NIFTY Options Trading by RAJ

[healthraj]

Long call and short put looks like this:

Then was a short call added a bit otm and now it looks like this:

As you told: This can be deadly in case market really strongly reverses.

Hi Somatung,

Actually the order is SELL Call and SELL Put (MAX OI Pair). And then Add a Long Call or Long Put based on the Trend.

And my additional rule is when you choose a Long Call / Put, choose a strike whose Price is not more than say 10-20% (or whatever risk you want to take) of the Pair that you have sold.

When your net Profit becomes Zero that means it is time to exit this strategy or to change the LONG Put to LONG Call or Vice Versa.

For example, Let us say we sold the NIFTY MAY 6000PE-7000CE Pair for 280. My Long Call / Put should not be more than say 310. Technically it would not be good if it is below 280 also. That Way I also finance my Long Call/Put using the Pair that I have sold. I mean when you SELL the Pair technically money comes into your account and when you Buy (Long Call / Put) Money goes out of your account.

Assuming if somebody had to take a positions today.
Case 1 : SHORT SELL 6000PE-7000CE @ 240. LONG 6900PE @ 250-255. - Outflow is 15 points - BIAS is DOWN.
Case 1 : SHORT SELL 6000PE-7000CE @ 240. LONG 6900CE @ 250-255. - Outflow is 15 points - BIAS is UP.

Both the 5900CE and 5900PE are trading around 250-255.

 

[Gaur_Krishna]

Hi Raj,

Thanks for a nice concept and this thread. Going thru few posts. One thing wanted to ask: Your signature says THREE software - MTP, OTP & OAT. So what are all these three?

Have you explained this in any post?

Thanks & Regards,
Gaur_Krishna

 

[healthraj]

Hi Raj,

Thanks for a nice concept and this thread. Going thru few posts. One thing wanted to ask: Your signature says THREE software - MTP, OTP & OAT. So what are all these three?

Have you explained this in any post?

Thanks & Regards,
Gaur_Krishna

The three tools were developed over a period of time. I use only OAT now.
Briefly,

As a beginner, you can start with OTP - One Trade Perday
then MTP - Multiple Trades Perday
OAT - Option Analysis tool for Options and Futures trading.

Please take your time and explore. I do not have any user manual. So explore at your own will and time.

 

[Somatung]

Hi Somatung,

Actually the order is SELL Call and SELL Put (MAX OI Pair). And then Add a Long Call or Long Put based on the Trend.

And my additional rule is when you choose a Long Call / Put, choose a strike whose Price is not more than say 10-20% (or whatever risk you want to take) of the Pair that you have sold.

When your net Profit becomes Zero that means it is time to exit this strategy or to change the LONG Put to LONG Call or Vice Versa.

For example, Let us say we sold the NIFTY MAY 6000PE-7000CE Pair for 280. My Long Call / Put should not be more than say 310. Technically it would not be good if it is below 280 also. That Way I also finance my Long Call/Put using the Pair that I have sold. I mean when you SELL the Pair technically money comes into your account and when you Buy (Long Call / Put) Money goes out of your account.

Assuming if somebody had to take a positions today.
Case 1 : SHORT SELL 6000PE-7000CE @ 240. LONG 6900PE @ 250-255. - Outflow is 15 points - BIAS is DOWN.
Case 1 : SHORT SELL 6000PE-7000CE @ 240. LONG 6900CE @ 250-255. - Outflow is 15 points - BIAS is UP.

Both the 5900CE and 5900PE are trading around 250-255.

@Healthraj

The strategy has its good and its bad sides. Never mind about this. As you tell by your self: If it is understood how to manage each leg according to market moves and IMV on the options we use, no problem by what is done.

As you help others in a very good way, lets expand your post with the following: You even can play with the MM and change the amount of legs on either side to ad risk or take out risk according to market moves and IMV. An other trick to reduce your risk on the side you are absolute open (In case you do not know this): Just buy wings otm on those side and your risk is limited. I hope you have some kind of option strategy analyzing software, so you will see what I mean when you start to play around with those idea.

Take care and see you around

 

[toughard]

Agreed. Yes the greatest challenge was the VOLT, which is not like the Price chart, where someone can predict. So the strategy to me is Volatility neutral. But the important catch is to keep switching between Calls and Puts and once you have sold the pair. If i have to take an example,

On 15-APR, when the Trend was down, SOLD 6000PE-7000PE at around 280 and bought 6800PE@ 300. So the outflow was 20.

