Option Buy Recomendations

[sanjeev28]

Dear marcus

thanks for giving the list of strategies but I have never bothered to go in details of all those as they are not very simple techniques for small time traders like us. I was not really speculating when I gave the the probable estimates of Nifty closing for tomorrow. I do analyse these trends on daily basis, and even I agree with you that nobody knows what will happen 2 days later but with the current index movements, I can see clearly the probability of index going downward is far more than going upward. For the index to go in uptrend, Nifty must close above 5831 which is a major resistance techinically and is also distant target looking at current global financial chaos. We will have to watch closings of sensex and Nifty closely for this week before confirming the trend but since our friend swargam is sitting on 100RS + profit and that too with options (calls) the risk of losing premium in volatile market is too much and it is not advisable holding these positions for long considering the time decay factor

 

[Sauve]

Thanks, I will follow your suggestion.

Dutta.

 

[pagolbaba]

ok boss nice topic,and valuable 4 us.plz follow newbee format

 

[nagendra_gb]

hI sir,

I have taken NTPC 230 call option. Wht may be ur target for this. will this go up on monday

 

[aca_trader]

Dear Sanjeev,

The advantage of options is that it has strategies to suit different market conditions, at the current time with an increase in volatility and uncertain direction it is best to use neutral stategies bullish on vloatility, some of these strategies are ..

Long Guts
Long Straddle (or Buy Straddle)
Long Strangle (or Buy Strangle)
Reverse Iron Butterfly
Reverse Iron Condor
Short Butterfly
Short Call Ladder
Short Condor
Short Put Butterfly
Short Put Ladder
Strap Strip

Among these my personal opinion is try to avoid a strategy where selling is involved for obvious reasons at the current time.

IMHO, as the IV is way too high now a days, Usually 45-50% as against Historical level of approx 30%, Selling is a better option. If one purchases options and IV drops (Reversal to mean), The option buyer will loose money even if the price does not drop. However, a drop in IV will benefit the Option Seller.

Ofcourse, to avoid the risk, one should avoid writing naked options. At the same time, purchasing naked options when IV is way too high should be avoided unless and until the bet is of very short-term nature.

Best Regards,
--Ashish

 

[marcus]

IMHO, as the IV is way too high now a days, Usually 45-50% as against Historical level of approx 30%, Selling is a better option. If one purchases options and IV drops (Reversal to mean), The option buyer will loose money even if the price does not drop. However, a drop in IV will benefit the Option Seller.

Ofcourse, to avoid the risk, one should avoid writing naked options. At the same time, purchasing naked options when IV is way too high should be avoided unless and until the bet is of very short-term nature.

Best Regards,
--Ashish

Thanks for you input Ashish, actually as options are normally short term trades its best to trade what is currently happening not what you expect to happen, if volatility is bullish and direction uncertain I think thats what one should trade. If the trend is up its best to trade in that direction rather than trade expecting the trend to end. Or if volatility is up its best to trade with that view point rather than expecting volatility to drop. This is for the short term of course.

The above strategies are meant for bullish on volatility whether you sell or buy doesn't matter, you would still make money, as long as volatility is bullish and direction is uncertain as has been these past few days. I could not understand which of the above mentioned strategies the seller would gain if volatility drops? According to me whether you use either the buy or sell strategies mentioned above you would lose either way if volatility drops. Can you please mention which of the above strategies you are referring to please?

The reason I said its best to use buy strategies and not sell strategies is because first you have margin requirements, secondly these are very uncertain times and brokers had abruptly shut there terminals a few days ago and one could not place a trade, if you are a seller and for some reason you could not get out/ square off you could end up with a margin call whereas a buyer would not. These are the reasons I meant.

Using a sell neutral strategy bullish on volatility will not result in a gain if volatility drops, it will result in a loss.

 

[aca_trader]

Thanks for you input Ashish, actually as options are normally short term trades its best to trade what is currently happening not what you expect to happen, if volatility is bullish and direction uncertain I think thats what one should trade. If the trend is up its best to trade in that direction rather than trade expecting the trend to end. Or if volatility is up its best to trade with that view point rather than expecting volatility to drop. This is for the short term of course.

The above strategies are meant for bullish on volatility whether you sell or buy doesn't matter, you would still make money, as long as volatility is bullish and direction is uncertain as has been these past few days. I could not understand which of the above mentioned strategies the seller would gain if volatility drops? According to me whether you use either the buy or sell strategies mentioned above you would lose either way if volatility drops. Can you please mention which of the above strategies you are referring to please?

The reason I said its best to use buy strategies and not sell strategies is because first you have margin requirements, secondly these are very uncertain times and brokers had abruptly shut there terminals a few days ago and one could not place a trade, if you are a seller and for some reason you could not get out/ square off you could end up with a margin call whereas a buyer would not. These are the reasons I meant.

Using a sell neutral strategy bullish on volatility will not result in a gain if volatility drops, it will result in a loss.

Hi Marcus!

My comment was not with reference to the particular strategy or set of strategy. It was just with reference to the caveat of not going for strategies which involved selling.

Regards,
--Ashish

 

[ghosh_ak34]

hI sir,

I have taken NTPC 230 call option. Wht may be ur target for this. will this go up on monday

Dear Nagendra,

Everybody is expecting gains from power stocks because of rel power listing
on Monday. Lets see how market reacts to Rel Power listing. Technically NTPC doesn't look bullish, so would suggest an exit from this counter.

Regards

 

[krishnan_vishnu]

Dear Sanjeev,

Currently sold nifty option 5400 @Rs.309/
Should I hold or squre off .Should I hedge with another option. pls recommend

Regards
Krish

Dear Sanjeev,

The advantage of options is that it has strategies to suit different market conditions, at the current time with an increase in volatility and uncertain direction it is best to use neutral stategies bullish on vloatility, some of these strategies are ..

Long Guts
Long Straddle (or Buy Straddle)
Long Strangle (or Buy Strangle)
Reverse Iron Butterfly
Reverse Iron Condor
Short Butterfly
Short Call Ladder
Short Condor
Short Put Butterfly
Short Put Ladder
Strap Strip

Among these my personal opinion is try to avoid a strategy where selling is involved for obvious reasons at the current time. Straddle, Strangles and long guts are very good choices depending upon how close we are to expiration. It is pointless speculating about the value of the nifty at this time, I think it would be more advisable to wait till nifty moves in a particular direction before speculating.

 

[krishnan_vishnu]

Dear sir,

Currently sold nifty option 5400 @Rs.309/
Should I hold or squre off .Should I hedge with another option. pls recommend

Regards
Krish