NIFTY Options Trading by RAJ

[mohan.sic]

I think there has been some healthy discussion on Rule 4. Thanks to all who contributed. While I agree that Volume is in Terms of Contracts, I have not seen anywhere if the OI/COI is expressed in terms of Quantities. It would be good if people can provide some documentation on how to ascertain that the OI/COI is expressed as Quantities and not contracts/lots.

But just to be on fair on both sides since we have a doubt on OI/COI, We can modify the Rule in 4 to say that Pick the Strike where the Volume is the max. But so far my analogy also has worked.

For eg. Today if you see on the CE side 6300 CE is the only strike with more than 100%. So today 6300 CE should have given the MAX Profit compared to all other CE Strikes. Where as in PE, If I take the MAX Vol, it is at 6000PE. so selling 6000PE should have given the max profit in terms of SELL

Raj Sir,

Regarding how to ascertain that OI/COI expressed in terms of Quantities and Volume in terms of no of lots: You can check some deep out the money contracts in option chain page. Volume count can be seen in odd numbers where as OI and change in OI will be only in multiples of 50.

And about the example: Todays 6300 CE change in OI is only strike with more than 100% : At the time of your post it was more than 100 %. As per number now it should be around 50% as volume is 127000 and change in OI 263000.
But it is actually 1, 27000 x 50 = 63 lakh qty traded and change of OI if 2,63000. Hence rest 60 lakh qty apprx traded qty of call falls under category of intraday square off or trades between existing holder and new holder which does not effect OI count.

thanks.

 

[healthraj]

Raj Sir,

Regarding how to ascertain that OI/COI expressed in terms of Quantities and Volume in terms of no of lots: You can check some deep out the money contracts in option chain page. Volume count can be seen in odd numbers where as OI and change in OI will be only in multiples of 50.

And about the example: Todays 6300 CE change in OI is only strike with more than 100% : At the time of your post it was more than 100 %. As per number now it should be around 50% as volume is 127000 and change in OI 263000.
But it is actually 1, 27000 x 50 = 63 lakh qty traded and change of OI if 2,63000. Hence rest 60 lakh qty apprx traded qty of call falls under category of intraday square off or trades between existing holder and new holder which does not effect OI count.

thanks.

Yes Mohan. Thanks. The OI and COI are all in multiples of 50. And it cannot be a Coincidence for all the Strikes.

OK. I will also modify the Volume with the Lot size so that it will also be displayed as Quantities and then we can do a meaningful observation of Volume. Thanks a lot for pointing this out. After 3 months somebody was able to point this out error.

 

[mohan.sic]

Raj Sir,

Regarding how to ascertain that OI/COI expressed in terms of Quantities and Volume in terms of no of lots: You can check some deep out the money contracts in option chain page. Volume count can be seen in odd numbers where as OI and change in OI will be only in multiples of 50.

And about the example: Todays 6300 CE change in OI is only strike with more than 100% : At the time of your post it was more than 100 %. As per number now it should be around 50% as volume is 127000 and change in OI 263000.
But it is actually 1, 27000 x 50 = 63 lakh qty traded and change of OI if 2,63000. Hence rest 60 lakh qty apprx traded qty of call falls under category of intraday square off or trades between existing holder and new holder which does not effect OI count.

thanks.

sorry, numbers posted above were wrong . I took change in OI for Change in volume.

Volume : 263000 = 263000 x 50 = 1,31,50000 qty traded.
change in OI = 1, 27,000.

Hence it can be around 1 crore 30 lakh intraday square off or other ways which does not effect count of OI.

