NIFTY Options Trading by RAJ

[guptak03]

Even 5500PE and 5400PE saw huge OI,today.May be due to LOW price of
options there.The sentiment is towards downside.

Thank you sir:thumb:

 

[gmt900]

gmt, do u have ebook or links of book on option and open interest...if , plz post it here...need some indepth reading in what health raj is working, coz if i know the basics can follow it properly...
thanks in advance...

timepass had provided link to open this book which I had downloaded.
I think that link doesn't work now.
The link was provided in post # 270 of "Option Trading with DanPickUp "
thread on 22 April 2013.
I don't know how toupload copy on my computer.
I hope you are able to download .

 

[healthraj]

dear,
as of now closing banknifty....i am thinking to form a strategy for this couple of weeks or if time permits until expiry...is it a good idea

Buy BNF 11000 CE @ 181 one lot
Sell BNF 11100 CE @ 150 Two lots

below 11300 if BNF closes the profit 119 BNF points....

is it really a tension free trade?

Hope you have executed this strategy around 10425.

As such This will give profit below 10500.

If you leave this Till expiry and market is below 11300, then it will give profit. MAx profit @ expiry at 10950.

So I think you have to closely track the positions when the market crosses above 10500

I am also thinking that the basic assumption of this trade was that you expect BankNifty to go down below 10500. So it is bearish strategy and so if the market moves strongly above 10500, then you should close this I think

 

[DanPickUp]

timepass had provided link to open this book which I had downloaded.
I think that link doesn't work now.
The link was provided in post # 270 of "Option Trading with DanPickUp "
thread on 22 April 2013.
I don't know how toupload copy on my computer.
I hope you are able to download .

@Gmt900

Do not upload any illegally copies of the book. TJ server is placed in the USA and the author rights are under US laws. So just forget it. The title of the book was mentioned and the rest is not your problem.

Take care / DanPickUp

 

[Happy_Singh]

I closed everything. I am going to avoid taking this 4 strike stategy.




Need to work on simple stretegies. Will need to do some reading this week end.

Can anybody recommend some simple books for simple stategies - My main criteria is "Limited" risk with "Limited" Profit.

Hi

I trade futures, mostly index futures, after reading your thread I got attracted to once again try options.

With futures we get money when the direction of our trade is right.

With options an option seller will get money (premium decay) for being right on the range . . .
selling a pair means we have to be right about the index not crossing the boundary on both the sides . . .
(luckily we get to choose this boundary)

To my mind the most simple strategy should be decide/assume the range and the bias of the market for the current month.
Then choose one strike price that will have least probability (as per our view) of getting crossed.
Create a short position on that SP, if our bias is down, sell calls and if it is up sell puts . . .
the strike price has to be far off so it can be effectively defended . . .

Likewise i choose BNF and feel during this month the probability of it crossing above 11300 is very low. I have shorted Calls and for now i plan to hedge it by going long on NF whenever i feel that the trend has turned bullish on 30 minutes TF. During the trade i will also be looking at various other ways of managing this kind of trade.

I am also trying to pick-up stuff from your rules and look at other parameters such as
Volume/OI/Change in OI/Put:Call ratios/implied volatility etc
to see if any of it can help me manage this kind of trade.

Happy

 

[meenulalit]

Dear Raj

I have started going through your thread to understand the basics of options which you are working very hard on for the benefit of beginners. In the rules for trading you have said that since bulls have long positions in the market they hedge their positions by selling puts to protect their position. In short, They are creating an opposite position. But isn't put selling the same as having a long position. What I understand is that selling a put is the same as being long and buying a put is being bearish. Please explain the logic behind this.

Thanks

 

[Option.Trader]

I did some calculation. You are right. The MAX Profit is just 11 points. So I closed everything. I am going to avoid taking this 4 strike stategy. At some point I was confused whether I sold the correct strike or not.

Need to work on simple stretegies. Will need to do some reading this week end.

Can anybody recommend some simple books for simple stategies - My main criteria is "Limited" risk with "Limited" Profit.

