Option trading with DanPickUp
- Thread starter DanPickUp
- Start date
- Status
Dear Monasona
Will take my time until Saturday evening. May I ask what kind of tools you use, so I may even can explain some stuff on that tools. Let me ask this<
-Stock or future options
-If Nifty options, where do you get your option chain from
-What kind of chart do you work with< Amibroker or any link from the net
-Any specific indicator you work with
-How much experience do you have with option trading
-Are you familiar with the option greeks
-Are you familiar with open interest
-Are you familiar with atm, otm and itm options
-How much margin can you afford
-Did you ever trade any calendar spread
-If so, what kind of calendar spread do you want to discuss or want me to explain to you, as there are various ways to trade calendar spreads
-And the last question< Can you use any software which shows you the analyzing picture from any option strategy you want to implement or control
If I know a bit more about you, my answers can be more precisely and adjusted to your knowledge or my knowledge, which helps you and me in the process of making it to the point.
DanPickUp
Will take my time until Saturday evening. May I ask what kind of tools you use, so I may even can explain some stuff on that tools. Let me ask this<
-Stock or future options
-If Nifty options, where do you get your option chain from
-What kind of chart do you work with< Amibroker or any link from the net
-Any specific indicator you work with
-How much experience do you have with option trading
-Are you familiar with the option greeks
-Are you familiar with open interest
-Are you familiar with atm, otm and itm options
-How much margin can you afford
-Did you ever trade any calendar spread
-If so, what kind of calendar spread do you want to discuss or want me to explain to you, as there are various ways to trade calendar spreads
-And the last question< Can you use any software which shows you the analyzing picture from any option strategy you want to implement or control
If I know a bit more about you, my answers can be more precisely and adjusted to your knowledge or my knowledge, which helps you and me in the process of making it to the point.
DanPickUp
Reply
A very good morning and thank you for your queries.
You may post your answers in the forum (for the benefit of large community) or write to me at subhojit0669 AT gmail.com ( in case my queries are very specific).
No problem with time : please reply when you can.
My reply to your queries are in red coloured texts (see below):
Will take my time until Saturday evening. May I ask what kind of tools you use, so I may even can explain some stuff on that tools. Let me ask this<
-Stock or future options : STOCK OPTIONS
-If Nifty options, where do you get your option chain from : From NSE INDIA website.
-What kind of chart do you work with< Amibroker or any link from the net : amibroker
-Any specific indicator you work with [mostly volatility though follow indicators like MA, ADX ]
-How much experience do you have with option trading [ very little only 3 months]
-Are you familiar with the option greeks : Yes
-Are you familiar with open interest ; Yes
-Are you familiar with atm, otm and itm options : Yes
-How much margin can you afford : 2 lakhs
-Did you ever trade any calendar spread : No
-If so, what kind of calendar spread do you want to discuss or want me to explain to you, as there are various ways to trade calendar spreads
-And the last question< Can you use any software which shows you the analyzing picture from any option strategy you want to implement or control : NO..I will try to download Option Oracle if required.
If I know a bit more about you, my answers can be more precisely and adjusted to your knowledge or my knowledge, which helps you and me in the process of making it to the point.
Thanking you in advance.
Regards
DanPickUp[/QUOTE]
A very good morning and thank you for your queries.
You may post your answers in the forum (for the benefit of large community) or write to me at subhojit0669 AT gmail.com ( in case my queries are very specific).
No problem with time : please reply when you can.
My reply to your queries are in red coloured texts (see below):
Will take my time until Saturday evening. May I ask what kind of tools you use, so I may even can explain some stuff on that tools. Let me ask this<
-Stock or future options : STOCK OPTIONS
-If Nifty options, where do you get your option chain from : From NSE INDIA website.
