NIFTY Options Trading by RAJ

[healthraj]

Maybe I am wrong but I think it makes sense, what I am about to tell here is a flaw in max pain theory


Most option writers have deep pockets, they are fii and other big entities right? Now if they wrote options it means that they are not expecting a particular level to be broken up or down side right? Now there is no way that even fii will be right on the market all the time , it cannot be, and also it has been seen that in case the markets moves beyond the highest oi boundaries the writers almost immediately changes their stance and write new level put and calls, so each and everything can happen in between start of a series and until it ends, however there is a little chance that all messy things happen in last expiry week and that's is the time when max pain theory truly works mostly. Because I believe that deep pockets guys when write option, they try to write it once and for all, they want it to let expire only and worthless for buyers , it's the markets that forces them to change their position to new levels, or they will suffer losses.

Just my point of view, please take it as informative post and not a criticism post, it will either help you guys or me to understand markets better :thumbup:

Hi,

First of all do not put any disclaimer for your thoughts. All the comments and suggestions are welcome and that is the purpose of this thread and forum. Because finally nobody is right. The market is always right.

You are absolutely right. The MAX Pain is supposed to work mostly during the Expiry week. Nobody is saying otherwise.

In the month of august if you noticed the MAX Pain for most of the time remained at 5500. When the market touched 5250, it went to 5400 and when it touched 5125 it went to 5300. But since for most of the time it was around 5500, the market also expired between 5400 and 5500. So that way the MAX Pain helps. Remember in the last week the market jumped from 5110 and closed at 5409 and killed all those Put holders (which was possible only due to MAX Pain at 5400). Even those who took Short positions around 5500 are also killed, because the VOLT was reduced by around 40-50% from the highs.

So finally what we are saying is that the MAX Pain is supposed to work mostly during the Expiry week. Nobody is saying otherwise.

If you forget the August month, what we are also saying is that normally the MAX Pain also acts as the Centre of gravity and so we can play 250 points from 5500. Accordingly if the market goes to 5250, you can definitely expect a pullback to 5500 once again, Which I think you don't agree. Anyways I never suggest to buy any naked Options. So we can use the MAX Pain for our positional Entries

 

[DanPickUp]

Hi,

First of all do not put any disclaimer for your thoughts. All the comments and suggestions are welcome and that is the purpose of this thread and forum. Because finally nobody is right. The market is always right.

You are absolutely right. The MAX Pain is supposed to work mostly during the Expiry week. Nobody is saying otherwise.

In the month of august if you noticed the MAX Pain for most of the time remained at 5500. When the market touched 5250, it went to 5400 and when it touched 5125 it went to 5300. But since for most of the time it was around 5500, the market also expired between 5400 and 5500. So that way the MAX Pain helps. Remember in the last week the market jumped from 5110 and closed at 5409 and killed all those Put holders (which was possible only due to MAX Pain at 5400). Even those who took Short positions around 5500 are also killed, because the VOLT was reduced by around 40-50% from the highs.

So finally what we are saying is that the MAX Pain is supposed to work mostly during the Expiry week. Nobody is saying otherwise.

If you forget the August month, what we are also saying is that normally the MAX Pain also acts as the Centre of gravity and so we can play 250 points from 5500. Accordingly if the market goes to 5250, you can definitely expect a pullback to 5500 once again, Which I think you don't agree. Anyways I never suggest to buy any naked Options. So we can use the MAX Pain for our positional Entries

@Healthraj

So the MAX Pain on/in your option OI calculation/observation is more or less the same like the probability calculation we can use in some software to have an idea where market can go, isn't it?

 

[gurjant]

With the Increase in VOLT, the Price is now at 54, So you are lucky. If the VOLT continues to be High and if the market goes up, you will break even at 5475 .

But let us say the VOLT Drops to 20%, then you will breakeven above 5525.

So all now depends on the Implied Volatility. The worst thing is yet to come.

I would suggest that when the market is around 5250-5300, you convert the positions into a Strategy because there is no sign of any pull back. So hedge your long positions with some equal number of Puts (Say 5000 PE).

When the market has moved nearly 450 points from 5110, you should expect to correct at least 120 points

This market could go Down even further because the OI in 5000 and 5200 are more than the MAX OI in CE.

OI at 5000 PE 42L
OI at 5200 PE 45L

The MAX OI at CE is at 5500, which is 38L.

Note : Just call me Raj

So according to u raj... When should I sell my call tomorrow I will buy some puts according to u but when should I exit from the calls at minimum loss.. I think today's crash is because the rumors about serials war or something... And should I buy 70 call of usd... It will b great support if my call get down coz of dollar?

 

[DanPickUp]

So according to u raj... When should I sell my call tomorrow I will buy some puts according to u but when should I exit from the calls at minimum loss.. I think today's crash is because the rumors about serials war or something... And should I buy 70 call of usd... It will b great support if my call get down coz of dollar?

Did you ever make any decision in your live by your self or was there always papa and mama who told you when to do so??

Sorry, but you really should learn to take trading decisions by your self and if you have any questions, please show a chart and explain by your self why you would enter or exit any trade there and there and we can correct you if needed. But asking for mama and papa help will not help you in your future trading, as this is a business where you have to learn to stand on your own feeds. Nothing personal, but think about it.