Better to keep exotic animals out of equation. Prefer KISS strategy. Synthetics, exotics are good for thesis, we are in it for cash and artistic method of trading

 

[Option.Trader]

Dear Raj

I have started going through your thread to understand the basics of options which you are working very hard on for the benefit of beginners. In the rules for trading you have said that since bulls have long positions in the market they hedge their positions by selling puts to protect their position. In short, They are creating an opposite position. But isn't put selling the same as having a long position. What I understand is that selling a put is the same as being long and buying a put is being bearish. Please explain the logic behind this.

Thanks

Not a hedge but if you are strongly bullish in your Outlook you may want to reduce your buy price in longs by selling puts. By this you are definitely biased on long side

 

[jamit_05]

Hi

I trade futures, mostly index futures, after reading your thread I got attracted to once again try options.

With futures we get money when the direction of our trade is right.

With options an option seller will get money (premium decay) for being right on the range . . .
selling a pair means we have to be right about the index not crossing the boundary on both the sides . . .
(luckily we get to choose this boundary)

To my mind the most simple strategy should be decide/assume the range and the bias of the market for the current month.
Then choose one strike price that will have least probability (as per our view) of getting crossed.
Create a short position on that SP, if our bias is down, sell calls and if it is up sell puts . . .
the strike price has to be far off so it can be effectively defended . . .

Likewise i choose BNF and feel during this month the probability of it crossing above 11300 is very low. I have shorted Calls and for now i plan to hedge it by going long on NF whenever i feel that the trend has turned bullish on 30 minutes TF. During the trade i will also be looking at various other ways of managing this kind of trade.

I am also trying to pick-up stuff from your rules and look at other parameters such as
Volume/OI/Change in OI/Put:Call ratios/implied volatility etc
to see if any of it can help me manage this kind of trade.

Happy

It just appears, but is it really better than Futures trading?

Selling Options does not, by default, give any advantage over selling futures. Sure, you may have time decay on your side, but you will lose out on Risk Reward ratio.

I mean, if options are sold, then your max return is fixed. But, in futures the max return is unlimited. Therefore, the Risk Reward is bound to be better.

At the end of the day, it is all one and the same. If you have the mental skills, then you will succeed irrespective of the instrument.

 

[healthraj]

Rule 1: If the MAX (CHG in OI) @ PE > MAX (CHG in OI) @ CE, then it is a Bullish market.

Why MAX (CHG in OI) PE will be a Bullish signal?
For the Market to exist we should be Have Bears and Bulls. Market is always trading in a specified range for any day. So we have to assume that BULLs will try to Protect the Bottom of the Range and Bears will Try to Protect the Top of the Range (Not let the market beyond the Range). BULLs have LONG Positions in the market. So to protect their LONGs they take the Opposite positions in the Options market by Selling the PUTS (PE) to hedge their positions, so that if the market goes in the opposite direction of their Longs they can make money using Options. But normally the market makers make money both in the Equities and in the Options market. When They build a Huge volume around a Strike Price, they are basically sending a signal to the BEARS saying "This is our area - We will not let you go below this level". So BULLs normally control a Lower Strike and BEARS normally control a Upper Strike. For a given day this Range would act as the Intraday Range.

Dear Raj

I have started going through your thread to understand the basics of options which you are working very hard on for the benefit of beginners. In the rules for trading you have said that since bulls have long positions in the market they hedge their positions by selling puts to protect their position. In short, They are creating an opposite position. But isn't put selling the same as having a long position. What I understand is that selling a put is the same as being long and buying a put is being bearish. Please explain the logic behind this.

Thanks

Yes you are right from a Retail Trader perspective. (If you have Stocks and you want to protect your stocks you have to Buy Puts and not Sell Puts because there is no Shorts possible in Stocks.) But from a Market Maker perspective, They Can Go Long and/or Sell Short. So they create a Range for the Retailers to play. So let us play within that Range. Sorry If my explanations are confusing. What I wanted to say was Market Makers try to create a Range for the Index or Stock, which is visible using the MAX (OI).