-What kind of chart do you work with< Amibroker or any link from the net : amibroker
-Any specific indicator you work with [mostly volatility though follow indicators like MA, ADX ]
-How much experience do you have with option trading [ very little only 3 months]
-Are you familiar with the option greeks : Yes
-Are you familiar with open interest ; Yes
-Are you familiar with atm, otm and itm options : Yes
-How much margin can you afford : 2 lakhs
-Did you ever trade any calendar spread : No
-If so, what kind of calendar spread do you want to discuss or want me to explain to you, as there are various ways to trade calendar spreads
-And the last question< Can you use any software which shows you the analyzing picture from any option strategy you want to implement or control : NO..I will try to download Option Oracle if required.
If I know a bit more about you, my answers can be more precisely and adjusted to your knowledge or my knowledge, which helps you and me in the process of making it to the point.
Thanking you in advance.
Regards
DanPickUp[/QUOTE]
Hi Monasona
She or he, I do not know as your avatar name sounds like a woman and the other name I see sounds like a man. But never mind as the subject is Calendar Spreads.
First of all< I am a pure future option trader and the last trade with a share option I did back in 1998. As share option trading is a bit different compare to future option trading, I may not be the right one to explain how a calendar spread is best made with share options.
My concern about trading calendars with Indian share option would surely be the demand for those options, as there is not much in India for those share options. But that is your decision as it is your money you want to invest.
As you never traded any calendar spreads before, it does not matter which one you do for the first time. Lets do it with a double calendar spread. Why< As told, I am a pure future option trader and I not going to bluff uff with some thing I am not very well experienced in it. But I have a colleague with the nickname DarkDoc, which is a pure share option trader. I had a talk with him a certain time ago when I was confronted with share fund trading and the following is the way he trades his Double Calendar Spreads<
Double calendars are a very effective technique to collect volatility prior to earnings announcements. As in any calendar trade, three quarters of the technique for a winning trade is your stock selection. In this case you are looking for several specific things, and some of the rules are different than you would usually trade for an income calendar.
When making a selection of the underlying stock (we are usually talking about stocks in this case since indices and ETF's will not usually announce earnings) we look for the following characteristics:
1. Pick a stock that tends to have a large volatility increase in the 14-20 days before earnings. Some stocks you know always have big volatility increases before earnings. First you go to a earning webpage to look at their earnings calendar, and find the stocks that are announcing earnings three to four weeks from now. Look at all the stocks for that week and pick out the ones that you recognize as being fairly volatile stocks. You then go to Amibroker, bring up the chart for each stock, and look at a daily chart for one year.
2. Ideally you want a stock that is more or less channeling for the last week or two. If the prices is in a fairly tight range, it just makes it easier to pick strikes for the calendars that are closer together.
3. Make sure that implied volatility is shown with the stock chart. Also make sure that the earnings dates are displayed on the stock chart. Now just look at the implied volatility (you just use your eyes for this test, not a scanner) to see if there tends to be a spike in the 2-3 weeks before the earnings announcement. Ideally, you want to find that the volatility increases about 10 to 15% prior to earnings. Since calendars are very sensitive to volatility, and they are all positive Vega spreads, an increase in volatility will increase the value of the spread considerably.
4. Since we are looking for a volatility increase, you'll get the somewhat better results if the volatility is starting at the lower range (in the lower 1/3 historically) rather than in the upper 50% of its historical volatility range. Because many stocks have a spike in volatility prior to earnings anyway, this may be less critical than it is with the average income calendar, but still, why not try to put more things on your site prior to putting on the trade.
5. Try to pick a stocks with high values. After all, you want to get paid for all this work. Higher priced stocks usually make more.
In the typical income calendar, you care a great deal about the volatility skew. You don't want your front month to be more than 2% less than the back month (negative skew), or more than 6% greater than the back month (positive skew). But when placing a double calendar for the purpose of buying volatility, you can probably be much more liberal about this. You'll sometimes see large negative skews prior to earnings, and as long as it's still in the lower historical 1/3, it will usually work out just fine.
Place the trade approximately 21 days prior to the earnings announcement. Because you're buying volatility, you need to exit the trade prior to the earnings announcement. If you wait until afterwards, the volatility will rapidly drain out of your trade and all your profit with it. Volatility crush is usually at its worst after earnings announcements.
