NIFTY Options Trading by RAJ

[anilnegi]

Actually I had stopped providing frequent updates after I provided the Intraday Strategy sometime back. I had also provided some daily guidelines and examples. But since there are some new comers, I thought I would provide some frequent updates so that People know how to interpret the data. As people say the Options Chain data and Change in OI, OI etc are available in the open in NSEIndia.com. Now how somebody interprets that data makes a lot of difference.

One challenge people will find is deciding the TREND based on the COI Data for the following reasons.

- XX50 Strikes data is not used properly and so the Accuracy of the Targets will not be good.
- My basic assumption was that the COI/OI changes when market makers are SELLing. But there are a fraction of traders who also BUY Options in HUGE quantity, which is not addressed in our assumptions. So what if the HUGE COI is a BUY and NOT A SELL. The Reason Why I am saying that it Options data is sometimes not good to Directional trading like Naked Options.
- One can also look at the Charts to take a more informed decision. I am sure Real traders also look at the Charts.
- OR it is the otherway. They look at charts and decide the TREND and for Intraday targets they could use Options Data.
- To summarize Options Data does not give the Entry point. It only gives the EXIT point.

1. For Intraday, use Charts for Entry and Use Options Chain for Exit.
2. Charts does not tell if the day is going to be FLAT. Use Options to find if the Day is going to be FLAT.

Disclaimer : I am not sure now Who in which thread is explaining all these because these are not found in any books. These are based on my "Comprehension", "Analysis", "Synthesis". Since this is not common knowledge and is purely based on my observations for the past three years, Do your own "Comprehension", "Analysis", "Synthesis" and Come to a "Conclusion" before "Application" in Real trades . I am just referring to the Blooms Taxonomy on knowledge. :thumb: :thumb:

Raj bhai

whatever u say above is very interesting, may i ask few question if you found time to answer:-

1. You said to consult chart as well, so it means option does not give idea for an entry however it give a better idea to exit.
2. Can this strategy be apply to stock as well.
3. You have said above for intraday what about positional trade can we apply this for positional as well by looking OI, again entry should be by chart and exit by option.
4. Can we use stoploss as per COI or OI for rather than chart in nifty as well as stock for intraday and positional trade
5. You mention range of 200 for nifty, how to calculate range for different stock, if this applies to stock as well

thanks
anil negi

 

[badarivt]

Dear Raj Sir,
Very amazing and lucid explanation. Hats off to you once again.
I want one clarification. For finding out MAX COI, you should consider only positive figure or absolute number. For eg if 8300CE is -200000( square off ) and 8400CE is +160000
( addition ), which will you consider for MAX COI?

Take absolute value. Negative means the level will not hold

 

[healthraj]

Dear Raj Sir,
Very amazing and lucid explanation. Hats off to you once again.
I want one clarification. For finding out MAX COI, you should consider only positive figure or absolute number. For eg if 8300CE is -200000( square off ) and 8400CE is +160000
( addition ), which will you consider for MAX COI?

Take the Absolute Value

 

[mohan.sic]

..........:thanx:

 

[healthraj]

Raj bhai

whatever u say above is very interesting, may i ask few question if you found time to answer:-

1. You said to consult chart as well, so it means option does not give idea for an entry however it give a better idea to exit.
2. Can this strategy be apply to stock as well.
3. You have said above for intraday what about positional trade can we apply this for positional as well by looking OI, again entry should be by chart and exit by option.
4. Can we use stoploss as per COI or OI for rather than chart in nifty as well as stock for intraday and positional trade
5. You mention range of 200 for nifty, how to calculate range for different stock, if this applies to stock as well

thanks
anil negi

1. Yes Take for example the BANKNIFTY. today the COI was at 18000-19000. Since it is a broad range, where will you enter. We know the target would be around 18500. So the only way is to look for entry in Charts. Once you found the right entry, using Options Chain you know that the next target would 18500 and so you can exit at 18500.

It can also give you early warnings to exit. For NIFTY chart today was showing a Support at 8355 in LTF. Options Chain was initially indicating 8375. So I was also expecting 8375. But the target changed to 8400. So somebody holding shorts could have exited early around 8400. Afterwards the target moved to 8450. Anyway today was a FLAT day. But just an example.

2. Yes I think so. I have not really traded stocks.
3. For Positional Enter and Exit at the MAX OI levels. I would assume when you say positional Trader you will either follow Hourly or Daily Charts. For Intraday trading we normally Lower time frames. So yes it is better to also get a confirmation in the charts for Positional trades also. But MAX OI should also be OK.
4. Stop loss is Trade specific. It follows Risk management
5. As I said one has to consider this Range based on the movement of the stock. So if you are trading in a particular stock then you will able to understand this.

 

[healthraj]

1. For Intraday, use Charts for Entry and Use Options Chain for Exit.
2. Charts does not tell if the day is going to be FLAT. Use Options to find if the Day is going to be FLAT.

So the moral of the story is Use Options Chain Analysis as a Supplement to your trading. Options Chain Analysis cannot be complement. It is like body builders taking Food supplements. Food + Supplements. Supplement alone will not work.

 

[mohan.sic]

:thanx:..........

 

[sangram1705]

Rajbhai,
Thanks 4 the detailed explanation.

I have a few doubts:
1) Any particular reason for watching COI at 9:30 to 10:00. Will Waiting a little longer give a clearer picture?

2) if the huge build up in COI is because of options buying & not done due to writing. does this happen frequently or these are rare cases?

3) In simple terms (without knowledge of option pricing) if huge buildup is due to buying then the price should increase. Since the buyers must be in a hurry to build their positions. So isnt there a way to get an idea if the COI built is due to writing or buying by looking/without into charts.

Sorry, if you feel that my question is silly but these doubts are striking my mind again & again.

 

[healthraj]

Rajbhai,
Thanks 4 the detailed explanation.

I have a few doubts:
1) Any particular reason for watching COI at 9:30 to 10:00. Will Waiting a little longer give a clearer picture?

2) if the huge build up in COI is because of options buying & not done due to writing. does this happen frequently or these are rare cases?

3) In simple terms (without knowledge of option pricing) if huge buildup is due to buying then the price should increase. Since the buyers must be in a hurry to build their positions. So isnt there a way to get an idea if the COI built is due to writing or buying by looking/without into charts.

Sorry, if you feel that my question is silly but these doubts are striking my mind again & again.

1. You should leave at least 30 minutes for market to settle. Waiting longer is upto the individual.
2. I would assume the volume of SELLing is more than the VOLUME of BUYing
3. Since my suggestion is to SELL Pairs, one early warning you will get is using the Volatility. If the Volatility jumps say more than 5%, then we can assume it is headed for Strong move, in which case we can expect more OTM Buys (In fact the VOLT goes UP due to BUYing in OTM Calls / Puts). So the VOLT is an indicator for BUYing. VOLT going down heavily is an indication of heavy SELLing. Plus obviously if you are good chart reader, you can also look at charts and identify TRENDing markets

 

[healthraj]

NIFTY LTF and Hourly Chart

LTF

Hourly