Option Buy Recomendations

[hyraj]

Dear GhoshDa,

Is it right for Mon13/12/2010

P=H+L+C/3
=6069.45+5721.15+5857.35/3
=5882.65
P=5882.65

R1=2P-L =2*5882.65-5721.15 =6044.15 R1=6044.15

S1=2P-H =2*5882.65-6069.45 =5695.85 S1=5695.85

R1=6044.15
S1=5695.85

Buy Call S1@5700=221.80
Buy Put R1@6000=169.45

~~~~~
HYRaj
~~~~~

 

[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 today are as under:

Resistance at 5950
Support at 5800

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

 

[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 6050
Support at 5820

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.

Note: I will not be available till 3rd Jan 2011. As I am going on my new year holiday starting tomorrow. WISH YOU ALL VERY HAPPY NEW YEAR 2011.

Regards

 

[aniket_tyagi]

Dear Ghosh Sir,

Happy holidaying..

 

[hyraj]

Hello ghosh ak34
After reading yur first post considering with weekly High,Low,Close...i calculated p, in my yestreday's post regarding with Nifty, n figures were R1=6044.15 S1=5695.85 .
I asked yur opinion asking that "Dear GhoshDa,Is it right for Mon13/12/2010".
I was expecting yur reply & opinion but u didn't respond.
Instead u r posting diffrnt Support and Resitance levels.
May i know what is the calculation strategy for this Resisatance n Support levels as it dsn't resembles with yur formula posted in yur 1st post. As i calculated in my previous post.
It'll be good if u pave the way.BTW all the best for yur New Year Holidays.

Thanks n Regards
HYRaj
~~~~

 

[TraderJunkie]

I'm happy to have found an active OPTIONS trading thread. I've been trading OPTIONS sporadically but starting in the new year I've decided to allocate 30% of my capital for trading options.

Currently I'm reading up various things to derive my own system. Would love to learn from other guys on this thead and seek their inputs and feedback.

Will post my system rules tonight and seek inputs

Thanks,
TJ

 

[VJAY]

Hello ghosh ak34
After reading yur first post considering with weekly High,Low,Close...i calculated p, in my yestreday's post regarding with Nifty, n figures were R1=6044.15 S1=5695.85 .
I asked yur opinion asking that "Dear GhoshDa,Is it right for Mon13/12/2010".
I was expecting yur reply & opinion but u didn't respond.
Instead u r posting diffrnt Support and Resitance levels.
May i know what is the calculation strategy for this Resisatance n Support levels as it dsn't resembles with yur formula posted in yur 1st post. As i calculated in my previous post.
It'll be good if u pave the way.BTW all the best for yur New Year Holidays.

Thanks n Regards
HYRaj
~~~~

Dear Hyraj,
Just posting my openion of ur Q..sure ghosh sir will give better view after he finish his vacation
He is giving daily sup&res for nifty future trading.....in his 1st post there you find weekly res&sup for option trading (option strike price)...as per your figures(R1=6044.15 S1=5695.85 )..you can buy CEof 5700 &pe of 6000 as per strategy given in 1st post....

 

[TraderJunkie]

Options traders and fellow friends, please critique my rules and system. I hope to learn from this thread and be a better options trader.

Why am I getting into OPTIONS trading ?
1.Relatively less capital necessary than futures trading.
2.With discipline and deeper understanding of option pricing one can potentially make decent profits. Especially by focuing on ATM or deep in the money calls with delta >= 0.5
3.It suits my risk profile.

What OPTIONS will I trade and why ?
I will day trade NIFTY options and highly liquid NIFTY stocks for shorter duration (4-8 days). For NIFTY I will generally only buy ITM or deeply ITM calls with delta >= 0.5. The reason for this is to have a better risk to reward ratio.

How many trades will I take per month ?
I will take at-least 1 NIFTY day-trade per day with a risk to reward ratio of 1:2. I will take around 6-8 stock option calls per month.

What are my targets ?
For the month I will target to win 250 NIFTY points and will be willing to lose 50 points on losing trades. Effectively I will target for 200 NIFTY points by end of the month. If I get closer to beating this target I may increase my trade size.

MY NIFTY TRADING SYSTEM RULES​

How to decide if to go long or short on the market ?

1. I will study the European and American closing and also track all ASIAN openings before our markets open. This will act as a proxy to building a hypothesis. I will further use the SGX NIFTY to corelate ASIAN opening with the Indian opening.

2. Watch the Indian opening from 9:15 till 10:30 am and will not trade unless there is an exceptional fall or exceptional rise.

3. From 9:15 till 10:30 if the NIFTY can hold onto at-least 50% of the gap up or gap down, that will be my 1st indicator of a trend.