Pay close attention also to option expiration. If your front month expires prior to the earnings announcement, you need to exit prior to expiration. If the earnings announcement is more than one week after option expiration, it may work better to sell your short options one month farther out - the disadvantage to this is that farther out month's usually have less Vega (less volatility increase) than the front month. You'll just need to test the trade to see which is better.
Select strike prices for your calendars that have breakevens that surround the current range of the stock price. On some stocks, if the ranges are larger, this might mean your strike prices start to get a little far apart. Looking at the profit/loss graph for expiration, you'll see a big sag in the middle. This still may work well if you get that expected 10% volatility increase and it will correct itself very nicely. Again, you'll just have to test it to see if it works OK.
If stock prices go all crazy in the first week of the trade, then you may need to just take the whole thing off and reposition it after a couple of days (after the market settles down a little). Otherwise, you can adjust these, if needed, by exiting some of your positions at the bad end, and reposition them at a new strike price that covers your stock price range.
I would say that most of the time, because stock price movement seems to settle down somewhat just before earnings, a good amount of the time you'll find these spreads don't need to be adjusted though.
I hope that serves your question and all the thanks go to DD. Now I wish you a nice weekend.
DanPickUp
She or he, I do not know as your avatar name sounds like a woman and the other name I see sounds like a man. But never mind as the subject is Calendar Spreads.
First of all< I am a pure future option trader and the last trade with a share option I did back in 1998. As share option trading is a bit different compare to future option trading, I may not be the right one to explain how a calendar spread is best made with share options.
My concern about trading calendars with Indian share option would surely be the demand for those options, as there is not much in India for those share options. But that is your decision as it is your money you want to invest.
As you never traded any calendar spreads before, it does not matter which one you do for the first time. Lets do it with a double calendar spread. Why< As told, I am a pure future option trader and I not going to bluff uff with some thing I am not very well experienced in it. But I have a colleague with the nickname DarkDoc, which is a pure share option trader. I had a talk with him a certain time ago when I was confronted with share fund trading and the following is the way he trades his Double Calendar Spreads<
Double calendars are a very effective technique to collect volatility prior to earnings announcements. As in any calendar trade, three quarters of the technique for a winning trade is your stock selection. In this case you are looking for several specific things, and some of the rules are different than you would usually trade for an income calendar.
When making a selection of the underlying stock (we are usually talking about stocks in this case since indices and ETF's will not usually announce earnings) we look for the following characteristics:
1. Pick a stock that tends to have a large volatility increase in the 14-20 days before earnings. Some stocks you know always have big volatility increases before earnings. First you go to a earning webpage to look at their earnings calendar, and find the stocks that are announcing earnings three to four weeks from now. Look at all the stocks for that week and pick out the ones that you recognize as being fairly volatile stocks. You then go to Amibroker, bring up the chart for each stock, and look at a daily chart for one year.
2. Ideally you want a stock that is more or less channeling for the last week or two. If the prices is in a fairly tight range, it just makes it easier to pick strikes for the calendars that are closer together.
3. Make sure that implied volatility is shown with the stock chart. Also make sure that the earnings dates are displayed on the stock chart. Now just look at the implied volatility (you just use your eyes for this test, not a scanner) to see if there tends to be a spike in the 2-3 weeks before the earnings announcement. Ideally, you want to find that the volatility increases about 10 to 15% prior to earnings. Since calendars are very sensitive to volatility, and they are all positive Vega spreads, an increase in volatility will increase the value of the spread considerably.
4. Since we are looking for a volatility increase, you'll get the somewhat better results if the volatility is starting at the lower range (in the lower 1/3 historically) rather than in the upper 50% of its historical volatility range. Because many stocks have a spike in volatility prior to earnings anyway, this may be less critical than it is with the average income calendar, but still, why not try to put more things on your site prior to putting on the trade.
5. Try to pick a stocks with high values. After all, you want to get paid for all this work. Higher priced stocks usually make more.
