NIFTY Options Trading by RAJ

[healthraj]

People might have seen the power of Volatility today. INDIAVIX down by 40% today. The largest drop in the last ~5 years

Even though the NIFTY moved 5 %, Since the VOLT moved down, if somebody had sold 6500-7500 Yesterday. Today they might be still be in profit. 6500PE lost 57 points and 7500CE gained only 16 points. So net profit is 40 points.

For SBIN If somebody sold 2100-2400, then since the VOLT came down from 70 to 40, the positions is still at a profit of 15 points. 2100PE has lost around 43 and 2400CE has gained only 28.

So two things very clear.

Better to buy ATM/ITM options.
When the VOLT is HIGH Sell the Pair.

Today another ~20% drop in VIX and IV. Overall drop of ~50% in IV in the last two trading days. My Pair of 6500PE-7250CE Sold on 12-May @ 259 is now at 119 with 140 points profit. Closing the pair and will switch to JUN-14 Series.

In JUN-14 the MAX OI is at 6700-7500.

SELLING the pair 6700-7500 @ 110. Will add Long Call or Put Later when the Trend is clear. Right now in the hourly charts it is Trading near the Pivot @ 7240. And the Current Trend is DOWN. The Support will come at 7140/7058/6920.

NIFTY has already bounced from the Support of 7140, which was hit on last Friday.

So if 7260 SPOT is broken then it might confrm an UP Move (till 7425, 7550) or if it breaks 7182 it might goto 7053.

 

[gmt900]

Today another ~20% drop in VIX and IV. Overall drop of ~50% in IV in the last two trading days. My Pair of 6500PE-7250CE Sold on 12-May @ 259 is now at 119 with 140 points profit. Closing the pair and will switch to JUN-14 Series.

In JUN-14 the MAX OI is at 6700-7500.

SELLING the pair 6700-7500 @ 110. Will add Long Call or Put Later when the Trend is clear. Right now in the hourly charts it is Trading near the Pivot @ 7240. And the Current Trend is DOWN. The Support will come at 7140/7058/6920.

NIFTY has already bounced from the Support of 7140, which was hit on last Friday.

So if 7260 SPOT is broken then it might confrm an UP Move (till 7425, 7550) or if it breaks 7182 it might goto 7053.

I think it would be better to wait for IV to go up before selling pair. Last time, I burnt my fingers by selling pair at low IV.

 

[toughard]

Today another ~20% drop in VIX and IV. Overall drop of ~50% in IV in the last two trading days. My Pair of 6500PE-7250CE Sold on 12-May @ 259 is now at 119 with 140 points profit. Closing the pair and will switch to JUN-14 Series.

In JUN-14 the MAX OI is at 6700-7500.

SELLING the pair 6700-7500 @ 110. Will add Long Call or Put Later when the Trend is clear. Right now in the hourly charts it is Trading near the Pivot @ 7240. And the Current Trend is DOWN. The Support will come at 7140/7058/6920.

NIFTY has already bounced from the Support of 7140, which was hit on last Friday.

So if 7260 SPOT is broken then it might confrm an UP Move (till 7425, 7550) or if it breaks 7182 it might goto 7053.

during your bearish view are you overseeing 7200 PE OI?

 

[healthraj]

Today another ~20% drop in VIX and IV. Overall drop of ~50% in IV in the last two trading days. My Pair of 6500PE-7250CE Sold on 12-May @ 259 is now at 119 with 140 points profit. Closing the pair and will switch to JUN-14 Series.

In JUN-14 the MAX OI is at 6700-7500.

SELLING the pair 6700-7500 @ 110. Will add Long Call or Put Later when the Trend is clear. Right now in the hourly charts it is Trading near the Pivot @ 7240. And the Current Trend is DOWN. The Support will come at 7140/7058/6920.

NIFTY has already bounced from the Support of 7140, which was hit on last Friday.

So if 7260 SPOT is broken then it might confrm an UP Move (till 7425, 7550) or if it breaks 7182 it might goto 7053.

Since 7260 was broken, Bought 7400 CE @ 130.

 

[new2trade]

I really need some help with a stuck trade.

