Stocks To Keep A Close Eye On

[gauharjk]

Mr SG - What is recommended way to start learning options?

Best,
B.G Maxine

Beegee bro...

There are 2 types of options... PUT Options and CALL options.

You buy PUT options when you expect stock price or market to go down and CALL options when you expect markets to go up.

How does it work?

1. PUT Option
PUT option gives you the option to SELL a stock or index at the strike price at expiry date.

For example. Today, IFCI is @60. You think IFCI is going to go below 60, or lower in the future. So, you buy a PUT option with a strike price of 60. IFCI PA@60.

Now, if IFCI does indeed go down... maybe around 55 before expiry, then your PUT option would allow you to buy IFCI at market price and sell it @60.

You might as well sell that PUT option instead of exercising it for a decent profit.

2. CALL Option
CALL option gives you the option of BUYING a stock or index at the strike price.

For example, IFCI is @60. You expect it might go above 60 in the future. So, you buy CALL option. IFCI CA@60.

Now, if IFCI does indeed go above your strike price... say 65 before expiry, then your CALL option would allow you to buy IFCI at strike price of 60 and sell it at market rate...

In the same way, you might as well sell that CALL option in a profit instead of exercising it.

--------------------------

There are some advanced strategies to effectively trade in options.

Please see Low Risk Options Trading Strategy - Option Spreads by AW10

There are other things too.. like Time Decay which affect the price of options. That means, the sooner the stock or index moves in your direction, the better it is for your profits.

There may be things I might have left out. SG sir and other members here would help you (and me) with it...

Cheers!

 

[SavantGarde]

Hmmm..... Looks like there is more time spent...reframing queries on options....considering my previous replies.... to stay away for sometime from options.... I see.....

All I want to say at this point is.... it is not as easy as it seemed.... because of a few calls on VIJ, NF & SBI.

I am not ready to explain... yet

You guys have a deathwish... go ahead...& find another thread to get your wish fulfilled....

SavantGarde

 

[amit_15]

Hmmm..... Looks like there is more time spent...reframing queries on options....considering my previous replies.... to stay away for sometime from options.... I see.....

All I want to say at this point is.... it is not as easy as it seemed.... because of a few calls on VIJ, NF & SBI.

I am not ready to explain... yet

You guys have a deathwish... go ahead...& find another thread to get your wish fulfilled....

SavantGarde

Thanks Mr SG and Mr Rajesh for the wake up call. Just very tempted by options that is all. Anyway as Mr SG says, I will keep my greed in check and stick with equities.

Thanks to everyone for sincere replies to my queries.

Amit.

 

[beegee]

Hmmm..... Looks like there is more time spent...reframing queries on options....considering my previous replies.... to stay away for sometime from options.... I see.....

All I want to say at this point is.... it is not as easy as it seemed.... because of a few calls on VIJ, NF & SBI.

I am not ready to explain... yet

You guys have a deathwish... go ahead...& find another thread to get your wish fulfilled....

SavantGarde

Mr SG - All this PA-CA related stuff goes right over my head so asked :lol:
Looks like options have their own terminology, will study it first.

Best,

B.G Maxine

 

[asnavale]

Hi Anant,

Is 20EMA standard indicator for 1min Time frame for intraday trading?
I mean... Does it work well with 2min, 5min, 30min charts also?