In the typical income calendar, you care a great deal about the volatility skew. You don't want your front month to be more than 2% less than the back month (negative skew), or more than 6% greater than the back month (positive skew). But when placing a double calendar for the purpose of buying volatility, you can probably be much more liberal about this. You'll sometimes see large negative skews prior to earnings, and as long as it's still in the lower historical 1/3, it will usually work out just fine.
Place the trade approximately 21 days prior to the earnings announcement. Because you're buying volatility, you need to exit the trade prior to the earnings announcement. If you wait until afterwards, the volatility will rapidly drain out of your trade and all your profit with it. Volatility crush is usually at its worst after earnings announcements.
Pay close attention also to option expiration. If your front month expires prior to the earnings announcement, you need to exit prior to expiration. If the earnings announcement is more than one week after option expiration, it may work better to sell your short options one month farther out - the disadvantage to this is that farther out month's usually have less Vega (less volatility increase) than the front month. You'll just need to test the trade to see which is better.
Select strike prices for your calendars that have breakevens that surround the current range of the stock price. On some stocks, if the ranges are larger, this might mean your strike prices start to get a little far apart. Looking at the profit/loss graph for expiration, you'll see a big sag in the middle. This still may work well if you get that expected 10% volatility increase and it will correct itself very nicely. Again, you'll just have to test it to see if it works OK.
If stock prices go all crazy in the first week of the trade, then you may need to just take the whole thing off and reposition it after a couple of days (after the market settles down a little). Otherwise, you can adjust these, if needed, by exiting some of your positions at the bad end, and reposition them at a new strike price that covers your stock price range.
I would say that most of the time, because stock price movement seems to settle down somewhat just before earnings, a good amount of the time you'll find these spreads don't need to be adjusted though.
I hope that serves your question and all the thanks go to DD. Now I wish you a nice weekend.
DanPickUp
Re: Thanks
Dear Sir
Thank you for your help in understanding calendar spread. Convey my regards to DD sir as well.
Monasona is the nick name of a man.
Sir I am little confused: you wrote that you are a pure future option trader. Do you mean that you trade options for the forthcoming months or there are also options available on Futures ( contracts) [ Futures and Options]?
I wanted to play Nifty using strategies coupling two months. Thats where my query arises about calendar spread...
For example: I want to sell 5600 Jan Call and buy Feb 5600 Call...something like this.
In any case you deserve appreciation for your effort of educating others.
Thank you so much Sir.
Regards
Monasona
Dear Sir
Thank you for your help in understanding calendar spread. Convey my regards to DD sir as well.
Monasona is the nick name of a man.
Sir I am little confused: you wrote that you are a pure future option trader. Do you mean that you trade options for the forthcoming months or there are also options available on Futures ( contracts) [ Futures and Options]?
I wanted to play Nifty using strategies coupling two months. Thats where my query arises about calendar spread...
For example: I want to sell 5600 Jan Call and buy Feb 5600 Call...something like this.
In any case you deserve appreciation for your effort of educating others.
Thank you so much Sir.
Regards
Monasona
Re: Thanks
Hi Monasona
Options are available on futures. In India the Exchange does not offer much on options. But I guess you know that. On the other hand, I trade with the CME http://www.cmegroup.com/product-codes-listing/cbot-market.html .
The CME is the most advanced place in the world when it comes to option trading, as they offer on any kind of product various options. As you see in the link, which is only part of the CMEgroupe, we have options on what ever future exist and that includes agriculture, energies, metals, equity indexes and so on . Check also the COMEX and the NYMEX, which offers also Swaps on various futures.
Now to your Calendar Spread example> Sell 5600 Jan Call and buy Feb 5600 Call.
Yes you can do that. That would be a classical Calendar Call spread which is bullish. Information about the different traditional calendar spreads and how they are done can you find all over the net. Here just two links http://www.optiontradingpedia.com/free_calendar_call_spread.htm and http://www.optiontradingpedia.com/diagonal_calendar_call_spread.htm
For a beginner, all the information is given. Even a bit more advanced option trader will find more than enough information.
