NIFTY Options Trading by RAJ
- Thread starter healthraj
- Start date
- Tags nifty options chain raj oat
Here some help to the ongoing problem about calculating IV.
http://i41.tinypic.com/2w3wexd.png
http://i40.tinypic.com/348ltmb.png
As of today, every platform from a broker who offers option trading should at least be able to show the IV of every option strike price he offers his clients to trade.
Next is some little help for those who are not so much adversed in option trading and may never heard about what IV is. I will not go much in theory instead show some screen shots which should make it clear what IV is. If you still have a problem with that, visit my thread about Option trading.
Here a past example from the S&P 500, which shows how important it is to know the IV of puts and calls at any strike level at any time we want to trade them. In this example http://i41.tinypic.com/xfrl8k.png; both put and call, have been 25 points far away from the current future strike level at 1525. The future level is marked with this symbol: >. You see clearly how different the IV was on those option levels by looking at the yellow marked lines. The 1500 put had an IV of 14.1 and the 1550 call had an IV of 10.2. You even see it on the value of the price, as IV has a direct impact on those option values. You can see the put is valued with 7.66 (higher vola compare to the call) and the call only has a value of 5.20 (lower vola compare to the put), even if both of them have exactly the same distance to the current future strike level.
Now coming to the next example which is in Corn. I am clear that you not can trade options on Corn in your place, but that is not the point. Have a look again at the spotted levels, marked in yellow and what do you see? http://i42.tinypic.com/2akmycl.png Here the actual Future was at 330 and you see the atm call 330 and the far out of the money 460 call. You see clearly the different the IV had at those different option strike levels. The atm 330 call had an IV of 33.2% and the otm 460 call even had an IV of 46.5%. So otm options can have a huge IV and this we need to know at the time we want to use those options for any trading idea we have in mind.
Take care / DanPickUp
http://i41.tinypic.com/2w3wexd.png
http://i40.tinypic.com/348ltmb.png
As of today, every platform from a broker who offers option trading should at least be able to show the IV of every option strike price he offers his clients to trade.
Next is some little help for those who are not so much adversed in option trading and may never heard about what IV is. I will not go much in theory instead show some screen shots which should make it clear what IV is. If you still have a problem with that, visit my thread about Option trading.
Here a past example from the S&P 500, which shows how important it is to know the IV of puts and calls at any strike level at any time we want to trade them. In this example http://i41.tinypic.com/xfrl8k.png; both put and call, have been 25 points far away from the current future strike level at 1525. The future level is marked with this symbol: >. You see clearly how different the IV was on those option levels by looking at the yellow marked lines. The 1500 put had an IV of 14.1 and the 1550 call had an IV of 10.2. You even see it on the value of the price, as IV has a direct impact on those option values. You can see the put is valued with 7.66 (higher vola compare to the call) and the call only has a value of 5.20 (lower vola compare to the put), even if both of them have exactly the same distance to the current future strike level.
Now coming to the next example which is in Corn. I am clear that you not can trade options on Corn in your place, but that is not the point. Have a look again at the spotted levels, marked in yellow and what do you see? http://i42.tinypic.com/2akmycl.png Here the actual Future was at 330 and you see the atm call 330 and the far out of the money 460 call. You see clearly the different the IV had at those different option strike levels. The atm 330 call had an IV of 33.2% and the otm 460 call even had an IV of 46.5%. So otm options can have a huge IV and this we need to know at the time we want to use those options for any trading idea we have in mind.
Take care / DanPickUp
Premji - I'm able to download it, many thanks.
Quick question for you/Dan/other seniors -
1. Isn't at high VIX levels (eg: 30-35), market tends to go up and at low vix levels (eg: 12-13) market tends to fall. They are same as overbought/oversold levels of RSI but in opposite direction.
2. At high volatility, we should be selling options to eat more premiums. What parameters in terms of IV levels, etc. should we be looking to judge high/low volatility?
Kindly clarify.
