Nifty Open Interest Analysis

[internet_fanbboy]

Saw this a couple of days back. It has since stuck with me.

If you know how to adjust Short Strangles, nothing like it. 90% of the times it will be a a easy cruise. just gotta manage that 10%.

http://www.youtube.com/watch?v=afbBm7B1o0w

@ OT

So much discussion and knowledge about Options should be put to some concrete use. Since, you are most knowledgeable you should start a thread which follows only one strategy, which is the most challenging:

Short Strangle !! The way market makers do !!

This will bring about all sorts of problems and questions. It will be probably the most informative thread on Options in TJ. It will attract lots of participation also, since it will give consistent income week after week (tks to Theta)

 

[Option.Trader]

Saw this a couple of days back. It has since stuck with me.

If you know how to adjust Short Strangles, nothing like it. 90% of the times it will be a a easy cruise. just gotta manage that 10%.

http://www.youtube.com/watch?v=afbBm7B1o0w

Well strategies in options are based on situations... strangle for eg is associated with squeezing as name suggest... literally squeeze the lemon out of all its juices... so when the market is range bound you want to eat up all the premiums... so you write an OTM put and OTM call and hope that it stays in the range and you get to eat the premium...
Our Option study does help in getting this range... if you see the picture, the nifty strike in blue zone is the expiry range as per Columbus strategy and coupled with OI .... its worth exploring
i.e at the outer end of the blue zone, write an OTM put and Call .. for eg the range indicated 5700PE and 6000CE with both having OI above 70L...
It also gives you a ready made stop loss... if it moves one way as it did today, the loss in the call is compensated by drop in put, though not in linear terms.. but you would not be left with a huge loss..
The issue is on profits... the moment you hedge anything in life, your margins decrease and this is the issue i have faced with Options... There is no clear winner unless you follow it up closely...
There is another technical one ... Delta Neutral Strategy ... its a nice variation of playing with the indicators in the market...but again too cumbersome...
In developed countries where even OTM options are liquid, a variety of strategies can be played with good potential..hell a bunch of kids opened up a company which only bought abs OTM options and made a killing.. .its described in a good book " Long Short" .. here only ITM options are liquid... and that too with the mood swings of market ... they leave you with terrible headaches if you are an option trader :lol:

 

[jamit_05]

Well strategies in options are based on situations... strangle for eg is associated with squeezing as name suggest... literally squeeze the lemon out of all its juices... so when the market is range bound you want to eat up all the premiums... so you write an OTM put and OTM call and hope that it stays in the range and you get to eat the premium...
Our Option study does help in getting this range... if you see the picture, the nifty strike in blue zone is the expiry range as per Columbus strategy and coupled with OI .... its worth exploring
i.e at the outer end of the blue zone, write an OTM put and Call .. for eg the range indicated 5700PE and 6000CE with both having OI above 70L...
It also gives you a ready made stop loss... if it moves one way as it did today, the loss in the call is compensated by drop in put, though not in linear terms.. but you would not be left with a huge loss..
The issue is on profits... the moment you hedge anything in life, your margins decrease and this is the issue i have faced with Options... There is no clear winner unless you follow it up closely...
There is another technical one ... Delta Neutral Strategy ... its a nice variation of playing with the indicators in the market...but again too cumbersome...
In developed countries where even OTM options are liquid, a variety of strategies can be played with good potential..hell a bunch of kids opened up a company which only bought abs OTM options and made a killing.. .its described in a good book " Long Short" .. here only ITM options are liquid... and that too with the mood swings of market ... they leave you with terrible headaches if you are an option trader :lol:

One reason why I cannot think like or want to be a market maker is simple. I do not have deep pockets.

I want 10 to 20 % monthly returns. Whereas a market maker probably gets less than 3%, but on 300 times my capital or more.

So, essentially, it is not my cup of tea. I am not qualified.

 

[Option.Trader]

One reason why I cannot think like or want to be a market maker is simple. I do not have deep pockets.

I want 10 to 20 % monthly returns. Whereas a market maker probably gets less than 3%, but on 300 times my capital or more.

So, essentially, it is not my cup of tea. I am not qualified.

I'm happy if my system gaurantees 3% return on 3L cash deployed month on month.. that will be 36% in a year.. more than any other avenue... only things required is patience... OI is a patience game

 

[jamit_05]

I'm happy if my system gaurantees 3% return on 3L cash deployed month on month.. that will be 36% in a year.. more than any other avenue... only things required is patience... OI is a patience game

True. Being an Options Writer requires a whole different set of trading skills than a Futures trader.

My work on Delta Neutral Trading is underway. It is a little free-style with simple rules. Here too the return is much less compared to Futures trading, but I wanted to develop a skill hence the effort.

 

[gmt900]

True. Being an Options Writer requires a whole different set of trading skills than a Futures trader.

My work on Delta Neutral Trading is underway. It is a little free-style with simple rules. Here too the return is much less compared to Futures trading, but I wanted to develop a skill hence the effort.

Hi Jamit,
Good to interact with you after along time.

i have been trying to study delta neutral strategy

 

[gmt900]

True. Being an Options Writer requires a whole different set of trading skills than a Futures trader.

My work on Delta Neutral Trading is underway. It is a little free-style with simple rules. Here too the return is much less compared to Futures trading, but I wanted to develop a skill hence the effort.

Hi Jamit,
Good to interact with you after along time.

i have been trying to study delta neutral strategy .

In fact I find that in theory you can never lose if you adjust your short

strangle.

The question is how to do it. There are various ways the "Experts" suggest.

but I for one have found it a bit difficult to do it. One reason is that I am not

at my work station thr' the trading hours. Even so I feel that it should be

possible to make reasonable amount ( say 4-5%) by writing a nifty short

strangle in a series. As you know, I am not a savvy trader, but I would be

happy to know your method of managing a short strangle.

Thanks & regards,

gmt900

 

[trdstudent]

@OT , am not a deep pocket trader so short strangle is not pssbl ..... i do trd delta neutral in option but the way jamit is using this ..... really intrsting :thumb: Can u plz give us ,the small option buyers some clue for option trding with some good mrgn ??

 

[Option.Trader]

Date : 14.3.2013

Surprise rally seems to have caught the FII's with their pants down. Huge 2240 cr of options traded on down side... looks like they have squared off their put positions in a loss..
On futures side... profits have been taken off the table both in FII trade as well as total F&O trade.
One good thing of huge shorts entering the system is the power of short covering if news comes along... it just pumps up the nifty... advice not to take shorts until RBI policy comes along, Nifty gonna have mood swings till then and better to have money in the pocket and ready when the trend is established

 

[Option.Trader]

@OT , am not a deep pocket trader so short strangle is not pssbl ..... i do trd delta neutral in option but the way jamit is using this ..... really intrsting :thumb: Can u plz give us ,the small option buyers some clue for option trding with some good mrgn ??

@trd, its always tempting with the leverage offered and swings encountered to make it big in options.. and believe me its like a beginners luck
I had my share of bounties, but unless you have a system in place that's repeatable, it does'nt take long for it to disappear. Like mr Big bull of india says, the passion should be in the process of making money not the end result itself... that is just a by product... i have not given u an answer... but i dont want to lead you to a false complacency... figure out a system and more importantly follow it... u are bound to succeed if the fundamentals are strong