On 17-APR, there was a Reversal. So Closed the 6800PE @ 325 - 25 points profit. That time 6000-7000 Pair was trading at 240 - With 40 points profit. But did not close the 6000-7000 Pair. Bought 6700CE around 265. So my net flow was 25 points compared to 240 and not 280.

Today it is at a overall profit of around 140 points. So the key is to catch the Reversal using the Hourly charts. You don't need to be exact because the cushion will come from the Pair that you have sold.

Now What if you have sold only the pair 6000-7000 for 280. You will still be making some profit now because the pair is trading around 240. But then you would be around 40 points instead of 140 points...

Now I must also tell you that Catching the reversal is not very difficult if you just follow the Hourly charts.

Today I had closed the 6700CE with 100 points and went for 6900 PE @ 255. Net flow of 15 points. The 6000-7000 Pair is still trading at around 240.

So the 280 points will come to you only at the end of MAY-14 Series.


To Summarize

There is no strategy which can be RISK FREE from GAP UP / DOWN. But we can handle a REVERSAL if we catch the REVERSAL correctly.
SELL the MAX OI Pair or an appropriate pair which you think can act as cushion and which would not broken in the month. (You can use Weekly Resistance and Support).

Then keep switching between a ITM/ATM Call / Put based on the Trend in the hourly charts (I use hourly charts because I don't want to change my positions every hour) and keep booking the profits. Some one can use a lower timeframe also. NEVER fo LONG on OTM Call/Put

I hope it is a simple strategy, which works well even when the VOLT GOES UP.

When the VOLT Goes UP the loss in the SELL Pair should be compensated by the LONG Call/Put (Provided you are in the right direction)
When the VOLT Goes DOWN the loss in the the LONG Call/Put should be compensated by the Sold Pair (Provided you are in the right direction)

Raj excellent understanding... :thumb:
I prefer more of STATIC STRATEGIES rather than dynamic and LEGGING ones due the fact that the certainty part is getting dented if we mess up somewhere...
but one who can do some curve fitting activity well like you, can do better as you are doing it... this still an adventure for me

 

[toughard]

@Healthraj

The strategy has its good and its bad sides. Never mind about this. As you tell by your self: If it is understood how to manage each leg according to market moves and IMV on the options we use, no problem by what is done.

As you help others in a very good way, lets expand your post with the following: You even can play with the MM and change the amount of legs on either side to ad risk or take out risk according to market moves and IMV. An other trick to reduce your risk on the side you are absolute open (In case you do not know this): Just buy wings otm on those side and your risk is limited. I hope you have some kind of option strategy analyzing software, so you will see what I mean when you start to play around with those idea.

Take care and see you around

RAJ I second and double agree on this :thumb::thumb::thumb::thumb: keep up the good work

 

[toughard]

The three tools were developed over a period of time. I use only OAT now.
Briefly,

As a beginner, you can start with OTP - One Trade Perday
then MTP - Multiple Trades Perday
OAT - Option Analysis tool for Options and Futures trading.

Please take your time and explore. I do not have any user manual. So explore at your own will and time.

Great work... this shows you are an expert in both excel and options:clap::clap::clapping:

 

[Somatung]

Raj excellent understanding... :thumb:
I prefer more of STATIC STRATEGIES rather than dynamic and LEGGING ones due the fact that the certainty part is getting dented if we mess up somewhere...
but one who can do some curve fitting activity well like you, can do better as you are doing it... this still an adventure for me

@Toughard

I love the way you post and your enthusiasm. :lol: :thumb: Nice to see new, good educated people around the forum. One quick comment: Even static strategies fail from time to time like leg in does from time to time. Non of them is perfect and if combined the right way, that will be in many cases more or less a good compromise.

Take care and see you around

 

[toughard]

@Toughard

I love the way you post and your enthusiasm. :lol: :thumb: Nice to see new, good educated people around the forum. One quick comment: Even static strategies fail from time to time like leg in does from time to time. Non of them is perfect and if combined the right way, that will be in many cases more or less a good compromise.

Take care and see you around

thank you....

you said Even static strategies fail from time to time

can you give some example? & how?

 

[Somatung]

thank you....

you said Even static strategies fail from time to time

can you give some example? & how?

What kind of strategies do you trade and are they all the time successful?

Take care dear friend