Quick question for you/Dan/other seniors -
1. Isn't at high VIX levels (eg: 30-35), market tends to go up and at low vix levels (eg: 12-13) market tends to fall. They are same as overbought/oversold levels of RSI but in opposite direction.
2. At high volatility, we should be selling options to eat more premiums. What parameters in terms of IV levels, etc. should we be looking to judge high/low volatility?
Kindly clarify.
Raj, We have definitely learnt to predict the broader market using the tools and the information you provided. for example I was able to guess on the expiry is 6285 - 6310.
Predicting the exact move is not possible and probably not required. My suggestion would be to implement strategies for trading rather than do an intraday trade.
No one makes money intraday
Predicting the exact move is not possible and probably not required. My suggestion would be to implement strategies for trading rather than do an intraday trade.
No one makes money intraday
lol rules are simple New highs are made in bulls market and new lows will be made in bear market.
Technique is to buy high and sell even higher :xD
Yesterday i was looking at charts lol and something in my mind said look like it i snot going to fall beyond 6100 anymore and if 6100 - 6200 remanins unbroken for coming week it will definitely create new high in jan within 2 weeks :xD
Again back to basis when i am on trading screen All rules are broken and lol stop loss is only saver loool:rofl::rofl:
According to me it;s gone a cross 6400 so jan is month of call :xD
I deserve to be wrong tho ... :xD my thinking and i trade by my thinking
Technique is to buy high and sell even higher :xD
Yesterday i was looking at charts lol and something in my mind said look like it i snot going to fall beyond 6100 anymore and if 6100 - 6200 remanins unbroken for coming week it will definitely create new high in jan within 2 weeks :xD
Again back to basis when i am on trading screen All rules are broken and lol stop loss is only saver loool
:rofl::rofl:According to me it;s gone a cross 6400 so jan is month of call :xD
I deserve to be wrong tho ... :xD my thinking and i trade by my thinking
Last edited:
lol rules are simple New highs are made in bulls market and new lows will be made in bear market.
Technique is to buy high and sell even higher :xD
Yesterday i was looking at charts lol and something in my mind said look like it i snot going to fall beyond 6100 anymore and if 6100 - 6200 remanins unbroken for coming week it will definitely create new high in jan within 2 weeks :xD
Again back to basis when i am on trading screen All rules are broken and lol stop loss is only saver loool:rofl::rofl:
According to me it;s gone a cross 6400 so jan is month of call :xD
I deserve to be wrong tho ... :xD my thinking and i trade by my thinking
Technique is to buy high and sell even higher :xD
Yesterday i was looking at charts lol and something in my mind said look like it i snot going to fall beyond 6100 anymore and if 6100 - 6200 remanins unbroken for coming week it will definitely create new high in jan within 2 weeks :xD
Again back to basis when i am on trading screen All rules are broken and lol stop loss is only saver loool
:rofl::rofl:According to me it;s gone a cross 6400 so jan is month of call :xD
I deserve to be wrong tho ... :xD my thinking and i trade by my thinking
Premji - For December, our OAT sheet showed 6200 as max pain and Raj explanation based on high and low of Dec series was 6275. How did you predict 6285-6310? You said using 3 tools to track pain, can you please advise?
Hi Dprikka
One first thing: Do only trade what you understand and do not trade what you do not understand. I do not know what kind of experience you have in option trading nor do I have any clue about what kind of option trader you are (Directional-,Strategical-, Back spread-, Time decay-, Delta Trader and so on). All those definitions are used for option traders and not about future traders. If you already would have a problem to understand those terms of definitions, then I would recommend you to work once through my thread about option trading. http://www.traderji.com/options/66266-option-trading-danpickup.html#post639903 It is basic stuff about option trading.
Now coming to your question about using that IV information in our option trading. Simple answer: For some option trader IV is of little value/use as they do scalp trading or only very short time intra day option trades. In that case they not even look at IV.
For other option traders IV is a measurement to know about there risk they have on there specific option legs. Those are in general strategically option traders who plan there trades/ideas they want to implement in the market.
