Option Buy Recomendations

[trillian]

Dear Trillian,

Please re-read the 1st post. I have stated -

"Trend is checked at 10:30 AM-10:45 AM with 20 pts up or down from Nifty opening price.

Depending on this trend its recommended to buy Nifty call at S1
if (Opening price - price at 10:30 AM) >= 20pts.

And its recommended to buy Nifty put at R1 if (Opening price - price at 10:30 AM) =< 20pts.

SL for both put and call price = 30% of your buy price."

We do not take into a/c the previous days close to judge the trend, our base point is Nifty opening price based on which we find the trend at 10:30 AM.

Regards

But ghosh_ak34 in your first thread you have mentioned abt Gap up & gap down right? so i mentioned about the close price of yesterday.. could you correct me here if i am wrong..

And also help what S1 and R1 here whether strike price or level of nifty spot level?

Thanks..

 

[ghosh_ak34]

But ghosh_ak34 in your first thread you have mentioned abt Gap up & gap down right? so i mentioned about the close price of yesterday.. could you correct me here if i am wrong..

And also help what S1 and R1 here whether strike price or level of nifty spot level?

Thanks..

I have written that we do not take previous days closing price into a/c while calculating the current trend. Hedging is done at 3:15 PM to min. the risk arising out of gap up or gap down.

R1 and S1 are Nifty strike prices.

Regards

 

[trillian]

For example: If Nifty opens gap up at 4625 then, at 10:30 to 10:45 it came down to 4545, (4625-4545= 80) means 80 pts down from peak, means trend is down so you can buy put at R1. Again at 3:00 PM to 3:15 PM suppose Nifty is at 4570 (4570-4545=25) or 4565 (4565-4545=20) it means trend is again up. So, buy call at S1 and hold it till next day provided at this stage put's SL is not hit and you are still holding it till next day. This will protect you from risk of gap up or down opening the next day.

Suppose by 3:15 PM your SL for put has been hit then, exit the put and do not enter into any trade that day. Wait for next day and trade as per the stated strategy.

You can buy more calls or puts during the day depending on the trend.

If due to gap up next day you are making profit in call bought at S1 then, either book profit or hold it with trailing SL=10%. If put SL is hit i.e. 30% of put buy price then, square off put else hold the put.

I have an doubt over here. you mentioned about gap up & gap down. Please mention here if market opens flat what we want to do? Is there any other strategy to follow?

Thanks..

 

[ghosh_ak34]

I have an doubt over here. you mentioned about gap up & gap down. Please mention here if market opens flat what we want to do? Is there any other strategy to follow?

Thanks..

Dear Trillian,

If its flat then, we will not trade and will wait for the trend to emerge as per the strategy posted in 1st post.

Its possible that somedays we may not get any trend and its reco. not to trade that day. After all its not important to trade everyday, but its important to save your hard earned money everyday.

Regards

 

[trillian]

Dear ghosh,

thanks for your reply.Still I am confused in this R1 and S1 part. so it will be very helpful for me if you explain with an real time scenario or with an simple example which can be understand by an novice like me in option trading..

Thanks..

 

[ghosh_ak34]

Dear ghosh,

thanks for your reply.Still I am confused in this R1 and S1 part. so it will be very helpful for me if you explain with an real time scenario or with an simple example which can be understand by an novice like me in option trading..

Thanks..

Dear Trillian,

Here is an example:

Lets take R1 = 4400 and S1 = 4200.

Suppose the trend is up at 10:30 AM i.e. difference between price at opening (4230) and price at 10:30 AM (4251) >=20. Then, around 10:30 AM we will buy calls at S1 (4200) strike price with SL=30% from your buy price.

And if trend is down i.e. difference between price at opening (4291) and price at 10:30 AM (4273) =<20. Then, around 10:30 AM we will buy puts at R1(4400) strike price with SL=30%.

To understand options, please refer to 888options dot com.

Hope this helps.