I bought 6500 PE of May series at 11.75/- on Friday the Elections result day as the market was heading down due to profit-booking. But now I am stuck in this trade :annoyed:

What is the maximum price the 6500 PE can get to with the time remaining for May expiry ? Can it reach 13-14?

 

[Somatung]

I really need some help with a stuck trade.

I bought 6500 PE of May series at 11.75/- on Friday the Elections result day as the market was heading down due to profit-booking. But now I am stuck in this trade :annoyed:

What is the maximum price the 6500 PE can get to with the time remaining for May expiry ? Can it reach 13-14?

Depending on IV of the May 6500 put and the remaining days to expiration, the market has to move down today at least to 6970 to get you a price of 13 - 14. If that fall would happen, IV would rise on this strike level. Let's assume it would rise 5% to about 38, as it is now at 33 on this strike level, then your wished priced would be reached around 7050.

If the market would slowly move down in the coming days, the time decay would eat away any small rise in IV in your option. In this case with six day left to OE, market would need to be at 6850 to have your wished price. With three days left at 6710. With one day left at 6590. This to give you an approximate/rough idea what you have to expect in case no special event happen which would force a strong down move in the shortest time possible.

 

[healthraj]

I really need some help with a stuck trade.

I bought 6500 PE of May series at 11.75/- on Friday the Elections result day as the market was heading down due to profit-booking. But now I am stuck in this trade :annoyed:

What is the maximum price the 6500 PE can get to with the time remaining for May expiry ? Can it reach 13-14?

With the Current IV, for 6500 PE to reach around 13, NIFTY should touch around 7000 SPOT. My personal opinion is that NIFTY as per the Daily charts will have to correct at least till the Pivot of 7050. But whether it will happen in MAY-14 Series is a question. The Price is now 1.6. So it has become worthless. so it is better to leave it and hope for the best.

Normally in such big events I have seen the Long Straddle and Long Strangle traders making profit. But in this election since the IV was more than double the normal IV, the Premium value was lost when the IV came down and I don't think any Long Straddle made profits.

So as I have been telling, to make profits in Options, Please consider IV as an important parameter. Even if market moves 300 points, if IV comes down by say 40%, then the Option will not give any profit. Or Otherwise go for only ITM / ATM Options.

One more important point is Never buy the Option where the MAX OI is present. MAX OI was always at 6500-7500. So it was never an option to buy 6500 PE.

 

[prabhsingh]

Raj,

What i have seen is MAX OI always tend to become support/resistence points.So for if 6500 is having Max OI it would mean traders are not expecting Nifty to go below 6500 levels in May series.Please share your thoughts.

 

[healthraj]

Raj,

What i have seen is MAX OI always tend to become support/resistence points.So for if 6500 is having Max OI it would mean traders are not expecting Nifty to go below 6500 levels in May series.Please share your thoughts.

You are right it would act as the Support (MAX OI @ PE) and Resistance (MAX OI @ CE).

For example right now the MAX OI for NIFTY for MAY -14 Series is at 7000-8000.

So with the current OI, one should not Expect NIFTY to go below 7000 or go above 8000.

And if one wants to Trader for NIFTY (OTM Puts) going around 7000, one should not Buy 7000PE. One can buy anything above 7000PE say 7050Pe, 7100PE, 7200 PE etc... Ideally ATM Puts are better.

 

[prabhsingh]

You are right it would act as the Support (MAX OI @ PE) and Resistance (MAX OI @ CE).

For example right now the MAX OI for NIFTY for MAY -14 Series is at 7000-8000.

So with the current OI, one should not Expect NIFTY to go below 7000 or go above 8000.

And if one wants to Trader for NIFTY (OTM Puts) going around 7000, one should not Buy 7000PE. One can buy anything above 7000PE say 7050Pe, 7100PE, 7200 PE etc... Ideally ATM Puts are better.

Infact what i would say is instead of buying once it reaches close to 7000 one should sell 7000PE and only when support gets broken i.e heavy COI starts showing negative value then buy PE because eventually that would mean support is getting broken.Same holds true for resistance.