NIFTY Options Trading by RAJ

[Option.Trader]

Dear OT
If I am correct, the future and option positions in your sheet is the total of all series!! Is there any data provided by NSE to know the position of August series or can we calculate it.
It may have happened that FIIs have bought 55K call of Sept series.

Good point, I would think the rollovers would be initiated with futures rather than options as the premiums are high on options before expiry especially for buying. But I'm not sure if this is the case or Nifty provides only current month statistics

 

[arcus]

Dear OT
If I am correct, the future and option positions in your sheet is the total of all series!! Is there any data provided by NSE to know the position of August series or can we calculate it.
It may have happened that FIIs have bought 55K call of Sept series.

Thanks for pointing that out.

The rollover distortion become all the more important as we are just a few days away from expiry.

 

[arcus]

please let mw know how to form the covered call or put in reliance stock.which software should i use for enter into the trading, please elaborate with examples.

To do a covered call in Reliance, buy (if you dont have) 250 shares of Reliance and sell one lot of Reliance CE (usually at the money CE is sold in covered calls).

Covered put is not possible in India as the SLB is not mature enough.

However, theoretically if you already own the stock then its possible to be "short" in it. If you think the price is going to go lower, you could sell the stock if you intend to buy it back in the future. In such a case, a covered put can be formed by selling one lot ATM Reliance PE (for every 250 shares you are "short")

 

[Option.Trader]

To do a covered call in Reliance, buy (if you dont have) 250 shares of Reliance and sell one lot of Reliance CE (usually at the money CE is sold in covered calls).

Covered put is not possible in India as the SLB is not mature enough.

However, theoretically if you already own the stock then its possible to be "short" in it. If you think the price is going to go lower, you could sell the stock if you intend to buy it back in the future. In such a case, a covered put can be formed by selling one lot ATM Reliance PE (for every 250 shares you are "short")

There is an interesting concept.. if you want to play covered call strategies.. .i call it the rent philosophy... find a stock which is in a long term trading range.. not too volatile.. but just chugging around (good quality)... buy the equivalent quantity of derivatives in equity and then keep writing OTM calls which is just outside the trading range.. over the course you can bring down the buy cost and if it is a dividend stock, you get more... almost like getting rent on an asset... the whole thing will go for a toss if you choose a volatlie stock

 

[DanPickUp]

There is an interesting concept.. if you want to play covered call strategies.. .i call it the rent philosophy... find a stock which is in a long term trading range.. not too volatile.. but just chugging around (good quality)... buy the equivalent quantity of derivatives in equity and then keep writing OTM calls which is just outside the trading range.. over the course you can bring down the buy cost and if it is a dividend stock, you get more... almost like getting rent on an asset... the whole thing will go for a toss if you choose a volatlie stock

Any live examples on that?

 

[Option.Trader]

Any live examples on that?

Not live, a couple of years back tried with acc, but it tests your patience, got bored and came out, but it's possible for a passive trader

 

[DanPickUp]

Not live, a couple of years back tried with acc, but it tests your patience, got bored and came out, but it's possible for a passive trader

I see.

May I make an example to be sure I understood it the right way:

John has 100 share XY
Now he buys 100 call options atm or just one call option atm, as one option is like 100 shares? (At least at the CME)

Now he sells 100 (Or depending on the above answer) one otm call.

An other question: The sold call option: Is it from that month series or from an other one?

 

[arcus]

There is an interesting concept.. if you want to play covered call strategies.. .i call it the rent philosophy... find a stock which is in a long term trading range.. not too volatile.. but just chugging around (good quality)... buy the equivalent quantity of derivatives in equity and then keep writing OTM calls which is just outside the trading range.. over the course you can bring down the buy cost and if it is a dividend stock, you get more... almost like getting rent on an asset... the whole thing will go for a toss if you choose a volatlie stock

The Call in the Covered Call usually offers protection for around 3% movement in the underlying in a month.

It depends on the underlying IV - here I assumed the stock has a modest IV of around 32-34 which is the usual ATM IV for "low volatile" stocks.

Once the stock falls by >3% the covered call starts to make mark to market losses unless you intent to hold the underlying stock until it "comes back" (maybe the trade turns out to be an investment .

So yeah, it could be considered as rent, but you may lose a part of the house.

If we are starting off with a sideways trading range kind of hypothesis, I think it might be worth trying out the short strangle.

 

[arcus]

I see.

May I make an example to be sure I understood it the right way:

John has 100 share XY
Now he buys 100 call options atm or just one call option atm, as one option is like 100 shares? (At least at the CME)

Now he sells 100 (Or depending on the above answer) one otm call.

An other question: The sold call option: Is it from that month series or from an other one?

As per your example, A covered call is when

John has 100 shares of XY.
He then sells one lot of ATM or OTM call option.

It can be of this month, the next month or even the next year. It depends on his covered call hypothesis.

 

[DanPickUp]

As per your example, A covered call is when

John has 100 shares of XY.
He then sells one lot of ATM or OTM call option.

It can be of this month, the next month or even the next year. It depends on his covered call hypothesis.

Thanks Arcus

As my English is not my mother tongue, this part confused me: Buy the equivalent quantity of derivatives in equity I interpreted that some how else. Never mind.

I am very familiar with the covered calls.

Anyway; Thanks to jump in and clear the confusion.

Take care / DanPickUp