SH's MArket Correction Prediction Strategy

[amitava82]

Yesterday when Nifty touched 5822 and restested 100 EMA .... not sure how many bought calls and puts together .... We are up 140 points from the lows of the days from yesterday... I am sure the combo would have given 30% profits by now.

I couldnt trade it since I was busy with my future positions... anyone traded it?

Cheers
SH

I have a question. Which Strike price one has to select for put and call option? Is there any rule for that? If you can give an example given yesterday's scenario that would be great.

Finally, can I still enter into the trade?

 

[Tradewithhunter]

I have a question. Which Strike price one has to select for put and call option? Is there any rule for that? If you can give an example given yesterday's scenario that would be great.

Finally, can I still enter into the trade?

the strike has to be ATM i.e 5800 PE and CE or 5900 PE and CE.

Yes you can still enter the trade.

Cheers
SH

 

[amitava82]

OK, I'm confused here. From your strategy post:

Now once we know this, how do we exploit this knowledge to our advantage?? Simple... As soon as Nifty touches 100 EMA ... we buy OTM (out of money) calls and puts both and hold until one of them becomes ITM (In the money). As soon as one of the option becomes ITM .. it will give you 25% to 50% returns over investment (even if the other option leg is expiring worthless).

For eg look at 3rd Nov candle which retested 100 EMA at 4650 odd levels. At that point one can buy 4800 Calls and 4500 Puts and hold. Since it was start of the month these options would not have costed more that 50-60 odd points each or Total investment of Rs 5000-6000 per pair of call and put taken together.

In your strategy you said we buy OTM calls and puts. And as per your example we bought higher strike calls and lower strike puts. I'm not sure how you selected 4800 calls and 4500 put.

the strike has to be ATM i.e 5800 PE and CE or 5900 PE and CE.

But today you are saying we have to buy ATM PE and CE at same strike price!

 

[nac]

OK, I'm confused here. From your strategy post:

In your strategy you said we buy OTM calls and puts. And as per your example we bought higher strike calls and lower strike puts. I'm not sure how you selected 4800 calls and 4500 put.

But today you are saying we have to buy ATM PE and CE at same strike price!

Earlier one was Strangle and later one is Straddle, both (Either strangle or straddle) the strategies can be applied when you are not sure about the direction and think that market would swing wide either go up or down...

 

[biggles]

OK, I'm confused here. From your strategy post:


In your strategy you said we buy OTM calls and puts. And as per your example we bought higher strike calls and lower strike puts. I'm not sure how you selected 4800 calls and 4500 put.



But today you are saying we have to buy ATM PE and CE at same strike price!

Hey ,

ure rite mate!!! I erred in this by buying the OTM calls. Should have gone for the ATM ones. I even sold out the puts at a marginal loss and held on to the calls.

Such a sureshot strategy and i messed it up. Maybe i'm jinxed!!

 

[GuluGulu]

Nifty Spot touched below 100DMA, 5805

5800CE=170/-
5800PE=119/-

Total 289/-. Bought 1L, DEC seies. Lets see what happens.

GG

 

[vinst]

NF closing below 100 ema?

vin

 

[Tradewithhunter]

Nifty Spot touched below 100DMA, 5805

5800CE=170/-
5800PE=119/-

Total 289/-. Bought 1L, DEC seies. Lets see what happens.

GG

Yeah - thats correct. Since we are taking the position right at the start of the series, we have ended up paying slightly more premium than usual.

I am holding the same straddle.

Cheers
SH

 

[Tradewithhunter]

OK, I'm confused here. From your strategy post:


In your strategy you said we buy OTM calls and puts. And as per your example we bought higher strike calls and lower strike puts. I'm not sure how you selected 4800 calls and 4500 put.



But today you are saying we have to buy ATM PE and CE at same strike price!

Hi - Sorry for the confusion. Till the time you are buying an ATM straddle or slightly OTM straddle (max 100-200 point away from ATM), the results you should get should be very similar.

Its just that when markets are rangebound you would want to risk a small amount hence you buy slightly OTM straddle (and end up paying less premium). When markets are volatile, you can buy ATM straddle as well, though you take higher risk by paying more premium but you also get higher profits.

It also depends on how much time is left to expiry. At the start of a series, when enough time is left, you can take higher risk and buy ATM straddle. When we are a couple of weeks away from an expiry, you want to risk small amount and hence slightly OTM options.

Cheers
SH

 

[amitava82]

Thanks for the explanation! I've purchased couple of books on option to understand different strategies before I get into deep water