NIFTY Options Trading by RAJ

[arcus]

Okay, this is going to be my last post on this.

That is silly. Market makers don't always make money. When they realize they are wrong market makers do square off their losses. If they don't, they lose money just like anyone else.

No market marker makes money 100% of the time. To suggest that they do is outright preposterous and misleading. The largest market maker in the world George Soros has losing trades.
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He (Soros) also took a $2 billion hit during the Russian debt crisis in 1998 and lost $700 million in 1999 during the tech bubble when he bet on a decline. Stung by the loss, he bought big in anticipation of a rise. He lost nearly $3 billion when the market finally crashed.

He cuts short his loses and moves on.

Okay here are some examples from India
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I spent around 5 minutes trying to find the above. Obviously you can dig out a lot lot more if you have got the free time.
No one in the market makes money 100% of the time, not even market makers.
Obviously I am not talking about such cases where someone takes one trade and by fluke that turns out to be a winner.

Don't criticize some one just quoting a movie.

The movie "Rogue trader" is based on a true story of a market maker - Here is the Wikipedia article
So obviously I can quote a true story and prove my point.

Why not hedging involves selling puts ?
One can sell the equity write puts at a much lower strike with the intention of buying at a lower price.

I dont know if you have read what I said.
I said

Hedging a long position never involves selling puts.

That is true no matter what twist you make to a hypothetical trade.

In your example, I am assuming you are short selling equity (One can sell the equity); if that is the case then it is a bearish view and to hedge that you can take a bullish view by selling puts.


and in the end I want to make one point before everyone here thinks I have come to ruin this thread.

"Price (action) is by far the most important. Volume and OI are secondary in importance and are used primarily as confirming indicators. Of those two (volume and open interest) volume is the more important.

Quote from John J Murphy's Technical Analysis Of The Financial Markets, Page 158.

This thread is fine but the amount of interpretation being drawn from just the Options OI is mind boggling. Obviously some of it is being made up as we go along as there is no basis for such interpretation. I doubt you can quote from a book about some conclusions being drawn in this thread about OI.

I don't intend to argue further so don't expect me to respond.

 

[DanPickUp]

@Arcus

I have not read all your posts in details, but you must have read some books and are knowledgeable in what you post. I also do not have any track records of any of your trades, so do not know any thing about that.

Even than: Let us clarify about market makers.

I agree with you that not all the times market makers are making money. Some even lost there homes in the past by doing wrong at the wrong moment. Now what doe's that mean?

It depends very much on what derivative they are market makers and what strategy they use in there market maker business. There are no right or wrong rules how to do that.

Second: Hedging a long stock with a short put is surely not done, as both is long. You are very right here.

Third: OI is part of trading and I agree with you that it is only part and not THE PART. But to value it more important compare to volume or other TA is some thing every body has to decide by him self, regardless what Mr. Murphy told. (Have read books from him and finally they are just books like other books on TA).

Finally: It seems that in India many traders like to watch OI to find where markets must go. So let them find out what works best for them, even you think that some posts are mind boggling. If you know or already have your clear rules about how to do it for your self, then those posts will not be any longer mind boggling for you.

Take care and have a good start in to the new week / DanPickUp

 

[jamit_05]

@Arcus
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Take care and have a good start in to the new week / DanPickUp

Lets pay heed to the senior-most authority in Option on TJ. Let us all bury the hatchet and wish each other the very best for the week.

I whole heartily wish that everyone on this thread has a successful week in terms of $$$ and/or knowledge.

 

[healthraj]

Option Update for 29-Jul-13

@ 9:45 AM

MAX CHG in OI @ 5400-6200 - Indicating a Bearish market. The overall trend continues to be a Strong Bear market
MAX OI @ 5800-6000.
The Pivot is at 5905 - You can expect 30 points below 5905.
If the MAX CHG in OI remains at 5400-6200, then today you expect a Low of 5815. So Trade with Caution on Longs. Expect 5815 only if there is a breakout at 5875.

 

[healthraj]

The Volumes are very less. So it would be better to stay on the sidelines or to play the Pair.

In the 5700-6100 Range the CHG in OI @
CE - 3.8L PE-2.34L. For any meaninful Trade in options we need to have atlease 5L as CHG in OI at the strike. but here the overall CHG in OI itself is only 3.8L.

Probably when the MAX CHG in OI changes from 5400-6200 to some other pair we will get to see some volumes because 5400-6200 is a wide range and indicates a FLAT Bearish market

 

[anup]

The Volumes are very less. So it would be better to stay on the sidelines or to play the Pair.

Volumes might be less because people are waiting for tomorrows RBI policy.. Just a guess!!

 

[healthraj]

MAX CHG in OI changed from 5400-6200 to 5800-6000. The MAX OI is also at 5800-6000. The pivot 5905 is I think broken so we might see 5875 in NF.

I shorted at 5904.

 

[healthraj]

The Volumes in 6100CE is Greater than the COI. So at the end of the Day, risky players can take a chance and go Long. This would be for positional Trade and not For Intraday. This is still risky. Try 1 lot if you have a capital of 1 Lakh. The Risk should be around 2% of your capital.

 

[gmt900]

The Volumes in 6100CE is Greater than the COI. So at the end of the Day, risky players can take a chance and go Long. This would be for positional Trade and not For Intraday. This is still risky. Try 1 lot if you have a capital of 1 Lakh. The Risk should be around 2% of your capital.

I did not understand this reco. Does one go long now or EOD? If the sentiment is bearish, taking a long position will be very risky

 

[healthraj]

If we look at the Heavily traded Options in Stocks it HUL, WIPRO and SBIN. Given that the RBI policy is there tomorrow We can try and trade the SBIN by EOD today.

The Top three strikes in SBIN being traded today are

1800CE, 1700PE and 1900CE.

The Volatility seems to be going UP. By EOD 1700PE and 1900CE would be a good pair to Trade. I am expecting the market to move UP a little bit tomorrow. So please track the 1700PE-1900CE pair. Now it is avilable at 96.

The VOLT Trend chart also indicates the lines meeting at 1825-1850. So tomorrow we might see a BIG UP for SBIN