NIFTY Options Trading by RAJ

[singlap]

Raj , 6200 is now MAX OI and MAX pain is 6000. So is there any rational for assuming that market will expire at 6200 ? It may touch 6200 but as far expiry is concerned , all the logic which have been discussed in the forum lead us to somewhere near 5950-6000 expiry. Also since banking results are poor (hdfc) , & banknifty is not participating in rally , IT already is almost on its top, upside from here should surly be tough.
Also , if we are buying a strangle (6000-6200) , it is better we do it for the month of november rather than for October as time decay for november strikes will be much lower. And in oct, if market is expiring near 6000 , the october combo may not give any chance to exit profitable. What are your views ?

 

[healthraj]

Raj , 6200 is now MAX OI and MAX pain is 6000. So is there any rational for assuming that market will expire at 6200 ? It may touch 6200 but as far expiry is concerned , all the logic which have been discussed in the forum lead us to somewhere near 5950-6000 expiry. Also since banking results are poor (hdfc) , & banknifty is not participating in rally , IT already is almost on its top, upside from here should surly be tough.
Also , if we are buying a strangle (6000-6200) , it is better we do it for the month of november rather than for October as time decay for november strikes will be much lower. And in oct, if market is expiring near 6000 , the october combo may not give any chance to exit profitable. What are your views ?

I am not sure 6300 Levels. But 6200 once again will be Tested. The IT stocks are yet to Test their Resistance. So INFY will test 3500, TCS to test 2300, HCLTECH to test 1200. So there is definitely some upside left. The FIIs are LONG. About the Spreads in OCT-13 or NOV-13 I think it is a choice. It is safe to put in NOV-13. But the main problem is not the time decay it is the VOLT. The VOLT is coming down daily so we don't what is the LowLow?

Market normally Tend to Expire around the MAX Pain. It is too early to play the Expiry game because we have 10+ days for Expiry.

 

[healthraj]

OK. For the time being I will go into Hibernation mode and will wake up when the Market touches 6000 or 6200. So in the mean time, Happy Trading:thumb:

 

[healthraj]

The 6000-6200 Pair is Trading at 96. Taken the position at 135. This is what happens when we don't know where the VOLT will go. Normally when the market moves 75 points, our position would be in Profit. But Today the VIX dropped by 10%. I am still holding my positions. Those who are complaining that my tool is not working, you will understand that Options Trading is more a Function of VOLT.

 

[mohan.sic]

Hello Raj Sir,

Great Thread.

Coming to my question, its about your Rule 4. I pasted Rule 4 below as it is given by you in the first page of this thread followed with my question.

Rule 4:
--------------------------------------------------------------------------
Rule 4: Does Volume in the Options Chain data play any role in our decision making?.

Yes. Use the Volume data to decide whether it is STRONG BULL or a STRONG BEAR.

Let us say at 6100 we have the MAX CHG in OI @ CE - Say 6L Postions
Let us say at 6000 we have the MAX CHG in OI @ PE - 11L Positions

Now 11L > 6L and PE > CE, so it is a BULL.
Now let us look the Volumes @ 6100CE and 6000PE

Volume @ 6100CE - 5.5L
Volume @ 6000PE - 17

Now compare the CHG in OI and Volume @ 6100CE.

Volume (5.5L) < 6L - So it is not a Strong BULL. Had the Volume been greater than the "CHG in OI" then it would have been a STRONG BULL.

And same logic for the STRONG BEAR also....
--------------------------------------------------------------------------

Raj Sir,

NSE option chain page gives 1) Change in OI in terms in QTY ( No of lots x 50 ) . And 2) Volume in terms of no of Lots. In your example of rule no.4, is it taken same way ?

Considering you took it same way, My question is how can Volume be less than OI.

In your example change in OI of 6100 CE is 6L positions ( means 6L / 50 = 12000 lots added) AND Volume traded is 5.5 lakh ( 5.5L / 50 = 11000 ).

When 11000 lots were trade how can 12000 lots get added to OI.

Did I miss something in this. please help me out.

Thanks.

 

[healthraj]

Hello Raj Sir,

Great Thread.

Coming to my question, its about your Rule 4. I pasted Rule 4 below as it is given by you in the first page of this thread followed with my question.



Rule 4:
--------------------------------------------------------------------------
Rule 4: Does Volume in the Options Chain data play any role in our decision making?.

Yes. Use the Volume data to decide whether it is STRONG BULL or a STRONG BEAR.

Let us say at 6100 we have the MAX CHG in OI @ CE - Say 6L Postions
Let us say at 6000 we have the MAX CHG in OI @ PE - 11L Positions

Now 11L > 6L and PE > CE, so it is a BULL.
Now let us look the Volumes @ 6100CE and 6000PE

Volume @ 6100CE - 5.5L
Volume @ 6000PE - 17

Now compare the CHG in OI and Volume @ 6100CE.

Volume (5.5L) < 6L - So it is not a Strong BULL. Had the Volume been greater than the "CHG in OI" then it would have been a STRONG BULL.

And same logic for the STRONG BEAR also....
--------------------------------------------------------------------------

Raj Sir,

NSE option chain page gives 1) Change in OI in terms in QTY ( No of lots x 50 ) . And 2) Volume in terms of no of Lots. In your example of rule no.4, is it taken same way ?

Considering you took it same way, My question is how can Volume be less than OI.

