1 lakh to 652 lakhs in 497 trading days - Winning 20% of Trade in NIFTY Futures - Bac

[healthraj]

Re: 1 lakh to 652 lakhs in 497 trading days - Winning 20% of Trade in NIFTY Futures -

You mentioned 5800pe -6000pe pair in your earlier post which confused me. The 5800-6000 pe ce pair is at 67 way below 100 that you are mentioning

Yes 5800PE-6000CE Pair is available at 67
I said to SELL, 5800PE-6000PE, Available around 97 - Assuming the market will spend some time at 5900. And ultimately the 5800 PE will loose the money - The reason why I said it is not a Neutral Strategy.

Anyways, it is better to Trade the 5600-6200 Pair in Aug-13 Series.

 

[gmt900]

Re: 1 lakh to 652 lakhs in 497 trading days - Winning 20% of Trade in NIFTY Futures -

Amit,

First of all I don't look at too many things. I see the MAX OI and then Sell the pair. Normally the NIFTY OI takes a lot of time to build up. And it won't happen suddenly. And when the Range is crossed then I close the position. So the Stoploss is breaking the Range by 30 points. On upper side the 6230 and on the downside it would be 5570.

It is also a Pair which is very much away from each other and so there won't much movement in the pair.

Looking at the August Series, it looks Bullish - This is my first assumption. So even for a Neutral trade we have to take some direction.

One more thing is the Volatility -

CE Volatility @ 14.5%
PE Volatility @ 22.5%

So even if the market moves UP, the change in CE price would not be that fast.
Since the PE volatility is more, the price it looses will be more.

So net net CE will move UP slowly and PE move down faster and my target is not more than 20-25 points.

@jamit,
I totally agree with raj's analysis. In fact, I wrote this pair @101 on 11 July.
My target, though, is to keep the pair till expiry by doing adjustments to the trade, if and when required.
The question you raised about the action required to be taken in NS crosses 6300 is rather irrelevant at this stage since the upper BEP is 6400, which is way above the realm of possibility even granting that market has it's own mind. Finally, if one has to take a risk to trade, I think this is the least unsafe trade.

Correction : upper BEP is 6300 and not 6400

 

[healthraj]

Re: 1 lakh to 652 lakhs in 497 trading days - Winning 20% of Trade in NIFTY Futures -

Does Anybody know how to get the Average Volatility of a Stock (Either Cash or Futures. Hope it should be the same) from NSEIndia.com?

 

[Option.Trader]

Re: 1 lakh to 652 lakhs in 497 trading days - Winning 20% of Trade in NIFTY Futures -

Does Anybody know how to get the Average Volatility of a Stock (Either Cash or Futures. Hope it should be the same) from NSEIndia.com?

It should be available at futures chain, I think volatility for stocks is available as a daily download

 

[healthraj]

Re: 1 lakh to 652 lakhs in 497 trading days - Winning 20% of Trade in NIFTY Futures -

Some Theory on how to Construct a Pair for Selling using the DELTA-NEUTRAL Strategy.

Delta - This is an Option Greek - "The amount that the theoretical price in Option will change if the market moves up/down 1 point".

Market today closed at 5979 (NIFTY Futures ).

The MAX OI at 5800PE-6000CE Pair and ideally it would be good to SELL this pair. But we want to know how much quantity to trade in this pair.

Let us calculate the Delta for 5800PE and 6000CE with the following parameters

Underlying Price , Exercise Price, Time to Expiry, Interest Rate, Volatility, Dividend

Underlying Price - I take the Futures current price
Exercise Price - It is 5800 or 6000
Time to Expiry - It is the number of days to Expiry expressed as a fraction of 365 days
Interest Rate - In the Options Chain the IV is calaculated using 10%. So we will use the same
Volatility - We will use the IV from the Options chain
Dividend - For Index it would be Zero because there is no dividend for Index. for Stocks you have to take the Average Dividend

IV - Implied volatility

So using the above values -

If we calculate the Delta then for
5800 PE -0.15 - Which indicates that if all the other paraemets are same (mainly volatility), If the underlying increase by 1 point then the 5800 PE will decrease by 0.15
6000 CE .49 - Which indicates that if all the other paraemets are same (mainly volatility), If the underlying increase by 1 point then the 6000 CE will increase by .49.

