SH's MArket Correction Prediction Strategy

[sach007]

Hi SH,
I am new on Traderji and also to trading. I came to your thread ... and I read all thread from start to end slowly from today morning step by step. I have understood most part of your strategy .... It is very nice that you explain all things with example.

But I want to know what will be the strategy as 3 EMA and 15 EMA have tested on daily charts.

I salute the people like you. Hats off to you. Will try your strategies when time comes.


And by the way for testing the strategies in this thread what should I choose EMA high, low , close , volume... as my TTADVANCE terminal of IIFL giving all these for charting.


Regards
Sachin

 

[Tradewithhunter]

NF closed at 100 EMA today again.

Bought the straddle of 5900 CE and PE for a total amount of 208

Cheers
SH

 

[rrmhatre72]

NF closed at 100 EMA today again.

Bought the straddle of 5900 CE and PE for a total amount of 208

Cheers
SH

Hi SH,
How do you know if option is adequately priced?

I have this query as I am tracking option prices on daily basis.
Yesterday NF close was ~6100.
6100 CE + PE straddle was costing 188.

Today NF close ~5900 & 5900 straddle cost 208.
If I go by strike price logic then today we should have got 5900 straddle below 188 ( considering time decay of 1day between yesterday & today).
Perhaps this may be due to change in volatility. Do you anticipate simillar volatility till end of month?
We have weekend hence Monday we will have further discount in option price.

This diff of rs 20 is almost 10% on price what is paid.
Isn't it point of concern while buying option?

 

[dayder]

NF closed at 100 EMA today again.

Bought the straddle of 5900 CE and PE for a total amount of 208

Cheers
SH

Dear SH & fellow traders,
On back-testing where the downtrend took the market, on breaching 100 EMA, I observed the following :
Date Price level Fell upto Date
30.05.08 4800 3700 15.07.08
14.08.08 4500 4200 26.08.08
09.09.08 4500 2200 27.10.08 !!!???
From this level went upto 5100 [20.10.09]
03.11.09 it went below 100 EMA and 04.11.09 gapped up to 4600 / 4800
A massive climb in just two days !!
26.01.10 4932 4665 07.02.10 - went upto 5400
04.05.10 5100 4800 24.05.10 - went up to 6300
24.11.10 5800 5700 25.11.10 - went up to 6100
Today, price breached at 5900 level.
Where will it end, going down ? 5700 level or below that ?
Or, may it recover on 10.01.11 itself ?
Let's wait and see !!!

 

[Tradewithhunter]

Hi SH,
How do you know if option is adequately priced?

I have this query as I am tracking option prices on daily basis.
Yesterday NF close was ~6100.
6100 CE + PE straddle was costing 188.

Today NF close ~5900 & 5900 straddle cost 208.
If I go by strike price logic then today we should have got 5900 straddle below 188 ( considering time decay of 1day between yesterday & today).
Perhaps this may be due to change in volatility. Do you anticipate simillar volatility till end of month?
We have weekend hence Monday we will have further discount in option price.

This diff of rs 20 is almost 10% on price what is paid.
Isn't it point of concern while buying option?

Yes the option prices go up due to increased volatility. Since we got almost 3% move yesterday, the volatility increased and hence the straddle price want up.

The whole idea of buying straddle near 100 EMA is that volatility is assumed in coming days ... this is because markets dont tend to stay close to 100 EMA for a lot of days. I expect a one way 300 point move in one direction (up or down) i.e 6200 or 5600 this month.

Cheers
SH

 

[merchantp]

Thanks to all for the wonderfull post..specially to Dear SH... God bless you all.

 

[EagleOne]

Yes, thats the whole point. We learn Maths and Science separately but their true magic is revealed when they are applied together....!

SH

A hallmark of a true intelligence. Well done, SH.

 

[aniket_tyagi]

Hi Hunter,

:clap::clap::clap::clap::clap::clap:

standing ovation..

 

[VJAY]

NF closed at 100 EMA today again.

Bought the straddle of 5900 CE and PE for a total amount of 208

Cheers
SH

Dear SH,
Please eloberate with some examples for when we take short stradle & buy stradle...confussion every time...last time @100 ema I bought stradle(where you shorted it)...i got minor loss...now I took short stradle(@208) where you bought it and it now +rs10 where am getting minor loss....so if we get some guidance from you we look ourself for this factor....

 

[rrmhatre72]

Dear SH,
Please eloberate with some examples for when we take short stradle & buy stradle...confussion every time...last time @100 ema I bought stradle(where you shorted it)...i got minor loss...now I took short stradle(@208) where you bought it and it now +rs10 where am getting minor loss....so if we get some guidance from you we look ourself for this factor....

I think Strategy is always buy stradle as market can move in any direction but away from 100EMA.....
Anyway, I have bought stradle today @203 & suqared off @218. I will keep on looking re-entry in it till Nifty is away from 100EMA ~300points on either direction..