What are the criterias to choose any kind of option strategy?

[Sunny1]

I think we should shift this discussion to Dan's other option thread which is for learning option.

This tread has been created specially for criterias to pick strategies

link: http://www.traderji.com/options/66266-option-trading-danpickup-7.html

 

[PartTime_Trader]

Hi hhh

Thanks for your inputs

You will not see any increase in the premium even vix increases and you will not get into profit until the nifty breaks 4800/5400.

Maybe you are right, lets find out how it actually behaves, in theory as the spot moves towards any one direction the reduction in premium on the losing side should be less by 10-15 points / 100

I didn't understand what is the reason for the startegy if you want 40 points profit!!! and expecting 200 points move in nifty.

If we know / can guess the direction for sure / with very high probability, then i guess it is better to buy / sell nifty future and no need to trade options

Once the call/put becomes deep in the money, there will be some difference in bid/ask. Just check DITM spread,

yes the spread is a concern, and the above price that i have quoted includes the impact of the spreads.

Cheers.

EDIT: To the OP, if these posts don't belong here, then plz shift them to your other threads as pointed above by sunny

 

[adityasaraf007]

@PTT

Maybe you are looking for something like this....

It has the data of Nifty on Contract Basis.... (The data is actually of Spot).... Gives you an idea about cycle, range, SD, Variance..... Would surely help in analysis....

 

[Sunny1]

DanPickup....
we are waiting for your answers to the post of part time...as you have great insight to option trading

 

[DanPickUp]

Hi

Please move on with the discussion in this thread. Is fine, no problem.

HHH has mentioned one point I also see: Why the whole strategy of a long strangle when you want to make 40p profit in your market? Why not just buy a call or a put with a defined stop loss? I am clear that this is a very directional approach and it is no demand to do so. Just wondering about your answer about this approach? By the way: What about leg in such a strangle? If you have any questions about stop losses on options, you may go quickly through that post:

http://www.traderji.com/options/66266-option-trading-danpickup-10.html#post675560

Even than, second and third criteria are on the table from PartTime_Trader which used them to think about his strategy: Range in any market and Low statistical volatility which is better for long strategies.

Good trading

DanPickUp

 

[PartTime_Trader]

Hi

HHH has mentioned one point I also see: Why the whole strategy of a long strangle when you want to make 40p profit in your market? Why not just buy a call or a put with a defined stop loss? I am clear that this is a very directional approach and it is no demand to do so. Just wondering about your answer about this approach? By the way: What about leg in such a strangle?

I am not sure how the Long PE-5400 & CE-4800, will play out till expiry (costing 620 @ CMP5120).
But in theory it seems that at either 4900 or 5300, the pair should be around 660.

I consider gains/loses made out of directional calls separately. In fact today i did the same, buying 1 lot of PE5400 and later added the CE 4800, my nett cost was under 600. I also plan to job around with this position (sell 1 leg and buy-back) in an attempt to bring down the cost further. But the gains coming out of legging into this trade or intra-day trading would be on account of being right about calling the direction of the trend.

I would like to see if what would be the returns if we use this strategy passively, by just holding this pair i.e. options ITM (300 Points on both sides)

There are 2 exit criteria, i would like to consider

1. Exit compulsorily at gains above 40 Points (i recon it will need a move of 200 points), and roll-over to new SPs 300 points wide of CMP

2. Exit in the last week of Expiry and roll-over to new series.

In case 1 we will get more than 12 trades in a year, in case 2, we get few trades with bigger profits.

Even than, second and third criteria are on the table from PartTime_Trader which used them to think about his strategy: Range in any market and Low statistical volatility which is better for long strategies.

Good trading

DanPickUp

Yes, i will like to incorporate the other aspects like volatility that impact option pricing when considering the timing of buying/selling, scaling-in/out, hope to learn about it in this thread.

Thanks Dan for these wonderful inputs

 

[PartTime_Trader]

@PTT

Maybe you are looking for something like this....

It has the data of Nifty on Contract Basis.... (The data is actually of Spot).... Gives you an idea about cycle, range, SD, Variance..... Would surely help in analysis....

Hello Aditya

Thanks for the file, but its not working at my end, i am using office 2003 and the conversion of the file did not work, will test it on another PC and let you know.

Thanks

Edit: Tried on another PC the excel file opened nicely also OO is installed, now hopefully will be able to configure it for nse and start testing

 

[adityasaraf007]

NIFTY - August Series:

Now that July Series has expired and we can see huge addition in OI of August Series, this is what I would believe is the strategy adopted by our dominant HFP...... As a matter, I have trimmed the quantity in following snapshots by 1/1000th..... If HFP have implemented this strategy, then this trade is worth about Rs 2 billion for them(ie; around $ 35 million)..... Since I have trimmed the quantity, for us the trade is worth Rs 2 million.....

OI Data for today (August Series):

​

Strategy Position:

​

Strategy Graph at Expiry:

​

So we can see that its a directional strategy - Bearish one..... The graph is also very similar to the one which Dan Sir posted today morning over here.... However, in the trade adopted by HFP, the graph goes below the "Zero" line..... Hopefully, Dan Sir would clear this for us....

PS - Dan Sir, hopefully, you won't mind if I continue this over here.... Otherwise, let me know and I would transfer it at AW Sir's Thread....

 

[adityasaraf007]

Hello Aditya

Thanks for the file, but its not working at my end, i am using office 2003 and the conversion of the file did not work, will test it on another PC and let you know.

Thanks

Okay... Would upload it in .xls format and share the link....

Hopefully, you can wait for a day or two...

 

[PartTime_Trader]

You will not see any increase in the premium even vix increases and you will not get into profit until the nifty breaks 4800/5400.
I didn't understand what is the reason for the startegy if you want 40 points profit!!! and expecting 200 points move in nifty.
Once the call/put becomes deep in the money, there will be some difference in bid/ask. Just check DITM spread,

After installing OO I rechecked everything about this strat.

What hhh had said is absolutely right, there seems to be no gain in holding on to this. Except for the huge moves that would come in 1/2 a year this has no other probable gain. On the other hand not much harm is done, should be easily able to unwind without any loss.

Also from this experience it seems to me directionally trading ITM Index options can be a good alternative to trading Index Futures, will need to look more into this.

Thanks