Option Buy Recomendations

[ghosh_ak34]

Dear Friends,

For Nifty Future traders who would like to trade as per trend check strategy posted in 1st post of the thread, Nifty levels for tomorrow are as under:

Resistance at 5545
Support at 5450

If you go short 1 lot then, buy 1 lot at money or near money call and if you go long 1 lot then, buy 1 lot at money or near money put to hedge. Reco. to trade as per trend check strategy posted in 1st post of this thread.

Regards

 

[cbiswas]

Selling option is always profitable

As you know more than 80% options are expairing worthless ie. out of money.
So, selling option is more profitable. And it gives a wide range for profit.
Like the subject pair:
Sell Sep 2010 5200 PE @37(Closing-18-08-2010)
Sell Sep 2010 5600 CE @54(Closing-18-08-2010)
Safe range is between 5109 and 5691, till expiry.
It is 582 points, and that much flactuation is only possible if there is a huge crash or surge.
Now, your profit potential in this strategy is : Rs. 4550 per lot (of 50).
And the investment is around 45000 (as margin money for selling options).
So the profit is more than 10% in a months time !
My advice is keep 1 lakh rs to play with 2 lots of nifty option.
For more information on wining strategies pls mail me: [email protected] :thumb:

 

[cbiswas]

Wining Strategy

sawh1234,
It is more profitable if you sell 2 lots of 5300 put and buy one lot of 5400 put. (sept series)
Try this strategy. It is more effective in this bull market with a strong under current of correction of 300 points.
Regards.

 

[ghosh_ak34]

Dear Mr. Ghosh,

It is nice to see your help to beginners.... actually i only want to know about " break even point " in case of short straddle or strangle.

I write Call & Put of 5400 strike price of nifty Sep'10 month @ premium of 254 but i will not wait for September expiry then will break even point work in case of sharp movement of Nifty ?

Suppose if Nifty reach @ 5654 on upper side tomorrow or 5146 on down side sharply ( no time decay factor involve ) then will the position in no profit no loss situation or in loss ?

This query is for short strangle ( OTM Call & Put ) too...... pls guide...

Dear sawh1234,

You can use any option calculator to calculate break evens.

In case of sharp fall this write strategy will suffer loss. But as per current trend it seems unlikely of a sudden sharp fall or rise tomorrow.

In case one expects sharp fall or rise, one will buy a strangle.

Regards

 

[VJAY]

Dear ghosh sir,
I had some doubts in nf future tradings as per trendcheck..please help me
1.If you go short 1 lot then, buy 1 lot at money or near money call and if you go long 1 lot then, buy 1 lot at money or near money put to hedge
here we go for buy 1 lot as per trend check....bought 1 lot nf then smae time need to hedge it with 1lot ATM put?or hedge to carry forward to next day...
2.To find these trades watch the volume, open int. of AT money or OTM call / put. And when charts (lack of direction i.e. previous interval +/- 20 up or dwn as per trend check strategy doesn't hold good) and data (vol. and open int.) give confirmation then, goahead and write the option that qualifies these data.

can you please eloberate it with an example?when no trend means up/dn below 20 with interval..is it right...then we go for write options....some confussions...pls help

3.please share your intervals for trend check..eg:9.05-9.35...then...?

 

[ghosh_ak34]

Dear ghosh sir,
I had some doubts in nf future tradings as per trendcheck..please help me
1.If you go short 1 lot then, buy 1 lot at money or near money call and if you go long 1 lot then, buy 1 lot at money or near money put to hedge
here we go for buy 1 lot as per trend check....bought 1 lot nf then smae time need to hedge it with 1lot ATM put?or hedge to carry forward to next day...
2.To find these trades watch the volume, open int. of AT money or OTM call / put. And when charts (lack of direction i.e. previous interval +/- 20 up or dwn as per trend check strategy doesn't hold good) and data (vol. and open int.) give confirmation then, goahead and write the option that qualifies these data.

can you please eloberate it with an example?when no trend means up/dn below 20 with interval..is it right...then we go for write options....some confussions...pls help

3.please share your intervals for trend check..eg:9.05-9.35...then...?