I will show once how a calendars can be traded. The following you have never seen in the forum any where. Now first have a look at the analyze pictures in the given links. What do you see<
The legs on the right side and on the left side are all under the zero line and the middle is a few % over the zero line. That little % are, if market not moves to any leg, the profit which can be made. If market now moves to any leg, you then have to adjust that specific leg by buying or selling it by moving up or down to the next strike level to widen your range in the direction the market moves. Possibility of profit stays in general the same after you adjusted that trade.
Most will implement such calendar spreads and specially straddles and strangles over a math range which is called Standard Deviation. That is what is posted all over the net and that is not wrong. It is just not the holy grail and it gives limited profits by doing it that way. But as most try to learn option trading over the net, they do not know what else to do when it comes to make good money and not only some % and that is the different from option pros to non pros. But that is with every job in live.
Now have a look at the following picture and then compare that picture with what you seen in the above two links http://i47.tinypic.com/fwko79.png .
Did you spot it< This calendar spread is flying. The dotted line is the zero line which includes all STDV and what so ever. Why is this calendar spread over the zero line and all what is shown and told in the net and published as the only and true thing is not<
Because it is not traded the way it is shown all over the net with all that perfect tools and in that way the profit look different and in many cases much better. If we would put the calendar spread just over standard deviation one, which is all over recommended and some even advocate as the thing, we never ever would and will get such analyze pictures and good money trades.
http://i48.tinypic.com/17z9dd.png Here you see the chart from Euro Currency with BB in a narrow range. Market gaped up to 143.12 in that narrow range and it was decided to take a directional trade with two long Dec 142 puts with a life time of 44 days and a defined stop loss. Vola was low, as seen in the narrow range, means we can take long positions as the premium is low. 44 days for the options gave us enough time to give the market time to go in the wished direction. No special indicators used, just outside BB, so market should come back into the BB range http://i46.tinypic.com/icmq1e.png
Shortly after having the Dec 142 puts, market went back into the BB and even gaped to the middle of it which was 142.00. Decision was token to sell here just one atm Nov 142 put to save profit. What do we have now< This is called a Put Calendar Back spread as we are two long dec and one short nov in options. http://i50.tinypic.com/52kfb6.png
Next day market gaped up again to 143.05. As we had that short Nov 142 put, we bought it back to take profit on that leg. In that way our entry price for the Dec puts also came down. Now we again had only that two Dec 142 put in the trade and those puts still had little profit and stop loss was not touched. http://i49.tinypic.com/241paao.png
The next day market opened lower compare to yesterday. As we have been long puts, there was nothing to do. But then in between 24 hours the market went back to the last high at 143.50. Now decision was token to sell the atm Nov 143.5 put. http://i47.tinypic.com/2vt1wnd.png Now we had again a put calendar back spread which was now over the zero line because of the profit we took on the trade with the short 142 Nov put.
Here you see the matrix with the traded positions http://i46.tinypic.com/4zx30y.png and here you see the whole analyzing picture with the left three positions http://i49.tinypic.com/30bfry1.jpg
Finally< You see, there is much more behind option trading as you will find in the open resources shown. Most of you probably will not have recognized that I made a mistake in the above example, which was my first ever traded calendar a few years ago. It was traded on a level, even I made that mistake, where there was no loss no matter where market moves. Now what could that mistake be<
The trend is up and I made a Put calendar back spread instead a Call calendar back spread. My mentor then told me the mistake and we had a good laugh about it as he never told me the mistake until the trade was finished. So we all start some where
Hope you enjoyed that post as this is just one way to trade calendars or at least how to use different options, play with them the market, convert them in to different strategies by legging in and out, going back to few legs and again adding other legs and so on. You can improve the way of trading I just showed and then the calendar back spread even looks like that http://i46.tinypic.com/iv8e3p.png
Good luck to all and good trading
DanPickUp
Hi Monasona
Options are available on futures. In India the Exchange does not offer much on options. But I guess you know that. On the other hand, I trade with the CME http://www.cmegroup.com/product-codes-listing/cbot-market.html .
