SH's 315 Strategy - how to use if effectively

[Tradewithhunter]

SH sir,
Thanks for response.
Spot nifty touching 15 EMA on 11,12,13,16,17,18 Aug. How to deal with such situation ?
Thanks.

Rahul - first of all, we should not look at spot charts since we trade futures. Always check futures charts.

Secondly, I do not understand why you want to deal with candles touching 15 EMA ? Please post a chart and your question again.

Cheers
SH

 

[rahuld2976]

Rahul - first of all, we should not look at spot charts since we trade futures. Always check futures charts.

Secondly, I do not understand why you want to deal with candles touching 15 EMA ? Please post a chart and your question again.

Cheers
SH

sir,
I checked future chart & found that candles are touching 15 EMA on the above mentioned dates ( on NF chart too).
In such case what should be done about adding our positions ? I was thinking about that.
Yours is very useful thread & I'm following it since long ago.
This is just a query & not finding lacunae in 315 strategy. Please dont take it otherwise.
Thanks.

 

[Tradewithhunter]

sir,
I checked future chart & found that candles are touching 15 EMA on the above mentioned dates ( on NF chart too).
In such case what should be done about adding our positions ? I was thinking about that.
Yours is very useful thread & I'm following it since long ago.
This is just a query & not finding lacunae in 315 strategy. Please dont take it otherwise.
Thanks.

Hi Rahul - you should ADD only if the previous position (or ADD) is already in profit. This is to manage risk.

If the 15 EMA touch are happening around the same level, it signifies rangebound markets and hence ADDS should be avoided.

Cheers
SH

 

[VJAY]

Dear SH,
Can you explain below with examples on current market ...eg selling pe/ce's if we get bearish cross over then which calls we sell?can we use it also on scrips like LT/RIL..etc?

For some of the 'sauve' traders who have enough money and risk appetite to increase their probabilities of earning money, a 315 crossover can also be used to sell options as per the signal i.e:

On bullish crossover sell OTM puts and hold until bearish crossover happens.
On bearish crossover sell OTM calls and hold until bullish crossover happens.

 

[rahuld2976]

Hi Rahul - you should ADD only if the previous position (or ADD) is already in profit. This is to manage risk.

If the 15 EMA touch are happening around the same level, it signifies rangebound markets and hence ADDS should be avoided.

Cheers
SH

Thanks a lot, sir.:clapping::clapping::clapping:

 

[Tradewithhunter]

Dear SH,
Can you explain below with examples on current market ...eg selling pe/ce's if we get bearish cross over then which calls we sell?can we use it also on scrips like LT/RIL..etc?

For some of the 'sauve' traders who have enough money and risk appetite to increase their probabilities of earning money, a 315 crossover can also be used to sell options as per the signal i.e:

On bullish crossover sell OTM puts and hold until bearish crossover happens.
On bearish crossover sell OTM calls and hold until bullish crossover happens.

VJAY - Like in movie inception...it seems either you stole my thought or planted your thought in my mind.

I logged in today on Traderji to write exactly about what you have written

My next post will be how a trader can reduce risk and increase profit probabilities through writing options.

Cheers
SH

 

[Tradewithhunter]

Dear Friends,

A lot of risk averse professional traders make money using options. Their objective is to make 5% - 10% of investment every month (which compounds to more than 100% returns on investment per annum).

Since their objective is to earn 'less' than the future traders do, they try and look for trading strategies that reduces their risk of losses due to any whipsaws.

One of the ways to do that is selling options (also called writing options).

A trader who has identified the trend of the market (lets say using 315 or 534) can write options which are likely to go down in value as the market trends i.e:

If 315 has given a bullish crossover, the trend is up, the puts will go down in value so sell puts.

If 315 has given a bearish crossover, the trend is down, the calls will go down in value so sell calls.

Which strike price to sell?
Depends how much risk and reward you want. If you are ready to take only a small risk, write out of money options. The reward will be less as well.

If you want to take some more risk for a higher reward, you can write ATM (at the money) options.

Why is it less risk and higher probabilities as compared to future trades

As a seller of an option, both the market trend and the time factor works in favour of the seller.

Even if the market trends for a few days in the direction of the 315 crossover and later comes back to the original level, the option will have already lost some points due to time erosion.

If the market whipsaws, the option will be up only slightly giving a trader very small loss (as against a future trader).

Word of caution

- Never write In the money options
- Since the options are naked, the seller stands to unlimited risk if the market gaps up/down in opposite direction based on any overnight news.
- Given above, never write naked puts since any financial bad news overnight can make an uptrending market suddenly gap down to a lower freeze.
- This is used only by traders who are professionals and have deep pockets, not recommended for any trader with small capital (less than 5 lakhs).


Cheers
SH

 

[tmnkin]

F&O Crossover as on 27-Aug-2010

Entry date Scrip Action Reason Entry Price Stop Loss
27-Aug-2010 CAIRN SELL 315 -Cross 338.10 346.55
27-Aug-2010 IDBI SELL 315 -Cross 121.85 124.90
27-Aug-2010 IFCI SELL 534 -Cross 58.25 59.71
27-Aug-2010 MINIFTY SELL 315 -Cross 5424.70 5560.32
27-Aug-2010 NIFTY SELL 315 -Cross 5423.90 5559.50

 

[sujittalukder]

Today on 28th Aug 2010 Nifty Spot, Nifty Future and Mini Nifty has given bearish 315 crossover.
So shorted at 5405 level.

Sujit Talukder

 

[nick721156]

Dear SH,

As I have very little knowledge about 'options', you are requested to clarify the following points.

You have written :


1) If 315 has given a bullish crossover, the trend is up, the puts will go down in value so sell puts.

If 315 has given a bearish crossover, the trend is down, the calls will go down in value so sell calls.

How does one make money here?

2) What are 'Money options' and 'At the money options (ATM)' ?


3) Why should we not write in 'Money options'? How is it affected if Market Gaps Up or Down suddenly?

4) What is 'Naked put' and why is it not to be written?

5) 'This is used only by traders who are professionals and have deep pockets, not recommended for any trader with small capital (less than 5 lakhs).'

Does it mean that 'Options' is for one who have deep pockets and not for trader with small capital?

Sorry to aske you so many at a time; but, this will help others like me to understand options better.

Regards,

Raju