Dear All,
Today I am starting new thread on options buy recomendations.
Stock - Call/Put-Strike Price - *Price - SL -Target
======================================
Nifty - Put - 5600 - 155 - 120 - 300
Idea - Put - 120 - 5.7 - 3.5 - 12
RCOM - Put - 700 - 39 - 28 - 90
SAIL - Put - 240 - 20 - 12 - 50
======================================
*Price is CMP. You can buy around this price. SL is Stop Loss
I am giving out-of-money calls and if these become in-money then you can hold them till expiry. Will suggest lotsize of equal quantity, say one lot.
I do not believe in hedging so suggesting SL.
I will track these on daily basis. Do let me know if these sound interesting to you.
Nifty Options Trading Strategy
Putting it here to help traderji members in understanding the same.
Will now consider opening at 9:20 AM instead of 09:05 AM. So, 1st trend check will start at 10:30AM etc as stated earlier.
For options to be successful, the nifty, if you are a nifty trader, should move in a particular direction steadily either up or down. When to buy option is a common question and there could be many answers to this. Normally, what I do I am sharing it here. First find last weeks support (S1)and resistence level (R1). R1 ~ S1 = 300 to 400 points. All calculations are based on Nifty Spot only. R1 and S1 are weekly resistence and supports, for Week starting Monday.Always maintain a strict SL=20-30% from your buy price. Have a target = 40-50% from your buy price and square off when your profit is met or hold your profit making position with a trailing SL=10% (max). I consider opening price as price at 9:20 AM because of initial jitters in opening. Square off all positions by Friday and start fresh with new R1 and S1 from Monday.
P = (Weeks High + Weeks Low + Weeks Close)/3
S1 = 2P - H
R1 = 2P - L
If (R1 - S1) >= 300 and <400 then,
Buy calls of Strike Price S1 and puts of Strike price R1 as per trend stated in "How to check trend and buy options". In case of bearish market buy more puts (e.g. 3-4 lots) than call (e.g 1 lot) and in case of bullish market buy more calls (e.g. 3-4 lots) than put (e.g. 1 lot).
else
Do not trade at all or trade as per sideways strategy stated below.
Keep a target and SL in mind and maintain that strictly. Do not hold call or put after 20th
of the month. If you are very sure that S1/R1 will be broken buy put at S1 / call at R1. Always remember to maintain a SL=20-30%.
The R1 and S1 are the Nifty strike prices. If calculated R1 = 5028 then, will consider nearest 100 as R1 i.e. 5000 as Nifty strike price. Similarly if calculated S1= 4958 then, will consider nearest 100 i.e. 5000 as Nifty strike price.
Sideways strategy is as under, applicable when R1~S1 <300 or >400.
If Nifty opens with gap up and remain above 20pts till 10:30AM - 10:45 AM buy calls at S1
with SL 20-30% from your buy price. Book profit if your target is achieved or buy puts at R1
around 3:00 PM-3:15 PM and hold call with a trailing SL of say 10%.
If Nifty opens with gap down and remain below 20pts till 10:30AM - 10:45 AM buy puts at R1
with SL 20-30% from your buy price. Book profit if your target is achieved or buy calls at
R1 around 3:00 PM-3:15 PM and and hold put with a trailing SL of say 10%.
Vary calls and puts nos. according to the trend.
If Nifty spot opens gap up 100 pts and then. settles at 20 pts. means trend is negative. So,
buy put at R1 with SL=30% from buy price. And similarly, if Nifty spot opens down 100
pts and then, settles at 20pts, means trend is positive. So, buy call at S1 with SL=30%.
For example: If Nifty opens gap up at 4625 then, at 10:30 to 10:45 it came down to 4545, (4625-4545= 80) means 80 pts down from peak, means trend is down so you can buy put at R1. Again at 3:00 PM to 3:15 PM suppose Nifty is at 4570 (4570-4545=25) or 4565 (4565-4545=20) it means trend is again up. So, buy call at S1 and hold it till next day provided at this stage put's SL is not hit and you are still holding it till next day. This will protect you from risk of gap up or down opening the next day.
Suppose by 3:15 PM your SL for put has been hit then, exit the put and do not enter into any trade that day. Wait for next day and trade as per the stated strategy.
You can buy more calls or puts during the day depending on the trend.
If due to gap up next day you are making profit in call bought at S1 then, either book profit or hold it with trailing SL=10%. If put SL is hit i.e. 30% of put buy price then, square off put else hold the put.
How to check the trend and Buy options
Trend is checked at 10:30 AM-10:45 AM with 20 pts up or down from Nifty openning price. Depending on this trend its recomended to buy Nifty call at S1
if (Price at 10:30 AM - Opening price) >= 20pts. And its recomended to buy Nifty put at R1 if (Price at 10:30 AM - Opening price ) =< 20pts.
SL for both put and call price = 30% of your buy price.