In your example change in OI of 6100 CE is 6L positions ( means 6L / 50 = 12000 lots added) AND Volume traded is 5.5 lakh ( 5.5L / 50 = 11000 ).

When 11000 lots were trade how can 12000 lots get added to OI.

Did I miss something in this. please help me out.

Thanks.

I was not aware of the highlighted part. I was thinking Volume, OI and COI are expressed as number of contracts, in which case my Rule and Analogy is wrong.
Can you throw more light on where did you get this info? I still think OI, COI and Volume are expressed as number of contracts

 

[healthraj]

Understanding VIX

Since the Options Trading is influenced by VIX, I want to understand what is the Implication of VIX going down.

Anybody who knows the answer.

When I was googling I found that INDIAVIX is calculated using the NIFTY OTM Options Bid and Ask Prices. So it is like Chicken and Egg problem. We use VIX to trade options. But VIX is calculate using Options Price.

So VIX is direct mapping of what is happening in Options?

So what is very clear is if VIX goes down the Options Prices go down?

My questions are
1. Why Should VIX go down suddenly? What is happening in Ask Bid Price pattern which will drive this VIX to go down?
2. Since the VIX is a function of OTM Options which are held mostly by Operators, they can anytime bring the VIX down or UP. So what is that we should look for in OTM options?
3. What is the pattern in Ask bid price we have to see to find out if VIX can go UP again?
4. Does VIX indicate the Range of the market?

The only answer I can think of from a Layman perspective is that The VIX will go down when there is a HUGE SELL Of the Options Price and the Prices drop suddenly. Why would they sell the options ? To consolidate the market or to Reverse the positions

In today's case does it indicate a REVERSAL to 5700 or a Consolidation to goto 6400 ?

The VIX of 21% indicates that in the next 30 days the market can MOVE UP or DOWN 6%. 21/SQRT(12).


At the EOD, if you look at the Bid-Ask Quantity in Put side it is no way comparable to the CE side. So I think there is Heavy Buying of Puts and the Market I think will go down heavily. Are we going to see 4900 in this expiry because the Largest bidding is in 4850, 4950 and 5050

http://vix.co.in/indiavix/how-india-vix-is-calculated/

 

[ananths]

Understanding VIX

Since the Options Trading is influenced by VIX, I want to understand what is the Implication of VIX going down.

Anybody who knows the answer.

When I was googling I found that INDIAVIX is calculated using the NIFTY OTM Options Bid and Ask Prices. So it is like Chicken and Egg problem. We use VIX to trade options. But VIX is calculate using Options Price.

So VIX is direct mapping of what is happening in Options?

So what is very clear is if VIX goes down the Options Prices go down?

My questions are
1. Why Should VIX go down suddenly? What is happening in Ask Bid Price pattern which will drive this VIX to go down?
2. Since the VIX is a function of OTM Options which are held mostly by Operators, they can anytime bring the VIX down or UP. So what is that we should look for in OTM options?
3. What is the pattern in Ask bid price we have to see to find out if VIX can go UP again?
4. Does VIX indicate the Range of the market?

The only answer I can think of from a Layman perspective is that The VIX will go down when there is a HUGE SELL Of the Options Price and the Prices drop suddenly. Why would they sell the options ? To consolidate the market or to Reverse the positions

In today's case does it indicate a REVERSAL to 5700 or a Consolidation to goto 6400 ?

The VIX of 21% indicates that in the next 30 days the market can MOVE UP or DOWN 6%. 21/SQRT(12).


At the EOD, if you look at the Bid-Ask Quantity in Put side it is no way comparable to the CE side. So I think there is Heavy Buying of Puts and the Market I think will go down heavily. Are we going to see 4900 in this expiry because the Largest bidding is in 4850, 4950 and 5050

http://vix.co.in/indiavix/how-india-vix-is-calculated/

Nice topic Raj....:thumb:

Volatility is a measure of how rapid price changes have been (SV - static vola) and what the market expects the price to do (IV - Implied vola). When volatility is high, buyers of options should be wary of straight options buying, and they should be looking instead to sell options. Low volatility, on the other hand, which generally occurs in quiet markets, will offer better prices for buyers; however, there's no guarantee the market will make a violent move anytime soon. By incorporating into trading an awareness of IV and SV, which are important dimensions of pricing, you can gain a decisive edge as an options trader.
Source :- http://www.investopedia.com/articles/optioninvestor/02/031102.asp

 

[healthraj]

Understanding VIX

At the EOD, if you look at the Bid-Ask Quantity in Put side it is no way comparable to the CE side. So I think there is Heavy Buying of Puts and the Market I think will go down heavily. Are we going to see 4900 in this expiry because the Largest bidding is in 4850, 4950 and 5050

http://vix.co.in/indiavix/how-india-vix-is-calculated/

Those who want to Take a Gamble, can buy some OTM 5200 Puts which are available at 1.5. This is purely a Gamble and if it works out you could become a Millionaire in a Fortnight. The Same opportunity was available when the market was around 5100. Let us Try this time. My suggestion is based on the Huge Bid at the 4850, 4950 and 5050 Strikes.

 

[anup]

Those who want to Take a Gamble, can buy some OTM 5200 Puts which are available at 1.5. This is purely a Gamble and if it works out you could become a Millionaire in a Fortnight. The Same opportunity was available when the market was around 5100. Let us Try this time. My suggestion is based on the Huge Bid at the 4850, 4950 and 5050 Strikes.

Hmm.. Interesting very very interesting!!.. Why not try it out!!