Educational thread on a long APR Infy Strangle

[Somatung]

Here an old movie and was posted from Amitrandive in the Hollywood movie thread. As we have Saturday, just an idea beside many others:

Rogue Trader 1999 K4FH
https://www.youtube.com/watch?v=MebaDb6HXyU

 

[Somatung]

Here some screen shots in case you want to do some premarket analyzes:

Here the absolute basic daily chart even with the dangerous spike up which could happen as mentioned on last Fridays post. If it continues, we have to find a solution for this as we have a Call Credit Spread:
http://i58.tinypic.com/9apoa0.png

for the week:
http://i61.tinypic.com/ng7ypy.png

and the actual APR option matrix:
http://i60.tinypic.com/4qpoxs.png

Basic daily nifty chart:
http://i61.tinypic.com/2ugkync.png

and here Nifty (Blue) and Infosys (Green) against each other:
http://i58.tinypic.com/2dbv1av.png

Short information to the question from Friday: The answer is: If we do not need absolute necessarily to go long puts or calls on a Friday, we avoid to do so on such days. After we bought such long legs, we have two days time decay against us. It is not a rule written in stones. It is your common sense if you want to do it. Just keep it in mind.

Have a good start into the new week. Somatung

 

[Somatung]

Hello

Now the up shooting of the market seems to have started. First move from 3231 up to 3293. The Call Credit Spread is in place. The risk here is very limited, but we still can make some loss through the spread we choosed. If you say: Yes, I do not care about this possible loss, then you let it run and other wise some action will be needed if market further moves up.

Our long APR 3150 Put is also in action. Here just remember the Friday rule and be flexible with it. If we think market could go further up, we should buy back this long APR 3150 Put at certain points. This points can be framed through a level on the script we trade on. It can be framed through the amount of Rs we want to maximum risk on this trade or it can be framed through the decision to risk all what was paid for this put. Just as you like and now wright or wrong.

Todays actual learning open position with three legs:

- Short APR 3450 Call @ 60.90, IV 36.70, OI 19'750 (56.45, IV 33.86, OI 1'750)
- Long APR 3550 Call @ 38.00, IV 37.03, OI 6'625 (35.50, IV 34.40, OI 1'125)

- Long APR 3150 put @ 73.20, IV 39.80, OI 15'750 (76.90, IV 36.88, OI 4'125)

Hope you enjoyed ""Todays thoughts about option trading".

Somatung

 

[Somatung]

End of day analyzes 31. Mar 2014:

Infosys closed @ 3282.80, IV assumed @ around 17.

- Short APR 3450 Call @ 58.50, IV 35.62, OI 7'125 / 67.45, IV 41.01, OI 18125 / 66.70, IV 36.22, OI 18'750 (56.45, IV 33.86, OI 1'750)
- Long APR 3550 Call @ 36.50, IV 35.83, OI 5'750 / 42.74, IV 41.01, OI 18'125 / 42.55, IV 36.90, OI 6'500 (35.50, IV 34.40, OI 1'125)

- Long APR 3150 Put @ 66.45, IV 35.58, OI 12'375 / 64.95, IV 39.20, OI 15'750 (76.90, IV 36.88, OI 4'125)

Hello

Until now we played a bit around with the options, the different strike levels and some simple option strategies. This to get a feeling for what we do and for the market we trade in. All was build more or less on pure price action on the most simple charts found in the net. On the other side we did some simple analyzes on the option martix. Even the charts are so simple, we have been able to recognized the mentioned support at around 3235 on the daily time frame. This support level seems to hold for now.

On the monthly chart we have a huge red candle which was eating down from 3850 to 3213. That's over 600 points which we not see too many times on this time frame in this market. Now lets add some simple tools on the daily chart which can be used with real precaution to make further trading decisions. Lets add some MA, one momentum indicator and the simple trend lines. You decide by your self what you want to use as parameters. As example I choosed for the MA's 3 Exponential and 2 Weighted and I choosed for the Momentum Indicator a Slow Stochastic 7, 14. They are not back tested on this simple charts used here. That's why I told: We use them with real precaution. http://i57.tinypic.com/2hmjax0.png

In the new chart with the help of this little tools, we also see some sort of a triangle pattern which is most likely an "Ending diagonal triangle" without the typical waves in it. Todays candle is a typical "Long Legged Doji". What doe's this "Long Legged Doji" mean to any of our trading decisions? Absolute nothing, as we still would have to guess where market may moves. If we include the OI from the options, we see an OI of 116'125 on the APR 3400 call and we see an OI of 141'125 on the APR 3200 put. So at the moment there is resistance at the 3400 level and support at the 3200 level = Possible range. Both of those options are even the same priced (Check the option matrix http://i59.tinypic.com/os4ign.png)

Now as lucky guys as we are, both of our trades, long Put and the Call Credit Spread, are just next to those support and resistance levels. How comes? In one way, this is a good thing in case market now starts to stay in this range. On the other hand: The MAs, the Momentum indicator and the broken down trend line would give a buy signal on the daily chart. Ok, lets play the game in a bit improved way. From now on we will change our MM and we will trade with at least two lots on any leg. This lots we now have cleverly to implement in the market, in the existing legs and in the new legs. We start tomorrow with the sell of one lot APR 3100 put. Exercise for you if you want: Choose by your self the moment when you want to sell this put. After we sold this put, we will have a Put Debit Spread and a Call Credit Spread. Our long APR Strangle is also/already implemented since last Friday through the two long legs which are the long APR 3550 call and the long APR 3150 put. It is important to understand this and I mention it, as I saw over the weekend that some readers here did not get this point.

Somatung

 

[Somatung]

Short intra day updates:

Hello

Market went up as the signals showed on the chart. So action was needed.

- Sold APR 3100 put at 53.40, IV 39.15, OI 39'125
- Sold an other APR 3100 put at 45.00

- Bought an other APR 3550 call @ 41.95

So here the new MM with two lots is implemented. We still have a problem with the long put and the short call. That will be our next point to handle.

 

[Somatung]

Request the mods to close this thread as it seems to be to difficult to understand what is done and shown here. Thank you.