Hi Mhatre,

This was an offshoot of a strategy which one of my friends was trying to implement. He was using PVI only, not even its MA, No EMA and others which I have used. He had asked me a few months back to test whether it works. I tried paper trade as per his input and found that it does work but there were failures also with equal frequency, but overall a small profit over a week's trading. I gave him the results and he was happy with that. But the strategy was always in my mind and I was trying to find means of improving it. As I had already tried 20 day moving average (SMA, EMA, MMA and Wilder's) on EOD I thought of applying it to intra-day. SG had long back shown that EMA(20) works on NIFTY intraday(Search the thread for his post). Thus the Single MA was tried on intraday also, but again, there were whipsaws frequently as in EOD. Then I added RSI, MACD and later OBV and tested. It appeared to work better. But success with backtesting intraday data was not satisfying to me because the right-hand side of chart was always available and it was influencing the decision in some way or the other. Then I decided to put it to live test. I could get live intraday charts free only for CNXIT, TATASTEEL, SAIL and UNITECH Futures(current month). As I can not daily trade intraday, I have not subscribed to any RT data. That site did not have Wilder's MA. So, I tried the combination of EMA, PVI, RSI, OBV and MACD (shall we call it EPROM?). Also, I tried it on only SAIL and TATASTEEL.

The live chart is available only for the day, the previous data continuity is not available. As I see the chart after about 1 hour and EMA(20) is used, the highest timeframe I could test was 3 minutes. If I use higher timeframe then it will be too late. The live paper trade worked satisfactorily for 1 min to 3 min timeframes.

With the limited confidence gained in the live paper trade, I tried today live trading which worked.

Even though the live real trade was successful I would request you and all others who want to trade this method to do the live paper trade sufficiently, on different scrips and timeframes to collect enoguh data and have confidence. Please share your experience.

-Anant

 

[nimish_rulz]

Thanks Mr SG and Mr Rajesh for the wake up call. Just very tempted by options that is all. Anyway as Mr SG says, I will keep my greed in check and stick with equities.

Thanks to everyone for sincere replies to my queries.

Amit.

The reason why options are sold in the first place is that the probability of options winning money is very low. If using a naked option it is like a throw of a dice or a coin toss. Hence the smart money usually sells options to hedge their portfolios. So playing with options one need to be very careful and very very nimble. The longer you hold option the more it loses its internsic value. It is good to use options in a very volatile market and when the trend is not known. It is very very risky to buy OTM Options while ITM or ATM are the best bet as the probability to make decent gains is high on them.

Options start losing value very quickly 2 weeks before the expiry.
This is my view on options in addition to Savant Sir and Rajesh.

 

[amit_15]

Thanks for the information.

Actually, for the last few days, I have lost a lot of focus, and instead of investing in equities, I have become obsessed with options. Given my precarious financial and family situation, I feel very bad at the moment. I hope to get back on track tomorrow and start focusing on deploying the remainder of my money in equities for investing.

I appreciate everyone's help in guiding me in the right direction so that I don't make mistakes that most beginners do.

Amit.

The reason why options are sold in the first place is that the probability of options winning money is very low. If using a naked option it is like a throw of a dice or a coin toss. Hence the smart money usually sells options to hedge their portfolios. So playing with options one need to be very careful and very very nimble. The longer you hold option the more it loses its internsic value. It is good to use options in a very volatile market and when the trend is not known. It is very very risky to buy OTM Options while ITM or ATM are the best bet as the probability to make decent gains is high on them.

Options start losing value very quickly 2 weeks before the expiry.
This is my view on options in addition to Savant Sir and Rajesh.

 

[PGDIMES]

So playing with options one need to be very careful and very very nimble. The longer you hold option the more it loses its internsic value. It is very very risky to buy OTM Options while ITM or ATM are the best bet as the probability to make decent gains is high on them.

Options start losing value very quickly 2 weeks before the expiry.

A factual error... OTM options have no intrinsic value... Intrinsic value in options is the in-the-money portion of the option's premium. An OTM option has only time value...

 

[savkar]

NF CA PA will become CE PE, starting from Jan 2011. options will be European style. I need to understand it too but thought i will inform you

Mr SG - All this PA-CA related stuff goes right over my head so asked :lol:
Looks like options have their own terminology, will study it first.

Best,

B.G Maxine

 

[SavantGarde]

Savkar,

All Index Options are already CE & PE right from the beginning

SavantGarde

NF CA PA will become CE PE, starting from Jan 2011. options will be European style. I need to understand it too but thought i will inform you