NIFTY Options Trading by RAJ

[new2trade]

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.

If the hourly charts of Nifty are showing a SELL signal, why is the market not correcting as a correction is due ? Thanks

 

[new2trade]

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.

Thanks for the explanation! Ok I get it. The hourly charts of Nifty are showing a SELL signal but the markets do not seem to correct to 7000 ? Is the signal wrong or whats up ?

 

[healthraj]

If the hourly charts of Nifty are showing a SELL signal, why is the market not correcting as a correction is due ? Thanks

The Market has corrected from the Highs of 7564 to 7132 and now trading at 7270. That was a correction of more than 330 points. But what you are expecting is for NIFTY to correct 500 to 1000 points from 7500 to 7000/6500 at one go... Which will not happen. And which might not happen before the MAY-14 expiry.

Even as per the current trend in the Hourly charts the support is at 7204 / 7170. So to expect 7000 or 6500 something drastic should happen. So what is the drastic thing you are expecting. Right now the mood is positive after the election results.

 

[gmt900]

Since yesterday max pain is at 7000

 

[healthraj]

Since yesterday max pain is at 7000

MAX Pain is at 7100

 

[new2trade]

The Market has corrected from the Highs of 7564 to 7132 and now trading at 7270. That was a correction of more than 330 points. But what you are expecting is for NIFTY to correct 500 to 1000 points from 7500 to 7000/6500 at one go... Which will not happen. And which might not happen before the MAY-14 expiry.

Even as per the current trend in the Hourly charts the support is at 7204 / 7170. So to expect 7000 or 6500 something drastic should happen. So what is the drastic thing you are expecting. Right now the mood is positive after the election results.

Ok i understand. But now that elections results are out and the new government is set to be formed, its become old news as the new government has yet to prove its worth after coming to power. So I was expecting a sell-off followed by buying when they present the budget/policies etc?

 

[onlinegtrash]

Ok i understand. But now that elections results are out and the new government is set to be formed, its become old news as the new government has yet to prove its worth after coming to power. So I was expecting a sell-off followed by buying when they present the budget/policies etc?

don't guess! trade what you see in the chart.
don't impose your ideas on market... market may start a crash if there is some macro economic change say... US dollar melt down of some sorts...
or market may not crash at all...

Follow the market.

When you are in conflict with market, correct your trades/positions... don't sit and find an explanation to things... explanations and reasons don't matter!

 

[toughard]

don't guess! trade what you see in the chart.
don't impose your ideas on market... market may start a crash if there is some macro economic change say... US dollar melt down of some sorts...
or market may not crash at all...

Follow the market.

When you are in conflict with market, correct your trades/positions... don't sit and find an explanation to things... explanations and reasons don't matter!

I agree, why we should dictate & guess... 1000 theories like IV's are existing only to form an illusion to keep a trader away from reality...

 

[toughard]

So it was never an option to buy 6500 PE.

true,
more you have real time experience....
more you develop realistic expectations...

 

[new2trade]

If the hourly charts are showing SELL signal, I expected some good correction to 6900-7000 considering markets reached at lifetime highs and no one should be buying at these levels. Confusing!