A Beginner's way to trade options.

[Smart_trade]

hi vineet,
how do square up my long call ?
sushil

By either selling the same ( same strike price and expiration) in the market or if it is a stock option,by excercising.....

ST

 

[jamit_05]

Following a system is good but you will have to measure the terms like 'pull back', 'PH' etc relative to your chosen time frame. For example there might be many pullbacks in hourly with several crossing previous high only to drop back. To keep things a bit formal u might want to choose one of the several indicators/trading systems (like combining ma/ema cross overs, macd, rsi etc). This also gives you opportunity to back test your system on previous data before blindly following it without emotions. Also make sure you don't tailor the system too close to previous data. Ideally test for a 3 months time frame at various quarters of previous years. You can include SL, trailing SL etc as variables of this system so that your exit, entry are well defined.

Most certainly.

Like I said, this was just something off the bat. The point of the post was to emphasize that for most of us any trading, especially options trading, should be along the lines of a thoroughly tested system, as opposed to trading on 'gut'. Options have several crucial parameters (greeks) that one could use to his advantage but for which a system is required. If may not cover all the greeks right away but a start would be alright.

 

[praveen taneja]

Thanks PT. Since you have been trading in options for long, can you tell which Nifty stocks have good volumes for us to buy and sell out of the money options without too much slippage.

Rgds

Earlier I use to trade in stock options too but after some time I realise that in stocks options liquidity is major problem when u want to book profit
So for the last one year of so I am trading Reliance and Nifty options no liquidity problem buyer seller always available at almost every 5-10paise
Hope it would be of some use to any one of you God bless us all:thumb:

 

[Smart_trade]

Bought 3700 May Nifty Call at 140 and 3700 May Nifty put at 158. This is a straddle buying as I am expecting atleast 200 points move on some side depending on election results and the party forming the Govt....

Smart_trade

 

[santhosh44]

Bought 3700 May Nifty Call at 140 and 3700 May Nifty put at 158. This is a straddle buying as I am expecting atleast 200 points move on some side depending on election results and the party forming the Govt....

Smart_trade

thanks ST..

how abt buying 3400 Puts and 3900 Calls together? but both costs around 60 Rs as of now :annoyed: I thought i could buy it at around 35-40 ..

 

[Smart_trade]

thanks ST..

how abt buying 3400 Puts and 3900 Calls together? but both costs around 60 Rs as of now :annoyed: I thought i could buy it at around 35-40 ..

I am expecting a 200-300 Nifty points move on Monday opening....either up or down....

Premiums are high because of major event of election result .

ST

 

[kharikumaar]

ST DA

there's something i wanted clarity on for quite sometime. its about the put-call ratio (PCR).
how does it help in gauging the market trend?

if a PCR is above 1, what does it indicate?( bearish/ bullish and why or how?)
if it is at 1 what is the indication and similarly for PCR below 1.

it would be enlightening if you could throw some light on this. i had downloaded a PCR data excel sheet from another thread in Traderji,( can upload it here if anyone wants) and am unable to make head and tail out of the readings i see in it.

thanks
hari

 

[Smart_trade]

ST DA

there's something i wanted clarity on for quite sometime. its about the put-call ratio (PCR).
how does it help in gauging the market trend?

if a PCR is above 1, what does it indicate?( bearish/ bullish and why or how?)
if it is at 1 what is the indication and similarly for PCR below 1.

it would be enlightening if you could throw some light on this. i had downloaded a PCR data excel sheet from another thread in Traderji,( can upload it here if anyone wants) and am unable to make head and tail out of the readings i see in it.

thanks
hari

Put-call ratio is simply the number of puts traded in a day devided by number of calls traded on that same day. Normally options are grouped into similar catagories when calculating the ratio.The examples are an index options put-call ratio ,equity only put call ratio,gold option put-call ratio etc.

Put-call ratio ( PCR) is known to be a very valuable contrary indicator. When too many people are bullish ( they are buying too many calls ) market is generally at the top of the move as majority opinion will always be wrong...PCR is a bit noisy indicator and thus a 21 day,34day or 55 day moving average of the PCR will give a smoother curve.

It may be noted that whenever an index option is heavily traded by hedgers and arbitrageurs,its usegulness as contrary indicator wanes....in this case stock PCR do a better job in predicting market turns.

You can work on your data on the above lines and see if it makes sense....it may give indication of market swing tops/bottoms in a general way...but I have not found it to be very useful with pinpoint accuracy we need for our short term trading of 1-3 days holding period....

Best Wishes,

Smart_trade

 

[dr.mariappan]

Amit, thank u very much for starting this thread on options.
best wishes
I request the senior member to enlighten the meaning of IN THE MONEY,NEAR THE MONEY,DEEP IN THE MONEY, OUT OF MONEY, DEEP OUT OF MONEY AT THE MONEY in call option & put option
With regards to all of you
drvm

 

[VIKAS 21]

Sir

how much money is required for option