4. I will further use the channel technique to see the trend. Higher tops and higher bottoms = go long. Lower tops and lower bottoms is = go short.

5. I will also look at the OI and Volume on the NIFTY futures to understand if there is enough push in the direction I want to go.

6. When will I enter trades ? Once the trend is established I will calculate/find out what the supports and resistances look like and try to enter long trades as away from resiatance levels as possible and short trades as away from support levels as possible. This is to give me a good risk to reward ratio.

7. I will use the 2 minute candles and 20 and 50 SMAs. I will buy calls when price crosses 20 SMA (1 large candle or 2 successive shorter white candles) and buy PUTS when NIFTY crosses below 20 SMA conculsively (1 large candle, or 2 shorter candles)

8. Most importantly, I will put my STOP LOSS orders slightly above that day's support levels if I buy CALLS and above resistance levels if I buy PUTS.

9. I will continuously monitor the trend and will use the same technique explained in point 3 and 4 to check for trend reversal. If there is a trend reversal, I will take appropriate CALLs or PUTs.

10. I will only carry my calls overnight if there is a strong chance of a gap up or gap down the next day. How will I decide this ? Based on the strength of the move from 3:00 pm to 3:30 pm. In addition I will also check if markets are closer to major resistance or support levels. This will tell me how much steam the current trend may have. Though as a general rule, I will close all trades on the same day.

11. I will get into trades that have potential to generate at-least 10 points , hence the reason to buy ATM or deep ITM calls with delta > 0.5. This means approximately I need 20-25 points move in the NIFTY to give me my 10 points on the call. Hence its important to enter trades not too close to support if its a PUT or not too close to resistance if its a CALL.

----------------
This seems to be too simple a strategy but I sesne its easy to write it than execute. Execution will demand strict discipline and to curb the desire to trade excessively (Now that I'm with ZERODHA). I understand that for my options strategy to work my costs have to be low, and hence ZERODA, but I will not trade excessively. I hope to stick to what I have said above and fine tune the system.

OPTIONS gurus on this thread , please help me learn and please be my critiques. I hope to share my trading journal at the end of each week or maybe daily on this thread.

Thanks,
TJ.

 

[DanPickUp]

Options traders and fellow friends, please critique my rules and system. I hope to learn from this thread and be a better options trader.

Why am I getting into OPTIONS trading ?
1.Relatively less capital necessary than futures trading.
2.With discipline and deeper understanding of option pricing one can potentially make decent profits. Especially by focuing on ATM or deep in the money calls with delta >= 0.5
3.It suits my risk profile.

What OPTIONS will I trade and why ?
I will day trade NIFTY options and highly liquid NIFTY stocks for shorter duration (4-8 days). For NIFTY I will generally only buy ITM or deeply ITM calls with delta >= 0.5. The reason for this is to have a better risk to reward ratio.

How many trades will I take per month ?
I will take at-least 1 NIFTY day-trade per day with a risk to reward ratio of 1:2. I will take around 6-8 stock option calls per month.

What are my targets ?
For the month I will target to win 250 NIFTY points and will be willing to lose 50 points on losing trades. Effectively I will target for 200 NIFTY points by end of the month. If I get closer to beating this target I may increase my trade size.

MY NIFTY TRADING SYSTEM RULES​

How to decide if to go long or short on the market ?

1. I will study the European and American closing and also track all ASIAN openings before our markets open. This will act as a proxy to building a hypothesis. I will further use the SGX NIFTY to corelate ASIAN opening with the Indian opening.

2. Watch the Indian opening from 9:15 till 10:30 am and will not trade unless there is an exceptional fall or exceptional rise.

3. From 9:15 till 10:30 if the NIFTY can hold onto at-least 50% of the gap up or gap down, that will be my 1st indicator of a trend.

4. I will further use the channel technique to see the trend. Higher tops and higher bottoms = go long. Lower tops and lower bottoms is = go short.

5. I will also look at the OI and Volume on the NIFTY futures to understand if there is enough push in the direction I want to go.

6. When will I enter trades ? Once the trend is established I will calculate/find out what the supports and resistances look like and try to enter long trades as away from resiatance levels as possible and short trades as away from support levels as possible. This is to give me a good risk to reward ratio.

7. I will use the 2 minute candles and 20 and 50 SMAs. I will buy calls when price crosses 20 SMA (1 large candle or 2 successive shorter white candles) and buy PUTS when NIFTY crosses below 20 SMA conculsively (1 large candle, or 2 shorter candles)

8. Most importantly, I will put my STOP LOSS orders slightly above that day's support levels if I buy CALLS and above resistance levels if I buy PUTS.