Dear Vijay,

Ans1: We immediately hedge our long or Short NF position with a AT money or near money put/call.

Ans2: To understand this one has to look at option chain at nse site. Check buy/sell orders at OTM strike price. Look for change in volumes/open interest and change in put/call ratio.

We also look at charts before we go and write OTM calls or puts. For example: If there is no trend i.e. Nifty Spot is +/- 20 points as per trend check and remains so for 3-5 days (we call these days as Narrow Range[NR] days) then, it suggests no trend and we write a straddle.

Ans 3: The trend checks are performed at 9:05 AM, 9:35 AM, 10:00 AM, 10:30 AM, 12:30 PM and 3:15 PM.

Regards

 

[ghosh_ak34]

Dear Friends,

For Nifty Future traders who would like to trade as per trend check strategy posted in 1st post of the thread, Nifty levels for tomorrow are as under:

Resistance at 5575
Support at 5500

If you go short 1 lot then, buy 1 lot at money or near money call and if you go long 1 lot then, buy 1 lot at money or near money put to hedge. Reco. to trade as per trend check strategy posted in 1st post of this thread.

Regards

 

[VJAY]

Thanks ghosh sir...nice explanation...here suppose if we see increasing open interest in OTM puts/calls....which one we write?increasing one/decreasing one?(I watching option chain & change in % of OI in my excell sheet for any spark above 100% OIin any ce/pe's)
How can I use it for trading....

 

[ghosh_ak34]

Thanks ghosh sir...nice explanation...here suppose if we see increasing open interest in OTM puts/calls....which one we write?increasing one/decreasing one?(I watching option chain & change in % of OI in my excell sheet for any spark above 100% OIin any ce/pe's)
How can I use it for trading....

Dear Vijay,

Changes in price, volume and open interest (OI) needs to be taken into account to understand this.

In case price, OI and volume rises then, its a bullish signal and so one can write OTM puts. And write OTM calls when price is decreasing with increase in OI and volume. Offcourse technical charts should also suggest this.

To understand how to use it, do paper trade first to see the results. I do the same to undersand new things.

Regards

 

[DanPickUp]

Re: Selling option is always profitable

As you know more than 80% options are expairing worthless ie. out of money.
So, selling option is more profitable. And it gives a wide range for profit.
Like the subject pair:
Sell Sep 2010 5200 PE @37(Closing-18-08-2010)
Sell Sep 2010 5600 CE @54(Closing-18-08-2010)
Safe range is between 5109 and 5691, till expiry.
It is 582 points, and that much flactuation is only possible if there is a huge crash or surge.
Now, your profit potential in this strategy is : Rs. 4550 per lot (of 50).
And the investment is around 45000 (as margin money for selling options).
So the profit is more than 10% in a months time !
My advice is keep 1 lakh rs to play with 2 lots of nifty option.
For more information on wining strategies pls mail me: [email protected] :thumb:

Hi cbiswas

Here my comments to your statement :

Popular belief: 80-90% of options expire worthless therefore it is better off being a net seller than a net buyer of options at any time.

How many times have you read this? I know I have read or heard it dozens of times. “80% of options expire worthless therefore it is better to be an option seller”.

I trade some times these things and this statement has confused me.

My first thought was how can it be possible?

If you consider that at any one time about 50% of all options are in-the-money and 50% are out-of-the-money, and only out-of-the-money options can expire worthless, then could not the figure be closer to 50%?

In the book Options on Futures by Summa (which I know personal and I also can tell you, that Guy Bower is a nice person, as he helped me a lot in back spread trading (you will see his name later in the article)) and Lubow, they quote the 80% figure and it is backed up by numbers from the Chicago Mercantile Exchange (CME). In a section entitled “The Numbers Speak for Themselves”, they show a table of data sourced from the CME. The numbers represent the percentage of options that expire worthless.

If you like to read more and educate your self about this subject, here it goes :

http://www.protraderdigest.com/articles/20081025_7

Ghosh_ak34 and all the others, have a nice weekend

DanPickUp