NIFTY Options Trading by RAJ

[healthraj]

Dear Raj Sir,
How to calculate Max Pain Strike for Mar15 Series? I have no tool or any software.
I have to manually.

Dear Sir,
Rule says we should not select a pair where there is MAX OI or MAX COI.
Then what is the criterion sir?
Please also help me to download your OTA tool by providing link/page no etc
alongwith steps.

Most of the times, MAX Pain is an simple average of MAX OI @ CE and PE. For example now MAX OI is at 8500-9000. So MAX Pain is average of 8500-9000 ie 8750.

On the second part, what I meant to say is one should not select a strike which is on MAX OI for buying. The MAX OI strikes are for Selling only.

 

[nepolian]

SOMEONE... look at JindalStel... may be it is screaming to say sell the pair 190PE-170CE pair @29...

 

[foruamit2004]

Rule 1: If the MAX (CHG in OI) @ PE > MAX (CHG in OI) @ CE, then it is a Bullish market.

Why MAX (CHG in OI) PE will be a Bullish signal?
For the Market to exist we should be Have Bears and Bulls. Market is always trading in a specified range for any day. So we have to assume that BULLs will try to Protect the Bottom of the Range and Bears will Try to Protect the Top of the Range (Not let the market beyond the Range). BULLs have LONG Positions in the market. So to protect their LONGs they take the Opposite positions in the Options market by Selling the PUTS (PE) to hedge their positions, so that if the market goes in the opposite direction of their Longs they can make money using Options. But normally the market makers make money both in the Equities and in the Options market. When They build a Huge volume around a Strike Price, they are basically sending a signal to the BEARS saying "This is our area - We will not let you go below this level". So BULLs normally control a Lower Strike and BEARS normally control a Upper Strike. For a given day this Range would act as the Intraday Range.

Dear Raj,

I have query regarding the lines marked in red. You said Bulls to protect their longs positions, they sell(or short) puts. But if market goes in opposite direction(i.e. goes down) then puts value will increase, that means selling puts will also be in loss? I think this has to do something with what you said about Bulls controlling lower strike price.

- Amit C

 

[healthraj]

Dear Raj,

I have query regarding the lines marked in red. You said Bulls to protect their longs positions, they sell(or short) puts. But if market goes in opposite direction(i.e. goes down) then puts value will increase, that means selling puts will also be in loss? I think this has to do something with what you said about Bulls controlling lower strike price.

- Amit C

The first assumption is that Market always is in a Range for Period. Assume a Trading Range of 8500-9000 for Mar-15.

Now think of it like the Bulls need to defend a Line and Bears need to Defend a Line.

Bulls would have bought stocks and so would like minimum defend 8500 and not Let the go market go beyond 8500. Assume that they will have to SELL Options to defend a Strike. What will they Sell 8500CE or 8500 PE ? 8500 PE right ?

Now most of the time, if the market is Range bound then the Selling Puts will help Bulls. But in the above example if 8500 Also breaks then the Bulls will have to Defend some lower levels...

 

[sangram1705]

The first assumption is that Market always is in a Range for Period. Assume a Trading Range of 8500-9000 for Mar-15.

Now think of it like the Bulls need to defend a Line and Bears need to Defend a Line.

Bulls would have bought stocks and so would like minimum defend 8500 and not Let the go market go beyond 8500. Assume that they will have to SELL Options to defend a Strike. What will they Sell 8500CE or 8500 PE ? 8500 PE right ?

Now most of the time, if the market is Range bound then the Selling Puts will help Bulls. But in the above example if 8500 Also breaks then the Bulls will have to Defend some lower levels...

Raj Bhai,
Pl take a look and guide me on this scenario:

Max OI @ CE 1800- 5,03,750
Max OI @ PE 1700- 4,25,500
Maxpain @ 1760

Stock LTP: 1695

As per Rules, should we expect this to move towards Maxpain or consider that the support has been broken & it is poised for further downmove.

What are the rules to be considered for expecting breakout?

I have been using this tool, to trade futures & it works beautifully. But when this type of scenario arises, I dont know what to do. Am I missing something? PL help
Thanks

 

[badarivt]

As per my understanding, max pain is valid only in the last few days of expiry

 

[kcsusha]

Today's observation--If it is wrong any member free to dispute it:-
I think today Bears had upper hand as fresh CE additions were in 8700,8800,8900,9000.
Bulls have weakened with reduction on PEs in 8700,8800,8900,9000.
Is it because of Fed Meeting later today? Market could not sustain gap-up opening.

 

[soumanag]

@ 11::44 PM
FED commentary slightly dovish. DOW recovered and gained nearly 0.8%. If this holds till end of US trading then it will be a bullish signal for NIFTY. Might see a short cover rally tomorrow. Lets see how it pans out tomorrow

 

[VJAY]

Dear raj & somanag,
Please share your thoughts on useing OI analyse todays afternoon actions...
is fall is seen in OI analyse?

@3.20

 

[soumanag]

Dear raj & somanag,
Please share your thoughts on useing OI analyse todays afternoon actions...
is fall is seen in OI analyse?

@3.20

If u follow the change in the chart then u would have noticed 8700 put additions were at 15L and call was negative during 1st 3 - 4 hours then PUT OI started reducing that was the signal that bears were not letting go of 8700. Just check your charts now 8700 calls are more that puts. Also in the morning 8500 PUT was -Ve that should have been a signal.
Bears have too much power in this market.