Now take care / DanPickUp

 

[gurjant]

Did you ever make any decision in your live by your self or was there always papa and mama who told you when to do so??

Sorry, but you really should learn to take trading decisions by your self and if you have any questions, please show a chart and explain by your self why you would enter or exit any trade there and there and we can correct you if needed. But asking for mama and papa help will not help you in your future trading, as this is a business where you have to learn to stand on your own feeds. Nothing personal, but think about it.

Now take care / DanPickUp

Hahahahahahaa superb Yarr......Muma Nd papa.... Hahahahahaha

 

[DanPickUp]

Hahahahahahaa superb Yarr......Muma Nd papa.... Hahahahahaha

As told: Nothing personal, but why should Healthraj tell you when you have to sell your call/s? Even he can not 100% predict the market. As you have no stop/ loss, guess you also do not have any money management or idea how to calculate option prices nor should you averaging your losses.

Such things you must learn before risking any money in that business, as other wise the money you invested in it (If yours or from some body else) is in real danger.

Take care / DanPickUp

 

[gurjant]

As told: Nothing personal, but why should Healthraj tell you when you have to sell your call/s? Even he can not 100% predict the market. As you have no stop/ loss, guess you also do not have any money management or idea how to calculate option prices nor should you averaging your losses.

Such things you must learn before risking any money in that business, as other wise the money you invested in it (If yours or from some body else) is in real danger.

Take care / DanPickUp

U take it very seriously bro........

Tu ta baala e serious le gya bai...

I am not afraid of losing money...

Nd plz don't reply with tht if u not afraid then y u don't give it to charity or other where instead of spoiling it in share market without knowing abt ur so called money management risk AVERAGING... Or ye wo.... Juz cool down Yarrrrr... Evbudy have their own ways... My way is asking some experts Nd then I think.... We r going to somewhere Nd itz not a bad thing to ask for address or something about the way.......

 

[healthraj]

@Healthraj

So the MAX Pain on/in your option OI calculation/observation is more or less the same like the probability calculation we can use in some software to have an idea where market can go, isn't it?

@Dan, Yes it is may be 90% true for Expiry Range. This 90% is based on my last three months observation. So even as per the Statistical theory we need minimum 7 points for the law of averages to work. So my 90% is debatable. May be I will be able to tell you with enough conviction when I have the data for 4 more months

It also acts as the Centre of gravity. That way if nobody knows where the market will go they can ask Mr. MAX Pain for some direction. For example in Aug-13 Series, if you notice the NIFTY movement, you will see how many times it went near 5500 (MAX Pain in Aug-13 was at 5500 for 80% of the days)

6000 - 5508 (08 Aug) - Down 500 points MAX Pain at 5500
5508-5754 (14-Aug) - UP 250 points MAX Pain at 5500
5754 - 5500 - 5308 (20-Aug) 450 points MAX Pain at 5500
5308 - 5504 (21-Aug) - 250 points MAX Pain at 5500
5504 - 5254 (22-Aug) - 250 points MAX Pain at 5500
5254 - 5528 (26-Aug) - 250 points MAX Pain at 5500
5528 - 5119 - (28-Aug) - 400 points MAX Pain changed from 5500 to 5400 to 5300
5119 - 5400 - 5500 - 5579 (03-Sep) - 450 points. MAX Pain changed from 5300 to 5400 and MArket expired on 29-Aug at 5409.

SEP-13 Series MAX Pain was at 5500 and 5600 was also peeking sometimes and so MAX was between 5500 and 5600 to 5579.

So you can see that 5500 was crossed 5 times starting from 01-Aug-13. If somebody was blindly taking a 250 position away from 5500, then he should have theoretically made 1250 points in NIFTY. Market in Aug-13 made around 1900 points and 1250 points out of 1900 is 66%.

So there is something in this MAX Pain.

 

[healthraj]

So according to u raj... When should I sell my call tomorrow I will buy some puts according to u but when should I exit from the calls at minimum loss.. I think today's crash is because the rumors about serials war or something... And should I buy 70 call of usd... It will b great support if my call get down coz of dollar?

Buy the Puts as soon as possible and close your positions when you make profits or no loss because you are already at a loss of 30 points. Tomorrow there might be a Pullback. So you can buy Puts from there.

In the OAT Tool, you can utilize the "TradeAnalyser" sheet to analyse your trades. In the TradeAnalyser you can input two legs and see where you get the profit. You can modify the VOLT, DTE (Days to Expiry) etc... Even when a tool is available Free, you are not using it... For Options it is always better to analyse the Strategy before executing it, so that you will know the Risk and the reward.

 

[healthraj]

Did you ever make any decision in your live by your self or was there always papa and mama who told you when to do so??

Sorry, but you really should learn to take trading decisions by your self and if you have any questions, please show a chart and explain by your self why you would enter or exit any trade there and there and we can correct you if needed. But asking for mama and papa help will not help you in your future trading, as this is a business where you have to learn to stand on your own feeds. Nothing personal, but think about it.

Now take care / DanPickUp

Agree with Dan. I have taken the pain to develop a tool which is available freely to you with all the source code. So try to make best use of the tool and you can make informed decisions. I myself is making all the decisions based on my OAT tool only.