Regards

 

[ghosh_ak34]

Dear Friends,

For the next week R1 =4400 and S1 = 4200. R1~S1 =< 300 and Nifty is still sideways so trade next week as per sideways strategy stated in the 1st post.

Regards

 

[trillian]

Dear ghosh,

Thanks for your valuable reply. Dont mistake me i have few doubts in this part.So please explain me..

Now I am posting this weeks calculation here:

Ghosh Correct me if I am wrong any where

25/08/08--------------------->>>>>>>>>>> 4318 4399 4318 4335
26/08/08--------------------->>>>>>>>>>> 4335 4345 4283 4338
27/08/08--------------------->>>>>>>>>>> 4337 4364 4283 4292
28/08/08--------------------->>>>>>>>>>> 4291 4305 4202 4214
29/08/08--------------------->>>>>>>>>>> 4231 4369 4231 4360


P = 4320.333333333
S1 = 4241.666666667
R1 = 4438.666666667
R1-S1 = 197

Here you said R1 & S1 are stike prices but you mentioned

Dear Friends,

For the next week R1 =4400 and S1 = 4200. R1~S1 =< 300 and Nifty is still sideways so trade next week as per sideways strategy stated in the 1st post.

Regards

Here is where i get confused in my calucation S1 = 4241.6666 & R1 = 4438.6666 and you gave that R1 = 4400 and S1 =4200. How do you calculate that?

And tell am i correct whether we want to take strike price which is near to R1 and S2?
If yes if we get R1 value around 4498 and S1 value around 4290 which strike price we want to choose?

My main question is around how to choose strike price ?

And also tell whether this strategy is only for nifty options ?

Thank you.

 

[ghosh_ak34]

Dear ghosh,

Thanks for your valuable reply. Dont mistake me i have few doubts in this part.So please explain me..

Now I am posting this weeks calculation here:

Ghosh Correct me if I am wrong any where

25/08/08--------------------->>>>>>>>>>> 4318 4399 4318 4335
26/08/08--------------------->>>>>>>>>>> 4335 4345 4283 4338
27/08/08--------------------->>>>>>>>>>> 4337 4364 4283 4292
28/08/08--------------------->>>>>>>>>>> 4291 4305 4202 4214
29/08/08--------------------->>>>>>>>>>> 4231 4369 4231 4360


P = 4320.333333333
S1 = 4241.666666667
R1 = 4438.666666667
R1-S1 = 197

Here you said R1 & S1 are stike prices but you mentioned


Here is where i get confused in my calucation S1 = 4241.6666 & R1 = 4438.6666 and you gave that R1 = 4400 and S1 =4200. How do you calculate that?

And tell am i correct whether we want to take strike price which is near to R1 and S2?
If yes if we get R1 value around 4498 and S1 value around 4290 which strike price we want to choose?

My main question is around how to choose strike price ?

And also tell whether this strategy is only for nifty options ?

Thank you.

Dear Trillian,

We take the nearest 100th Strike price based on calculated R1 and S1.

So, if R1 = 4248 or 4235 we will take R1=4200 and if R1=4398 or 4358 we will take R1=4400. Same is true for S1 as well. We normally avoid the nearest 50th strike price. And moreover, there is no strike price at fraction for Nifty like 4238 etc.

As stated earlier, this strategy is only for Nifty and not for stock options.

Hope this clears all your confusion/doubts.

Regards

 

[trillian]

Dear Trillian,

We take the nearest 100th Strike price based on calculated R1 and S1.

So, if R1 = 4248 or 4235 we will take R1=4200 and if R1=4398 or 4358 we will take R1=4400. Same is true for S1 as well. We normally avoid the nearest 50th strike price. And moreover, there is no strike price at fraction for Nifty like 4238 etc.

As stated earlier, this strategy is only for Nifty and not for stock options.

Hope this clears all your confusion/doubts.

Regards

Thanks Ghosh it has cleared my doubt.

Let me say if R1 is near 4250 then we to avoid that right? correct me if iam wrong..

Thanks.