9. I will continuously monitor the trend and will use the same technique explained in point 3 and 4 to check for trend reversal. If there is a trend reversal, I will take appropriate CALLs or PUTs.

10. I will only carry my calls overnight if there is a strong chance of a gap up or gap down the next day. How will I decide this ? Based on the strength of the move from 3:00 pm to 3:30 pm. In addition I will also check if markets are closer to major resistance or support levels. This will tell me how much steam the current trend may have. Though as a general rule, I will close all trades on the same day.

11. I will get into trades that have potential to generate at-least 10 points , hence the reason to buy ATM or deep ITM calls with delta > 0.5. This means approximately I need 20-25 points move in the NIFTY to give me my 10 points on the call. Hence its important to enter trades not too close to support if its a PUT or not too close to resistance if its a CALL.

----------------
This seems to be too simple a strategy but I sesne its easy to write it than execute. Execution will demand strict discipline and to curb the desire to trade excessively (Now that I'm with ZERODHA). I understand that for my options strategy to work my costs have to be low, and hence ZERODA, but I will not trade excessively. I hope to stick to what I have said above and fine tune the system.

OPTIONS gurus on this thread , please help me learn and please be my critiques. I hope to share my trading journal at the end of each week or maybe daily on this thread.

Thanks,
TJ.

Hi TraderJunkie

Nice stuff. I may put in some little thoughts from outside. Some may sound critical to you. Take them as ideas and not as critiques, as you asked for comments. Ok

I see a lot of TA in your trading plan. In my opinion a little bit to much for an option trader. Sounds all to technical and theoretical. Reduce that stuff.

What I miss, are clearer ideas or definitions or rules for stop losses, position sizing and money management. They have to be written down in your trading plan in exact details. Why ? If you are invested, there is not time to define that stuff. That must be done in every detail in advance.

I also did not see any comments on volatility. Volatility is one of the most important keys in option trading and no word about it in your plan.

Next point I miss are more ideas for different time frames with different option strategies. Example : You trade the weekly time frame of Nifty. What about a strangle or straddle for such time frames ?

You can diversify short and middle time frame strategies. You even can run different accounts for that. One for short time trades. One for middle time frames. One for living and so on.

TraderJunkie, I hope, you got some more ideas for your trading plan. Some you may can use and others are god for thoughts in the future. I hope, it was not too much for you.

I wish you all the best and a god start in 2011.

DanPickUp

 

[TraderJunkie]

Hi TraderJunkie

Nice stuff. I may put in some little thoughts from outside. Some may sound critical to you. Take them as ideas and not as critiques, as you asked for comments. Ok

I see a lot of TA in your trading plan. In my opinion a little bit to much for an option trader. Sounds all to technical and theoretical. Reduce that stuff.

What I miss, are clearer ideas or definitions or rules for stop losses, position sizing and money management. They have to be written down in your trading plan in exact details. Why ? If you are invested, there is not time to define that stuff. That must be done in every detail in advance.

I also did not see any comments on volatility. Volatility is one of the most important keys in option trading and no word about it in your plan.

Next point I miss are more ideas for different time frames with different option strategies. Example : You trade the weekly time frame of Nifty. What about a strangle or straddle for such time frames ?

You can diversify short and middle time frame strategies. You even can run different accounts for that. One for short time trades. One for middle time frames. One for living and so on.

TraderJunkie, I hope, you got some more ideas for your trading plan. Some you may can use and others are god for thoughts in the future. I hope, it was not too much for you.

I wish you all the best and a god start in 2011.

DanPickUp

Thank you Dan for your encouragement and suggestions. I am going to incorporate the following additions to my trading plan to take care of money management (stoploss and position sizing). As far as time-frames go, I am going to start with only NIFTY day trade and positional shorter-term trades with stocks.

Money management rules

1. Stoploss will be placed using 2 rules. One is my personal risk appetite and two risk reward ratio.Additionally Iwill use support and resistance levels. The idea is not to have too small SL as to not give the trade breathing space.

So, per trade I won't want to lose more than 15% (of option value). To ensure that this 15% is approximately closer to supports and resistances I will attempt to enter trades closer to supports and resistances while going long or short
respectively.

Regarding volatility : I might be naive here, but my thinking is to start with a small position of trade irrespective of volatility. Meaning to say, what is the smallest trade I will take no matter what ? Thats the position size for me to start with. Maybe as I experience and understand the greeks better, I will try to fine-tune. Currently keeping it simple , will invest 50% of max trade size I want to take , and take it from there.

.......

Guys - I did a small test today with my system, I will post it soon for you to critique.

Dan - thanks a ton man ! Appreciate your taking the time