The CME is the most advanced place in the world when it comes to option trading, as they offer on any kind of product various options. As you see in the link, which is only part of the CMEgroupe, we have options on what ever future exist and that includes agriculture, energies, metals, equity indexes and so on . Check also the COMEX and the NYMEX, which offers also Swaps on various futures.
Now to your Calendar Spread example> Sell 5600 Jan Call and buy Feb 5600 Call.
Yes you can do that. That would be a classical Calendar Call spread which is bullish. Information about the different traditional calendar spreads and how they are done can you find all over the net. Here just two links http://www.optiontradingpedia.com/free_calendar_call_spread.htm and http://www.optiontradingpedia.com/diagonal_calendar_call_spread.htm
For a beginner, all the information is given. Even a bit more advanced option trader will find more than enough information.
I will show once how a calendars can be traded. The following you have never seen in the forum any where. Now first have a look at the analyze pictures in the given links. What do you see<
The legs on the right side and on the left side are all under the zero line and the middle is a few % over the zero line. That little % are, if market not moves to any leg, the profit which can be made. If market now moves to any leg, you then have to adjust that specific leg by buying or selling it by moving up or down to the next strike level to widen your range in the direction the market moves. Possibility of profit stays in general the same after you adjusted that trade.
Most will implement such calendar spreads and specially straddles and strangles over a math range which is called Standard Deviation. That is what is posted all over the net and that is not wrong. It is just not the holy grail and it gives limited profits by doing it that way. But as most try to learn option trading over the net, they do not know what else to do when it comes to make good money and not only some % and that is the different from option pros to non pros. But that is with every job in live.
Now have a look at the following picture and then compare that picture with what you seen in the above two links http://i47.tinypic.com/fwko79.png .
Did you spot it< This calendar spread is flying. The dotted line is the zero line which includes all STDV and what so ever. Why is this calendar spread over the zero line and all what is shown and told in the net and published as the only and true thing is not<
Because it is not traded the way it is shown all over the net with all that perfect tools and in that way the profit look different and in many cases much better. If we would put the calendar spread just over standard deviation one, which is all over recommended and some even advocate as the thing, we never ever would and will get such analyze pictures and good money trades.
http://i48.tinypic.com/17z9dd.png Here you see the chart from Euro Currency with BB in a narrow range. Market gaped up to 143.12 in that narrow range and it was decided to take a directional trade with two long Dec 142 puts with a life time of 44 days and a defined stop loss. Vola was low, as seen in the narrow range, means we can take long positions as the premium is low. 44 days for the options gave us enough time to give the market time to go in the wished direction. No special indicators used, just outside BB, so market should come back into the BB range http://i46.tinypic.com/icmq1e.png
Shortly after having the Dec 142 puts, market went back into the BB and even gaped to the middle of it which was 142.00. Decision was token to sell here just one atm Nov 142 put to save profit. What do we have now< This is called a Put Calendar Back spread as we are two long dec and one short nov in options. http://i50.tinypic.com/52kfb6.png
Next day market gaped up again to 143.05. As we had that short Nov 142 put, we bought it back to take profit on that leg. In that way our entry price for the Dec puts also came down. Now we again had only that two Dec 142 put in the trade and those puts still had little profit and stop loss was not touched. http://i49.tinypic.com/241paao.png
The next day market opened lower compare to yesterday. As we have been long puts, there was nothing to do. But then in between 24 hours the market went back to the last high at 143.50. Now decision was token to sell the atm Nov 143.5 put. http://i47.tinypic.com/2vt1wnd.png Now we had again a put calendar back spread which was now over the zero line because of the profit we took on the trade with the short 142 Nov put.