A third group are those traders which want to sell high IV options and prefer to buy low IV options. They use volatility skews on options to find miss balances between them and to see if they are over or under priced according to the fair value. Pro Option Matrixes offer such tools.
I will make a simple example which spots to the strategically option traders. Let's have a look at a Short or long Strangle, because this you can trade in your markets. First check the HV of the underlying. If it is low then choose the long strangle and if HV is high, then choose the short strangle. Let's assume HV is low and we choosed the long strangle. To keep it simple I will talk about a trade which is implemented at once and not by leg in. Now we look at our option matrix, for example here: http://tinypic.com/view.php?pic=xfrl8k&s=5 and we have to decide about the option strike levels we want to choose for those long strangle. We can go for a delta neutral long strangle, we can go for a price equal play on the legs in this long strangle or we can go for an IV play on the legs from this long strangle.
Delta play: For example the 1550 call and the 1500 put. Both have the same distance to the actual future strike level, so delta is the same on the plus and minus side (Call is plus delta and put is minus delta). But as we see the IV of each option leg, we get to know that the risk will be higher on the put leg compare to the call leg, as the put leg has a higher IV. It is also clearly reflected through the higher price the put leg has.
Price neutral play: Here we choose the 1550 call (5.20) and the 1485 put (5.60). Risk again higher on the put leg as the IV is far above the IV from the call leg.
IV play: If we want to have that risk equal on each side we not can choose the long strangle instead we have to choose a long straddle as only the 1525 call and 1525 put have more or less the same IV. The call has an IV of 12.1% and the put has an IV of 12.5%.
Enjoy your Sunday / DanPickUp
One first thing: Do only trade what you understand and do not trade what you do not understand.
I do not know what kind of experience you have in option trading nor do I have any clue about what kind of option trader you are (Directional-,Strategical-, Back spread-, Time decay-, Delta Trader and so on). All those definitions are used for option traders and not about future traders. If you already would have a problem to understand those terms of definitions, then I would recommend you to work once through my thread about option trading. http://www.traderji.com/options/66266-option-trading-danpickup.html#post639903 It is basic stuff about option trading.Now coming to your question about using that IV information in our option trading. Simple answer: For some option trader IV is of little value/use as they do scalp trading or only very short time intra day option trades. In that case they not even look at IV.
For other option traders IV is a measurement to know about there risk they have on there specific option legs. Those are in general strategically option traders who plan there trades/ideas they want to implement in the market.
A third group are those traders which want to sell high IV options and prefer to buy low IV options. They use volatility skews on options to find miss balances between them and to see if they are over or under priced according to the fair value. Pro Option Matrixes offer such tools.
I will make a simple example which spots to the strategically option traders. Let's have a look at a Short or long Strangle, because this you can trade in your markets. First check the HV of the underlying. If it is low then choose the long strangle and if HV is high, then choose the short strangle. Let's assume HV is low and we choosed the long strangle. To keep it simple I will talk about a trade which is implemented at once and not by leg in. Now we look at our option matrix, for example here: http://tinypic.com/view.php?pic=xfrl8k&s=5 and we have to decide about the option strike levels we want to choose for those long strangle. We can go for a delta neutral long strangle, we can go for a price equal play on the legs in this long strangle or we can go for an IV play on the legs from this long strangle.
Delta play: For example the 1550 call and the 1500 put. Both have the same distance to the actual future strike level, so delta is the same on the plus and minus side (Call is plus delta and put is minus delta). But as we see the IV of each option leg, we get to know that the risk will be higher on the put leg compare to the call leg, as the put leg has a higher IV. It is also clearly reflected through the higher price the put leg has.
Price neutral play: Here we choose the 1550 call (5.20) and the 1485 put (5.60). Risk again higher on the put leg as the IV is far above the IV from the call leg.
IV play: If we want to have that risk equal on each side we not can choose the long strangle instead we have to choose a long straddle as only the 1525 call and 1525 put have more or less the same IV. The call has an IV of 12.1% and the put has an IV of 12.5%.
Enjoy your Sunday / DanPickUp
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