Trading Strategies Using Technical Analysis

[sidsup]

Siddharth,

In my opinion, options is less of Technicals and more of Mathematics. Hence, normal TA principles do not work well when options are analyzed. If one is tracking the underlying asset, there is no guarantee he will make money in options despite being right on the underlying direction. This is just something I have observed.

As of trading intraday is concerned, we have observed some mathematical relationships which seem to work very well on intra day basis and hence at present I am looking for protecting capital in case trades go wrong. I have openly written many times that my knowledge in options is limited. But this is just temporary. My insatiable thirst of knowledge has attracted me to options now. Therefore, it is now only a matter of time when I start getting the hang of the same.

I agree I am well versed with stocks and futures. It is just that now it is time to explore options.

Tc

Raunak,

Yes, You re right, options may not work for you even if you get your direction right.

It depends on the strike price, the rate of movement of stock, the time left for expiry to name a few.

So as long as the stock is not moving in the direction you pick in an option you are constantly losing. Example - if your bullish , even if the stock price is flat tracking you will continue to lose money. And eventually even when it does move up it may not give you great returns or sometimes not even reach the intial buy/sell price. Hence My advice to you to stick to stock or futures when it comes to intraday trades where you sense a quick reversal or a breakout.

By all means learn options and trade in them, but it is my observation that they are nothing great when it comes to intraday trades.

They are very helpful in speculative strategies, hedging and saving trades that are going at a loss.

Hope It was some use. I by no means want discourage you. If there is still a way to trade options intraday. I d be more than happy to learn that myself.

Regards,

Siddharth

 

[MindlessTrader]

Raunak,

Yes, You re right, options may not work for you even if you get your direction right.

It depends on the strike price, the rate of movement of stock, the time left for expiry to name a few.

So as long as the stock is not moving in the direction you pick in an option you are constantly losing. Example - if your bullish , even if the stock price is flat tracking you will continue to lose money. And eventually even when it does move up it may not give you great returns or sometimes not even reach the intial buy/sell price. Hence My advice to you to stick to stock or futures when it comes to intraday trades where you sense a quick reversal or a breakout.

By all means learn options and trade in them, but it is my observation that they are nothing great when it comes to intraday trades.

They are very helpful in speculative strategies, hedging and saving trades that are going at a loss.

Hope It was some use. I by no means want discourage you. If there is still a way to trade options intraday. I d be more than happy to learn that myself.

Regards,

Siddharth

my two cents on options...if somebody is technically sound...ie he gets more or less direction right then option are best in intraday...you cant get better than this....but the main point is " direction should be right "....regarding SL ...this is a tricky point in options...because unlike stocks, options oscillate too much...like you bought @ 50 1 lot...then this wil oscillate like 45 - 50 -55...so SL is tricky...myself trading in only options , intraday unsuccesfully since last 6 months..(option scalper)., if price moves in my direction then I put TSL and its always gets hit......option delivery is complicated as they lost time value quickly...so RAUNAK is welcome in trading options...may be we can all benefit from his research on intraday options...

 

[DanPickUp]

Hi Raunak

You ask about stop loss for options. You got different ways to handle that. I will keep it here very simple, as I could write a whole page about that.

Look at it like you look at it with your futures and share trading. Very simple.

If you happy with a 1% SL, so it is. Look at your option account and decide on that amount, how much money you want to risk with each option trade.

I am not a fan of intra day option trading. Buying an option for a few minutes and then selling it, is not what I like and do and it is not for what I use options. If I do option trades, I always have clear battle field plans in which I convert from one strategy to an other one. Very little possibility's for that in Indian market, as your option market is not very well developed. But this was not your question.

Mindless trader has mentioned some tricky part from intra day option trading. Believe him by what he is saying

My two cents : If intra day trading, stay with what you do and use options only as a hedge for your future or share trades. One practicable option strategy in your home market is the covered call on side way moving shares.

Take care

DanPickUp

 

[SwingKing]

Tata steel has again been reversed. Currently on December contract short.

Tc

 

[gangadharan]

Entered Tatasteel........ equities at 624 with the support of 620 puts at 9.10


With Regards,
Gangadharan

Exited from all Tata steel puts at 23.50, TCS put at 68 ........ balramchini put at 5.25


Holding, equties. TCS.......SBI.........Balchini......Tatasteel and Chambalfert..

Champalfert put holding.

With regards,
Gangadharan.

 

[SwingKing]

Stocks in sugar sector from Investments have been exited.

Rest of investment positions have also been severely cut.

Position in Unilever continues to be maintained.

Tc

 

[gangadharan]

Tata steel has again been reversed. Currently on December contract short.

Tc

There is some smart money playing on Tata Steel and TCS........ I think both may see a 50% high from here before 31st march 2011.

Let us hope,........ No brokerage........ or........ premium paid for wishful hopes.

With Regards,

Gangadharan

 

[jagankris]

Hello Raunak,

To answer your question on options I d like to make a few things clear.

1. Since your TA is so strong why are you trading options intra day ?? You will definately be more successful with futures. Trading options intra day makes little sense for someone who I ve noticed is very strong in technicals.

2. Regarding a stop loss , the option is only a reflection of the underlying. Hence your stop loss should be based on your underlying not the options itself. So like with any other assest (stock, future ) you can derive your stop loss which I m sure you re pretty great at.


Hope the above mentioned was of some use.

Regards

Siddharth

Dear Siddarth,

Please explain why it is better to trade futures than options strictly from intraday trading perspective.

IMO intraday options trading is the best
Better return on investment and excellent liquidity.
Instead of one lot NF in future once can go three times that in Options.
Very cheap in terms of STT,Stamp Duty compared to that of futures.
Also the risk is limited.

Raunak Bhai is very strong in technicals and hence his right front is to play with options intraday which is heavily competed with professionals and FII's.

Also personally i will be benefited a lot because of this Lol

Thanks,
JK

 

[MindlessTrader]

my two cents on options...if somebody is technically sound...ie he gets more or less direction right then option are best in intraday...you cant get better than this....but the main point is " direction should be right "....regarding SL ...this is a tricky point in options...because unlike stocks, options oscillate too much...like you bought @ 50 1 lot...then this wil oscillate like 45 - 50 -55...so SL is tricky...myself trading in only options , intraday unsuccesfully since last 6 months..(option scalper)., if price moves in my direction then I put TSL and its always gets hit......option delivery is complicated as they lost time value quickly...so RAUNAK is welcome in trading options...may be we can all benefit from his research on intraday options...

see today's trade....I had nifty puts, 6 lots @ 31 ..as market behaving uncertain..after it went to 35..i put TSL @ 33....then it came back hit my TSL and jooooommmm to 78 ...so had there was no SL ..then 78 - 31 = 47 x 6 x 50 = 14 - 15 K in 30 minutes....so this is power of options...money more than double....after my TSL get hit , I had a consolation trade , put 2 lot @ 84 went to 150..here too TSL..was there but 10 points behind Market price.(only 2 lots so took liberty for deep SL)..so when highest price was @ 150 TSL was @ 135..ultimately it get hit.So got 5K instead of .....

 

[gangadharan]

Hi Raunak



My two cents : If intra day trading, stay with what you do and use options only as a hedge for your future or share trades. One practicable option strategy in your home market is the covered call on side way moving shares.

Take care

DanPickUp

Raunak Sir,

Mr. Dan is exactly right,

http://www.traderji.com/options/30597-low-risk-options-trading-strategy-option-spreads.html

Hope the above link may give you some insight about option trading.

With Regards,
Gangadharan