Here you see the matrix with the traded positions http://i46.tinypic.com/4zx30y.png and here you see the whole analyzing picture with the left three positions http://i49.tinypic.com/30bfry1.jpg
Finally< You see, there is much more behind option trading as you will find in the open resources shown. Most of you probably will not have recognized that I made a mistake in the above example, which was my first ever traded calendar a few years ago. It was traded on a level, even I made that mistake, where there was no loss no matter where market moves. Now what could that mistake be<
The trend is up and I made a Put calendar back spread instead a Call calendar back spread. My mentor then told me the mistake and we had a good laugh about it as he never told me the mistake until the trade was finished. So we all start some where
Hope you enjoyed that post as this is just one way to trade calendars or at least how to use different options, play with them the market, convert them in to different strategies by legging in and out, going back to few legs and again adding other legs and so on. You can improve the way of trading I just showed and then the calendar back spread even looks like that http://i46.tinypic.com/iv8e3p.png
Good luck to all and good trading
DanPickUp
Last edited:
Dan,
Thank you X 1000 times for the immense knowledge that you have shared so far....
amazing. Till now i've been trained to think expiry to expiry and stick to just put on trades at one go...instead of leggin in.
Again, the mindset has always been to take profit [in your example you could have sold both the puts after the gap down itself] soon. And then jump to the next trade.
your posts have encouraged me to think of many "what if" scenarios and align them with option strategies...this is what I've been doing over the past few days....
Although, i don't have a mentor...you are filling in the need for one...by your presence here at the forum.
Few questions:
when you leg in to take a option position, you set SL; but what about Take profit? Is your objective to bring the trade above zero line...
Iam trying to understand your thought process here.....kindly share ...
Do you think of profit/money in terms of monthly income [wrt to option trading] OR about getting it into a no loss zone...what comes first to you....
I am primarily at a kindergarden stage of option trading...and my mindset is to take profit asap....
thank you again for your views and presence here...
Thank you X 1000 times
for the immense knowledge that you have shared so far....amazing. Till now i've been trained to think expiry to expiry and stick to just put on trades at one go...instead of leggin in.
Again, the mindset has always been to take profit [in your example you could have sold both the puts after the gap down itself] soon. And then jump to the next trade.
your posts have encouraged me to think of many "what if" scenarios and align them with option strategies...this is what I've been doing over the past few days....
Although, i don't have a mentor...you are filling in the need for one...by your presence here at the forum.
Few questions:
when you leg in to take a option position, you set SL; but what about Take profit? Is your objective to bring the trade above zero line...
Iam trying to understand your thought process here.....kindly share ...
Do you think of profit/money in terms of monthly income [wrt to option trading] OR about getting it into a no loss zone...what comes first to you....
I am primarily at a kindergarden stage of option trading...and my mindset is to take profit asap....
thank you again for your views and presence here...
Dan,
Thank you X 1000 times for the immense knowledge that you have shared so far....
amazing. Till now i've been trained to think expiry to expiry and stick to just put on trades at one go...instead of leggin in.
Again, the mindset has always been to take profit [in your example you could have sold both the puts after the gap down itself] soon. And then jump to the next trade.
your posts have encouraged me to think of many "what if" scenarios and align them with option strategies...this is what I've been doing over the past few days....
Although, i don't have a mentor...you are filling in the need for one...by your presence here at the forum.
Few questions:
when you leg in to take a option position, you set SL; but what about Take profit? Is your objective to bring the trade above zero line...
Iam trying to understand your thought process here.....kindly share ...
Do you think of profit/money in terms of monthly income [wrt to option trading] OR about getting it into a no loss zone...what comes first to you....
I am primarily at a kindergarden stage of option trading...and my mindset is to take profit asap....
thank you again for your views and presence here...
Thank you X 1000 times
for the immense knowledge that you have shared so far....amazing. Till now i've been trained to think expiry to expiry and stick to just put on trades at one go...instead of leggin in.
Again, the mindset has always been to take profit [in your example you could have sold both the puts after the gap down itself] soon. And then jump to the next trade.
your posts have encouraged me to think of many "what if" scenarios and align them with option strategies...this is what I've been doing over the past few days....
Although, i don't have a mentor...you are filling in the need for one...by your presence here at the forum.
