NIFTY Futures Mechanical Trading

[zeekid]

do you mean feb 6th? can you clarify

yes, I'm sorry - it was the 6th of Feb that market opened with a huge gap-down and not 7th.

Now according to the options strategy that you have suggested, can you explain with a practical example, what option trade should have been taken (on 5th Feb) to keep most of the profit intact that is made till the EoD on 5th Feb? (not knowing ofcourse, how the markets will open on 6th)

Nitesh

 

[nadodav]

Dear Marcus, Zeekid, Ravalsb

Let me put my thoughts on hedging with options.

Gap-up or gap-down opening will be either in favout of you or it will against you. so overall at the end of say a year, there will not be much impact on your overall results. In case of strong trend, gap-up or gap-down happnes quite few days in your favour too.

We don't know how market will open next day whether it will open with gap-up or gap-down as our market is following purely global markets. So it would be difficult to buy options everyday to protect opening gap losses. but yes, in certain time like this and some cases, it may work well but overall, it will be not of much help. Instead, hedging can work better if we hold options instead of just buying at close and selling at next day open. I prefer to hedge profit and not the losses as in case of losses, we will be stopped out. While in case of profit, we can use options to lock profit whenever we have good amount of profit. but again, there will be two possibilities either you have to suffer of your hedging cost or your profit will be protected. I believe, that options heding should not be done with each and every trade with mechanical trading but should be done only to protect large gains. If we try to protect our positions from the begining of each trade, than it will also eats up your gains considerably.

Thanks & Regards,

Vinod

 

[nadodav]

NIFTY FUTURE For February 12,

Current position : NIL

Nifty Fut Closed at : 4810.55

Net Profit / (Loss) since thread started : +926

Support : 4772
Resistance : 5002

All new members visiting first time are requested to read all messages start from first one before going ahead.

Happy Trading.

Vinod

 

[arjit]

Mr.Vinod,When will you take any position?I am waiting very eagerly.Your supp. and resi. are too good.Thanks. Ajay

 

[debdeeps]

NIFTY FUTURE For February 12,

Current position : NIL

Nifty Fut Closed at : 4810.55

Net Profit / (Loss) since thread started : +926

Support : 4772
Resistance : 5002

All new members visiting first time are requested to read all messages start from first one before going ahead.

Happy Trading.

Vinod

Hi Vinod,
My indiabulls terminal is showing that Nifty Fut Closed at : 4781.1
Thanks,

 

[marcus]

yes, I'm sorry - it was the 6th of Feb that market opened with a huge gap-down and not 7th.

Now according to the options strategy that you have suggested, can you explain with a practical example, what option trade should have been taken (on 5th Feb) to keep most of the profit intact that is made till the EoD on 5th Feb? (not knowing ofcourse, how the markets will open on 6th)

Nitesh

On feb 5th nifty closed at 5480.95 assume you were long one lot the next day it opened at 5255.0 so due to the gap down you would have lost 225.95 or Rs11297.5/-

If we wanted to lock in our profits and protect ourselves against gaps then just before the close on 5th we could buy one lot of nifty PE of delta near one(approx) at say strike price 5800 at premium of Rs410/- the next day open due to the gap down the premium is Rs570/- as the option gets deeper ITM so we have made a profit of Rs8000/- thereby reducing our overloss loss in futures position from the gap down from Rs11297/- to Rs3297/-

This is without using options s/w, with options software better hedging is possible if we can determine the value of the greeks and roughly estimate IV

 

[marcus]

Thanks for your opinion Vinod, the system is yours we are only attempting if possible to improve it if this is possible.

Dear Marcus, Zeekid, Ravalsb

so overall at the end of say a year, there will not be much impact on your overall results. In case of strong trend, gap-up or gap-down happnes quite few days in your favour too.

Are you sure at the end of the year gap downs will negate the gap ups?

I'm of the opinion gaps down would be more than gap ups,I am not sure about this is I have not calculated for myself but this is what my thinking tells me may be possible. Because declines are always sharper than rallies primarily because people tend to book profit during rallies and we may not see many large gap ups but during declines especially with short selling not being allowed in India in the past (I know its allowed now) gap downs are more severe and prone due to panic selling.

Generally slightly shorter term MA or rolling breakout period or exponential smoothing work better during corrections and downtrends than uptrends in trend following systems, this is because of the above reason.

Anyway happy trading!

 

[nadodav]

Hi Vinod,
My indiabulls terminal is showing that Nifty Fut Closed at : 4781.1
Thanks,

4781.1 may be last traded price. as per NSE's Daily Settlement Prices, Nifty Future closed at 4810.55

Vinod

 

[debdeeps]

4781.1 may be last traded price. as per NSE's Daily Settlement Prices, Nifty Future closed at 4810.55

Vinod

Ok, thanks for the clarification. By the way when are we going to take next position or short? I am very much interested in your mechanical trading method. Thanks,

 

[ravalsb]

I'm of the opinion gaps down would be more than gap ups,I am not sure about this is I have not calculated for myself but this is what my thinking tells me may be possible. Because declines are always sharper than rallies primarily because people tend to book profit during rallies and we may not see many large gap ups but during declines especially with short selling not being allowed in India in the past (I know its allowed now) gap downs are more severe and prone due to panic selling.

Marcus,

It would also matter whether we are long or short at that particular time.

If we are short, Gap downs would be in our favour and gap ups would be not be in our favour. Since according to your analysis, gap ups are not as strong as gap downs are severe, going short seems to be better proposition. Appreciate your analysis.

It would be interesting to see if we can work out options strategies using these support and resistance levels as kind of benchmark.

That is to say, By trading options (not hedging) instead of Nifty Futures we can definitely leverage our funds better.

We all know that this system is working fine and support/resistance levels are also good. Point is can we work out options strategies??

Vinod, do you think it is viable??

Thanks & Regards