Again after 2 hrs i.e. at 12:30 PM check the trend with respect to price at 10:30 AM.
if (Price at 12:30PM - Price at 10:30 AM) =<20 pts buy puts at R1 or hold the profit making puts bought at 10:30 AM. SL = 30% from your buy price.
if (Price at 12:30PM - Price at 10:30 AM) >=20 pts buy calls at S1 or hold the profit making call bought at 10:30 AM. SL = 30% from your buy price.
You can also check the trend at your comfortable intervals. Above is just an example.
Before the day ends do the market check again. Check for the price at 3:00 PM.
If (Price at 3:00PM - Price at 12:30 PM ) =<20 pts square off profit making put or hold it for next day and hedge the position by buying call at S1.
If (Price at 3:00PM - Price at 12:30 PM ) >=20 pts square off profit making call or hold it for next day and hedge the position by buying put at S1.
If trend has not emerged i.e. the difference between current prices and price at base point is neither >=20 pts nor =<20 pts then, just do not trade.
Base point is the price at opening or at 12:30 PM or 3:00 PM or any other desired intervals of your choice if you have somehow missed these.
I reco. 30% SL for options (Nifty/Stock) because it has worked for me. This is based on my experience that if price goes below 30% of my buy price then, the option hardly comes back in profit so I cut my all losses with SL=30% from buy price.
You can have your own SL based on your comfort level. 30% SL is just my reco. based on my experience.
As far as sideways or bullish or bearish trend is concerned one needs to refer to charts for TA. One days move doesn't decide that trend is bullish, bearish or sideways. According to my strategy, the trend should remain in bullish or bearish mode for atleast 15 days in a row for it be considered bullish or bearish. If for last 15days its not showing any trend either up or down in a row, it means the rend is sideways.
I reco. hedging by atleast 50% or close to it by price.
In nut shell carry both put and call next day only when SL for both has not been hit. And do not carry any open position next day w/o any hedge.
Suppose you are holding both calls (at S1) and put (at R1) positions by EOD today.Then,
1. Tomorrow if market opens gap down, and if SL of S1 Call is hit then exit it and hold the profit making R1 Put with trailing SL.
2. Tomorrow if market opens gap up, and if SL of R1 Put is hit then exit it and hold the profit making S1 Call with trailing SL.
Then, you can continue as earlier i.e. buying calls and puts as per trends at 10:30, 12:30 and at 3:00 PM
Writing Nifty Options
You can also write options. Say write calls at R1 and write puts at S1 but remember the total cost of total calls written and puts written should be of equal value or near by. Writing options is always risky. I seldom prefer writing options reason being it eats money and the ROI from writing options is less.
Suppose you have written Nifty 4600 call @150 and 4100 put @150 then, option writer might have paid around 60k to 70k as margin money for a max gain of 15k. Which is 25% or lesser return. While if I use 60k or 70k in buying options I could gain more than 25% profit and that to with lesser tensions and risks. So, I recommend buying options and avoid writing options.
Suppose you have written Nifty 4600 call @150 and 4100 put @150 and you fear a up side movement. While writing options keep a SL=30% from your write price. In case you are fearing a loss due to move up, maintain the SL=30% and reco. to follow the following strategy:
Buy 4600 call say at 180 with SL = 140.
If SL is hits then,
exit 4600 call and hold 4600 call write.
else
buyback 4600 call and write 4700 call. Hold 4600 call with trailing SL.
end
This will reduce loss if any and will give some mental peace. People exit in hurry because they could not withstand the margin pressure/risk of lossing money
Trading in Nifty Futures using the above trend check strategy
Many traders have asked me whether they could trade in Nifty futures using my strategy of "Trend Checking at stated intervals above". Yes, you could do so but its risky. Here is a way how you could do so.
Suppose at 10:30 AM trend is up by 20pts so you can go long in Nifty and buy a at money put simultaneously. When in profit square off both long Nifty and ATM put. Like wise you can do for other intervals stated in 1st post of this thread.
This way your risk will reduce. Keep total SL of this setup = Rs 5000 per lot or an amount that you could afford to loose per trade. I am still testing it though and finding it okay! Remember your Target % should be always greater than your SL%. Will keep posting my finding from time to time.
Writing Stock options
Writing a call and buying a call is done to hedge your postions. But below I will just talk about when I will write a call if at all I wish to write:
In my view, normally call is written when underlying volume is decreasing, underlying is not showing any significant movement up near your strike price and expiry is approaching i.e. after middle of the month. Example you took Chambal Fert. at 100 strike price @6 and the underlying is at 90. But all of a sudden volume goes down from 1000k to 700k for e.g. and Chamble Fert underlying remains around 90 or below 100 near middle of the month, underlying is trading below 50 days moving average or approaching it then one can think to write a call. but its always risky. So, always try to avoid writing options.
Regards
NIFTY/ BANK NIFTY Option Trade Tool (Buy/ Sell) based on Futures / Spot Prices