 

[Option.Trader]

A word of caution for Max pain followers... OAT tool shows max pain as 6100 whereas it still is at 6000 in line for bumper trade

 

[healthraj]

A word of caution for Max pain followers... OAT tool shows max pain as 6100 whereas it still is at 6000 in line for bumper trade

OT, the MAX Pain is still at 6000. Probably the problems is still there in the Tool

 

[healthraj]

Hopefully 6222 NF should be met today. It is now trading around 6190. So another 30 points

Made high of 6221.9. So the OAT Intraday target met

 

[Rish]

Made high of 6221.9. So the OAT Intraday target met

:clap::clap::clap::clap:

 

[mohan.sic]

Hope you are talking about Rule #4. Rule #4 should help you choose a Strike Price to Trade. Depending on the Trend of the market, If you want to Buy or Sell, you have to choose a Strike. So today the Volume Vs COI gives 6300CE as more than 100%. So tomorrow if the market is DOWN you can apply the same logic for choosing a PE. But the point for Discussion was that COI and Volume in Options Chain table are not expressed with the Same units (Quantities Vs Lots).

So given the above confusion, I am simplifying the Rule saying, If you have decided to Buy CE, then choose the Strike with MAX Volume which would be 6200 CE today. But as per original logic you would have chosen 6300 CE instead of 6200 CE. Today If you want to SELL Put, Then the MAX PE volume is at 6100 PE and so SELL 6100 PE.

If you know what strikes to choose for Option Trade, then one can ignore this Rule.

One more myth was before Jul-13 I was always using Volume to Decide the Trend of the market, But where as after analysis for Intraday I use COI for Trend and Volume just for choosing the Strikes. I hope it is clear.:thumb:

Raj Sir,

Your above reply is confusing me completely.

Rule 4 is about whether it is STRONG BULL or a STRONG BEAR. Its not about choosing a strike price to trade. Again, It is about going naked call or put if we find strong trend based on volume. Not about choosing strikes. Those are your own rules. please clarify.

And the second point said by you about simplifying the rule: " If you have decided to buy a call then go for strike with MAX volume ".. How to decide to buy a naked call without rule based logic ( rule 4 being injust ).

And if I want to buy a call why to go for strike with MAX Volume. If i am bullish i can simply buy at the money call or 1 strike above which gives max return in terms of percentage. Why buying a strike where MAX volume is traded but which is 5 intervals above ATM option which gives less absolute return than near strike options.

Thank you.

 

[healthraj]

Raj Sir,

Your above reply is confusing me completely.

Rule 4 is about whether it is STRONG BULL or a STRONG BEAR. Its not about choosing a strike price to trade. Again, It is about going naked call or put if we find strong trend based on volume. Not about choosing strikes. Those are your own rules. please clarify.

And the second point said by you about simplifying the rule: " If you have decided to buy a call then go for strike with MAX volume ".. How to decide to buy a naked call without rule based logic ( rule 4 being injust ).

And if I want to buy a call why to go for strike with MAX Volume. If i am bullish i can simply buy at the money call or 1 strike above which gives max return in terms of percentage. Why buying a strike where MAX volume is traded but which is 5 intervals above ATM option which gives less absolute return than near strike options.

Thank you.

Mohan,

The Rule is basically to see how we can use Volume for our decision.

 

[sahen]

I think there has been some healthy discussion on Rule 4. Thanks to all who contributed. While I agree that Volume is in Terms of Contracts, I have not seen anywhere if the OI/COI is expressed in terms of Quantities. It would be good if people can provide some documentation on how to ascertain that the OI/COI is expressed as Quantities and not contracts/lots.

But just to be on fair on both sides since we have a doubt on OI/COI, We can modify the Rule in 4 to say that Pick the Strike where the Volume is the max. But so far my analogy also has worked.

For eg. Today if you see on the CE side 6300 CE is the only strike with more than 100%. So today 6300 CE should have given the MAX Profit compared to all other CE Strikes. Where as in PE, If I take the MAX Vol, it is at 6000PE. so selling 6000PE should have given the max profit in terms of SELL

If you study the OI data on OPTION CHAIN of NSE site, then you can observe that all volumes are in multiples of 50 only.==> so volumes are not in lots.