We can apply this Delta Neutral Strateg if we know the Range.

Using the MAX OI we know the Range for NIFTY is 5800-6000.

Now we have to make the Delta to Zero (more or less).

So we can say that .49 (Delta of 6000 CE) + 3 * -0.15 (Delta of 5800 PE) = 0.04.

That means For constructing our pair,

We have to Sell one Lot of 6000 CE and 3 lots of 5800 PE.

6000 CE Premium is 50.8
5800 PE Premium is 17.25

So our total Premium would be 50.8+3* 17.25 = 102.55.

So when the Market reaches around 6030, we can execute this strategy.

Tomorrow When the Market reaches around 6000,

The Delta for 6000 CE would be .54 and the price would be around 69.
The Delta for 5800 PE would be -0.12 and the price would be around 12.

So you might have to SELL 1 6000 CE and 4 5800 PE - with the Total premium of 117.

 

[healthraj]

Re: 1 lakh to 652 lakhs in 497 trading days - Winning 20% of Trade in NIFTY Futures -

It should be available at futures chain, I think volatility for stocks is available as a daily download

What is Futures Chain? Please provide the NSEindia.com link for the Futures Chain

 

[healthraj]

Re: 1 lakh to 652 lakhs in 497 trading days - Winning 20% of Trade in NIFTY Futures -

I have Sold the August Series 5600PE-6200CE Pair for 97. May be the Right time to Sell because NIFTY right in the middle of the pair. But this is the first time I am selling a pair in the next month. The main strategy behind Selling is gaining the premium using the Time decay. Let us see if it works.

Just cross checking if this pair is Delta Neutral. It is not because the Delta of 5600PE is -0.15 and 6200CE is 0.33. So for this to be Delta Neutral, I will have to Sell one more lot of 5600PE.

If I have to make it simple. Make sure the Premium you are paying for the PUT and CALL or more or less same...

The DELTA Neutral strategy is done mostly for People who are having stocks and those who want to Hedge their positions.

 

[healthraj]

Re: 1 lakh to 652 lakhs in 497 trading days - Winning 20% of Trade in NIFTY Futures -

Some theory on How to Trade using Implied Volatility of the Options chain.

If you plot the Trendline of IV of the CE and the PE, you will notice that

- TrendLine crosses at around 6000.
- Above 6000, you can notice that the IV going above the PE trend line

At 5800, CE IV is 19.1 and PE IV is 20.4. PE IV > CE IV
At 6000, CE IV is 16.3 and PE IV is 16.5 - More or less same
At 6100, CE IV is 15.6 and PE IV is 15.1. PE IV < CE IV

So it is a Buy at 5800 and Sell at 6000 or above.
Try taking Naked Puts/Calls at the point when the Volatility Trend lines cross each other.

 

[healthraj]

Re: 1 lakh to 652 lakhs in 497 trading days - Winning 20% of Trade in NIFTY Futures -

Some theory on How to Trade using Implied Volatility of the Options chain.

If you plot the Trendline of IV of the CE and the PE, you will notice that

- TrendLine crosses at around 6000.
- Above 6000, you can notice that the IV going above the PE trend line

At 5800, CE IV is 19.1 and PE IV is 20.4. PE IV > CE IV
At 6000, CE IV is 16.3 and PE IV is 16.5 - More or less same
At 6100, CE IV is 15.6 and PE IV is 15.1. PE IV < CE IV

So it is a Buy at 5800 and Sell at 6000 or above.
Try taking Naked Puts/Calls at the point when the Volatility Trend lines cross each other.

For Example If you apply this to INFY, you will notice that the Trend line crosses each other at around 2850. So till 2850, it is a Buy and above 2850 it is a SELL.

 

[srichakra]

Re: 1 lakh to 652 lakhs in 497 trading days - Winning 20% of Trade in NIFTY Futures -

Does Anybody know how to get the Average Volatility of a Stock (Either Cash or Futures. Hope it should be the same) from NSEIndia.com?

Hi,

http://nseindia.com/products/content/derivatives/equities/homepage_fo.htm

the above link will take you to daily reports section and one of the reports is Daily Volatility in .csv format of all F& O scrips

Hope it helps.