NIFTY Options Trading by RAJ

Discussion in 'Trading Diary' started by healthraj, Jul 22, 2013.

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How do you use OAT tool?

This poll will close on Apr 25, 2020 at 4:11 PM.
  1. For Intraday Naked Options trading

    44 vote(s)
    33.3%
  2. For Intraday Pair trading of Options

    24 vote(s)
    18.2%
  3. For Intraday Futures trading

    16 vote(s)
    12.1%
  4. For Positional Naked Options trading

    29 vote(s)
    22.0%
  5. For Positional Pair trading of options

    25 vote(s)
    18.9%
  6. For Positional Futures trading

    10 vote(s)
    7.6%
  7. To trade in Cash market

    10 vote(s)
    7.6%
  8. Overall trading has improved with OAT

    22 vote(s)
    16.7%
  9. Understanding of Options has improved with OAT

    53 vote(s)
    40.2%
Multiple votes are allowed.
  1. healthraj

    healthraj Well-Known Member

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    Yes. Thanks Escape
     
  2. gmt900

    gmt900 Well-Known Member

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    I was thinking that there is a single strike price at which Nifty has max pain, while from escape's explanation , it appears that there are separate strike prices for max pain for Call and Put
     
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  3. gmt900

    gmt900 Well-Known Member

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    This is the reason why I believed that there is a single strike price where there is max pain
     
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  4. healthraj

    healthraj Well-Known Member

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    Yes the MAX Pain is ultimately at a single Strike Price. But what Escape tells is also true. In essence you should avoid calls or puts in the Deep. Or when you are nearing the Expiry make sure your calls are in "In the money" and not "Out of the money"
     
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  5. gmt900

    gmt900 Well-Known Member

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    Thanks, but still that doesn't answer the question how does one decide a single strike price.
    Is it the maximum OI for Call and Put at a given time?

    Rule 8 says always respect strike price at which Max pain is situated. This is like a centre of gravity. Is this important mainly during expiry week? how does one " respect"
    Strike price at max pain at other times?
     
    Last edited: Jul 23, 2013
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  6. healthraj

    healthraj Well-Known Member

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    23-Jul-13 Option Analysis

    MAX CHG in OI at 6000PE-6300CE - Favouring Bulls
    MAX OI at 5900PE-6100CE

    Early morning Calls are being squared - Profit booking

    Yesterday's pullback rally started from 6033. So the initial top could be 6093. If 6093 breaks then expect more.

    so be cautious on Longs above 6093.

    Volatility Chart indicates a SELL on Calls.
    Since there is a GAP UP, it is mildly bullish.
     
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  7. healthraj

    healthraj Well-Known Member

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    Options Pair Trading

    Since the Max PAIN is still at 6000, I am selling the pair 6000PE-6000CE at 105. It is still Risky.

    The Volatility also confirms the above... PE VOLT @ 19.6 CE VOLT@ 23.21. So you can see the Calls being Short
     
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  8. guptak03

    guptak03 Well-Known Member

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    Hello does any one know how to add open interest change in nest trader option chain!!???:)
     
  9. Happy_Singh

    Happy_Singh Well-Known Member

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    Hello Raj

    Nice thread, thanks for your efforts and sharing.

    on this pair more than 90% of the value is from the calls, then why sell the pair?
    if max pain is at 6000 then why sell the puts, something that is going to increase in value . . . as we go near 6000??

    the RR will improve if we short only the call instead of pair . . .


    :) Happy
     
  10. healthraj

    healthraj Well-Known Member

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    There is a formula to calculate the Option Pain. For US markets there are sites like OptionPain.com to calculate the MAX pain. For the Indian markets Yesterday I posted a link.

    http://www.traderscockpit.com/?pageView=futures-and-options-chain-analysis

    In that please look at the Bar chart given at the bottom.

    Whichever bar has the lowest value (Total PE+CE) has the Maximum pain, which is at 5975. So you can expect this market to expire around 5975.

    So if you have taken Naked calls above 5975, then better to close it now.

    There are also Excel spreadsheets available. You can google to find out.

    MAX Pain is another indicator for Option Trading. Like any other indicator this is not 100%. The MAX Pain could shift to 6100 also. But right now it is at 6000. So it should be used only as a Caution. It applies more during the expiry because when we have just 5 days left we cannot expect any magic in the last 5 days because normally the Market makers come and eat the premium.
     

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