NIFTY Options Trading by RAJ

[Option.Trader]

I do not agree because that is the view given by the media channels like cnbc. That is the "fundamentals" view. So it is a choice you have to make. My opinion is that if you are doing Intraday trading do not give much importance to Fundamentals. Give more importance to Technicals. In summary do not mix both technicals and fundamentals.

Raj,

I would like to review the reasons for 6000PE/CE pair suggested. The facts
- Market was in a trending phase
-option pain suggested both 6000/6100 to be pain points (see yesterdays sheet)

Writing ATM strike prices in a trending market is always fraught with risks.. the assumption is that index wont move anywhere... but in a trending market the opp is true... and we were lucky the index closed at a high yesterday.. if instead it had closed @6050, we would be belly up by now...
So what are the lessons of this trade?

Is it that the premium should be sufficent to cover a swing in trade?
Theta is favourable to expiry?
Option pain point lies at lower end of strike price (ideally towards the lower premium)

Any thoughts on this would be helpful... and if this triggers any rule... would request you to put it in the first few posts

 

[healthraj]

Raj,

I would like to review the reasons for 6000PE/CE pair suggested. The facts
- Market was in a trending phase
-option pain suggested both 6000/6100 to be pain points (see yesterdays sheet)

Writing ATM strike prices in a trending market is always fraught with risks.. the assumption is that index wont move anywhere... but in a trending market the opp is true... and we were lucky the index closed at a high yesterday.. if instead it had closed @6050, we would be belly up by now...
So what are the lessons of this trade?

Is it that the premium should be sufficent to cover a swing in trade?
Theta is favourable to expiry?
Option pain point lies at lower end of strike price (ideally towards the lower premium)

Any thoughts on this would be helpful... and if this triggers any rule... would request you to put it in the first few posts

OT,

- The primary reason was that MAX Pain was at 6000.
- Secondly there was heavy squaring in CEs on Yesterday. If market was to make more highs, you would not see such heavy squaring in CEs.
- Plus this was the last week of the Expiry and so both the CEs and PEs need to be squared off at some point.
-Third point is Normally the instituitional fund take a break after they make 500 points. So from 5600 to 6100, having made 500 points it was logical for the market to go down.
- Finally I agree that it was a Risky call

Can you provide the data to say that the MAX Pain was at 6100?

 

[healthraj]

First of all It is a risky call. So I agree that 90% of the value is from Calls. The whole idea is built on the MAX Pain - I mean market will move towards 6000 for Expiry.

What If the market moves towards 5975, Let us calculate the Prices for 6000CE and 6000PE - Assuming the Volatility does not increase. If the VOLT decreases then it would help our position.

So if the Market touches

6060 - Pair would become 91 (CE 79, PE 12) - Gain of 14 points
6030 - Pair would become 79 (CE 58, PE 21) - 26 points
6000 - Pair would become 74 (CE 41, PE 33) - 31 points
5975 - Pair would become 76 (CE 29, PE 47) -

What if the VOLT reduces to around 18 (CE now @ 22. [email protected])

At 6000, The pair would become - 64 (PE- 30, CE- 34)

Keep the Stop loss 6100 where the Price would become 116 - Ten points Stoploss.

For those who want 20 points stoploss, Keep it at 6110.

For those of you who wants to know why we took 6000CE/PE pair when the market was around 6100.

I also tried this for SBIN (Paper trade). The MAX Pain was at 1800 but the market was trading yesterday around 1860.

 

[arcus]

"Options sellers eat like chickens and go to the bathroom like elephants."

 

[maneverfix]

"Options sellers eat like chickens and go to the bathroom like elephants."

means???, I am novice in options.

 

[guptak03]

:rofl::rofl::rofl::rofl::rofl::rofl::rofl:

"Options sellers eat like chickens and go to the bathroom like elephants."

 

[Option.Trader]

OT,

Can you provide the data to say that the MAX Pain was at 6100?

Please see the sheet Option Analysis sheet that i had uploaded yesterday. The option pain tab has it shown for yesterday that the lowest was at 6100 and not at 6000 as you mention.. though by just a marginal difference

 

[healthraj]

Please see the sheet Option Analysis sheet that i had uploaded yesterday. The option pain tab has it shown for yesterday that the lowest was at 6100 and not at 6000 as you mention.. though by just a marginal difference

The Calculation in your sheet seems to be wrong. I had also given a link to the site Where the MAX Pain is calculated as 5975. So there is some something wrong in your calculation. Please check. Otherwise I can send the sample of my calculation. So the MAX Pain was at 6000 and is still at 6000

 

[Option.Trader]

The Calculation in your sheet seems to be wrong. I had also given a link to the site Where the MAX Pain is calculated as 5975. So there is some something wrong in your calculation. Please check. Otherwise I can send the sample of my calculation. So the MAX Pain was at 6000 and is still at 6000

The website is goofy.. .not sure how you can say option pain is at 5975 when those strike prices are not even available on Nifty.. so i would not give much importance to the chart shown there... apart from that, the calculation looks similar... did you find any discrepancy in the formula?... its in the sheet itself
The formula's are shown in the website
http://www.marketcalls.in/futures-and-options/option-pain-charts-for-nifty.html

 

[boarders]

"Options sellers eat like chickens and go to the bathroom like elephants."

against Einstein's law E=MC2