Few questions:
when you leg in to take a option position, you set SL; but what about Take profit? Is your objective to bring the trade above zero line...
Iam trying to understand your thought process here.....kindly share ...
Do you think of profit/money in terms of monthly income [wrt to option trading] OR about getting it into a no loss zone...what comes first to you....
I am primarily at a kindergarden stage of option trading...and my mindset is to take profit asap....
thank you again for your views and presence here...
First, Thanks a ton for the kind words.
What was shown is a part of my very personal trading. As you know< Usually I do not show such stuff, as such ways of option trading in India are nearly impossible. Not because of the option traders in India, because the Exchange not offers such a wide range of options which give all that possibilities and the margins are far to high, as your exchange not brings in account any hedged position. So, no sense to show such stuff just for fun.
As you got the basic idea behind that way of trading, it is personal choice to do so or to do some thing else. I think many have now seen through a little window in my last post into an other option trading world, which is not know for most of option traders. There are many option traders around which think they are what ever, but not have the thinnest clue about such way of trading the market with options. By the way< That is just a way how to trade a calendar. But you know how many other strategies are around.
What is my objective when entering an option trade?
It all depends on the situation. Do not fall in the trap to think that there is just a specific thought and then you have to follow that. If you life from trading, then you have to split your way of trading. Some strategy you do with far out of the month strategies with otm options you sell. Explained that in the past already in AW10 thread and in the Traders Den room. Those options have a live of at least three months and every two month you close them. You enter new trades each month and so ........ You got the idea. Short strangles.
The next thing you do are any kind of simple credit spreads. But those credit spreads are done in the most expensive markets we have, as the return is much higher compare to the Nifty market. One of those market is the S^P 500 in the States. Those credit spreads are done with options which have a live of two or at least one month. Those two strategies are the backbones of your income.
Now, as we trade for money, also the more powerful trades are entered beside those backbone income strategies. And here is no just one rule. Even here are options used witch have a life time of three months. Some very specific option strategies are implemented just in the last two weeks the options have. It all depends on what idea you want to implement in the market. Here very important not to lose any money which was made with the backbone strategies.
The more aggressive trades need a stop loss or at least the knowledge how to bring you out of any loss which occurs. I do not advocat those strategies where you can recover losses, even I know under certain circumstances how to trade them. But being in loss and then trade them out is not my target, but it can happen.
The more aggressive trades are mainly implemented in a directional way with clear ideas in what the given leg or legs will be converted after a certain market move. If the trade is not implemented at the zero line, the target is to get the trade as quick as possible at and over the zero line and then bring the trade up step by step to the next possible higher level as shown in that flying condor http://i48.tinypic.com/347wqv4.png As you see, the options also have a live time of over 40 days and you not even need a side way market to get such a picture. Just know what and when to convert from one to the next.
You also see that the condor at its highest level is in between STDV one, but all legs are in the sky even STDV was never some thing which was specially looked at or have been in any way a special criteria in that trade. If you do it the right way, then you automatically will be in the range as you do trade the chart in your time frame which is actual at the moment you convert and play the options.
Hope that served your questions as I not can fill out the need for a mentor in the given situation.
Good trading
DanPickUp
Edit< In that post I have explained many ways how to enter a trade and then to move on http://www.traderji.com/options/66266-option-trading-danpickup-6.html#post648489
Last edited:
As we have 31 Dec 2012, which is the last day in this year, I wish you all a good start and a funny beginning for 2013. I wish you many good trades and all your dreams may become reality.
My feelings and respect go also to the family whose daughter was sadly raped from those six men. I hope this not happen again in the coming year.
DanPickUp
My feelings and respect go also to the family whose daughter was sadly raped from those six men. I hope this not happen again in the coming year.
DanPickUp
- Status
Similar threads
-
I have an interesting options trading strategy.
- Started by nan574688
- Replies: 8
-
Day trading live ill be posting my weekly pnl here lets see how it will be with some rules here-option buy
- Started by maheswara.rd
- Replies: 3
-
-