New Trading Strategy

[perfecttip]

Dear friends,

I would like to share with you an idea which i have just discovered and would like all of you to test it and offer your vaulable comments.

Open ODIN and select a scrip. Say ICICIBANK. Suppose it is trading at 640. Now we want to see if this scrip is about to make a move or not. So we open the ATM and just OTM options , both call and put for this scrip, say 640 CA, 660 CA 680 CA, 640 PA, 620 PA and 600 PA.

The premium of equidistant strikes should be almost the same. If not, the higher premium shows the likely direction.

Now create a new column with a new formula "Buyers/Sellers" and the formula will be Total Bids/Total Offers. If the result is > 1 then we get to know that there is buying pressure and if < 1 then there is selling pressure. We will now notice that there are significantly high B/S ratios at particular strikes on one side ( call or put ). This give the likely direction and the approx target.

Please test this and ofer your valuable comments.
Thank you.

 

[ag_fx]

Dear friends,

I would like to share with you an idea which i have just discovered and would like all of you to test it and offer your vaulable comments.

Open ODIN and select a scrip. Say ICICIBANK. Suppose it is trading at 640. Now we want to see if this scrip is about to make a move or not. So we open the ATM and just OTM options , both call and put for this scrip, say 640 CA, 660 CA 680 CA, 640 PA, 620 PA and 600 PA.

The premium of equidistant strikes should be almost the same. If not, the higher premium shows the likely direction.

Now create a new column with a new formula "Buyers/Sellers" and the formula will be Total Bids/Total Offers. If the result is > 1 then we get to know that there is buying pressure and if < 1 then there is selling pressure. We will now notice that there are significantly high B/S ratios at particular strikes on one side ( call or put ). This give the likely direction and the approx target.

Please test this and ofer your valuable comments.
Thank you.

Option pricing in stocks, esp for intraday is haywaire at times...the premiums generated are not in line with the ITM/OTM values. Also, there is no exit strategy in ur system. What if you are proven wrong, how do you SL? what is TP level and what about money mgmt.
Try this in real time option prices for more insight.

Happy Trading

 

[bandlab2]

in bearish market, puts comman higher premim, but that doesnt mean it will go down further

 

[perfecttip]

True.. but what I wanted to stress on is the Buyer/Seller Ratio. Please coment on that.

please note, this is not a trading system, this is just an idea I came across and put it here for a discussion. I do not mind being proven wrong as I am here to learn.
thanks.

 

[fast_rizwaan]

True.. but what I wanted to stress on is the Buyer/Seller Ratio. Please coment on that.

please note, this is not a trading system, this is just an idea I came across and put it here for a discussion. I do not mind being proven wrong as I am here to learn.
thanks.

Buy>sell and vice versa, can be manipulated. if a scrip is trading at 100, one can put a buy order of 10 times the margin at 80,85,90 etc., to make it look like there is more buying pressure and vice versa. Don't fall for that trap. Only if the difference is accompanied by price's upward movement then we may trust it. But the smart money will put more sellers and take the prices up, fooling other traders into bull trap (making them short the shares thinking that more sellers will make the price go down but they ultimately cover at a huge loss).

 

[ca_chirag]

Yes, I do believe what you suggested but need to check it in real market during a working day, and whether it applies to all scrips?