . . plan to square off . . . but not sure where . . . will take a SL if any side move a lot

2) Short CE 5400 @ 7.25 plan to let it expire also will average if it goes up . . . will hedge with future if it comes to it . . .

Bank Nifty:

1) Short CE 9000 @ avg 42.xx (got fills from 37 - 45) . . . .plan of action same as 2 for NF above

Over all not comfortable with straddle short, shorting just out of money options seem to be far better way to go about on expiry day . . .

maybe its more of due to my personal mind frame . . .
as being used to taking positions with futures and confident with the thought that
i can always take a long futures position to offset any sharp price rise . . .

Thanks once again, your thread is a big help in trying out these different ways of trading for me :thumb:


Happy



EDIT: Update on above position squared off the straddle @ 59, now carrying only short out of money CEs,
very much in my comfort zone . . .

 

[Option.Trader]

As per OAT, the MAX Pain is at 5400. The current trend is down with the sell taken from 5348 SPOT. The next support / Resistance will be 5280. The pivot is at 5300. Since the overall Trend for Today is Bullish and the global markets are looking bullish, I hope we can play between 5340 and 5280. 40 points above the pivot and 20 points below the pivot. I hope it will bounce at 5280.

As per the OAT, The intraday Low Pivot is 5198 and the High is 5404. With the MAX Pain at 5400, Hope 5404 today will be met.

Recording option levels to check this
5300 ce 34
5400 ce 4.45
5200 pe 3.85

 

[Option.Trader]

When the cause leads to an effect which inturn accentuates the cause, it leads to a positive feedback mechanism or what

Since you raised the topic of behavioral finance, I have a very interesting documentary I watched a few months back which I would recommend

Thanks Arcus, fascinating and I think only place to observe a million people at any given point of time