Non-directional Option Strategies for Stocks and Indexes

[Options_Trader]

Thursday Good day to short vega and theta means to say that its a good time to create a debit spread? and exit by friday EOD?
yes rise in vix rise in premium but why means vix is non directional index na... so if you get caught on a wrong side so my 1st question?

A vertical debit/credit spread has a low theta and vega.

A simpler statement would have been Thursday is a good day to short options. It was an incorrect statement to say short theta.

See, by option pricing formula, option value by Friday EOD will not include theta decay for weekends. So for decaying the option value, IVs are reduced which is reflected in VIX. That is why I say short vega.

We can get caught on the wrong side, however, you will observe that this is a logical strategy, backed by historical data. If we are clued in with the workings of IV, we will be more often than not on the right side. Given all things equal, which day will I consider for shorting options, my answer is Thursday.

 

[Options_Trader]

A vertical debit/credit spread has a low theta and vega.

A simpler statement would have been Thursday is a good day to short options.

See, by option pricing formula, option value by Friday EOD will not include theta decay for weekends. So for decaying the option value, IVs are reduced which is reflected in VIX. That is why I say short vega.

We can get caught on the wrong side, however, you will observe that this is a logical strategy, backed by historical data. If we are clued in with the workings of IV, we will be more often than not on the right side. Given all things equal, which day will I consider for shorting options, my answer is Thursday.

Further, we mostly see an increase in VIX on Monday. Because, now, according to the option pricing formula, theta decay will reflect the weekend decay. But since most of the decay has already occurred, IVs are increased to reflect less decay compared to Friday.

 

[toughard]

A vertical debit/credit spread has a low theta and vega.

A short option is vega/theta short. A simpler statement would have been Thursday is a good day to short options.

See, by option pricing formula, option value by Friday EOD will not include theta decay for weekends. So for decaying the option value, IVs are reduced which is reflected in VIX. That is why I say short vega.

We can get caught on the wrong side, however, you will observe that this is a logical strategy, backed by historical data. If we are clued in with the workings of IV, we will be more often than not on the right side. Given all things equal, which day will I consider for shorting options, my answer is Thursday.

good explanation.... it may be wrong or right I really don't trade based on GREEKS and VIX... I trade simply by LOGIC of OPTION SUM....

still I will NOT short options on Thursday's, NOT because of ANY logical strategy, backed by historical data- just based on simple and common observations like-

1. options are highly leveraged because it made to hedge/save/protect NOT TO TAKE RISK EVEN BY IT and BY SHORTING where you are open to unlimited risk
2. NO Shorting on Thursday simply bcz majority of times market see a big move on friday
3. NO Shorting on Thursday and holding till Monday bcz...

a. gap up or gap down opening risk
b. overnight risk
c. global markets risk over four nights

4. what would be the risk reward ratio (if you make 10 points also 1.2% of margin blocked and risk is open)

5. MOST importantly all these for what "just few points which we MAY get from time decay, unprotected,that too if nothing of above is factored" NO NO NO... WHAT's Necessary


these are my conservative views... all others may differ and fair.:thumb:

 

[toughard]

------------------------deleted by toughard--------------------------

 

[Options_Trader]

good explanation.... it may be wrong or right I really don't trade based on GREEKS and VIX... I trade simply by LOGIC of OPTION SUM....

still I will NOT short options on Thursday's, NOT because of ANY logical strategy, backed by historical data- just based on simple and common observations like-

1. options are highly leveraged because it made to hedge/save/protect NOT TO TAKE RISK EVEN BY IT and BY SHORTING where you are open to unlimited risk
2. NO Shorting on Thursday simply bcz majority of times market see a big move on friday
3. NO Shorting on Thursday and holding till Monday bcz...

a. gap up or gap down opening risk
b. overnight risk
c. global markets risk over four nights

4. what would be the risk reward ratio (if you make 10 points also 1.2% of margin blocked and risk is open)

5. MOST importantly all these for what "just few points which we MAY get from time decay, unprotected,that too if nothing of above is factored" NO NO NO... WHAT's Necessary


these are my conservative views... all others may differ and fair.:thumb:

I agree with your views, however would like to point the following

1. Is there a difference in risk between futures and options. Futures are more risky than option even if option shorts are considered. Moreover, may be with put options, the risk is too much, but with short calls (except for situations like elections) that is not the case. I feel (and may be wrong) that too much has been made of the word UNLIMITED RISK. If you know how to manage the risk, there is no such thing as unlimited risk.
2.Did I ever mention to hold it till Monday or EOD Friday. I believe these are your own conclusions. If the VIX drops on Thursday, close the position on Thursday itself.
3.Risk reward ratio: I hedge my positions, so risk reward calculation is difficult.

Can I ask if you are consistently profitable using your techniques? If so, I would definitely like to learn from you. My objective is to be consistently profitable whatever way I can achieve that.

 

[Options_Trader]

good explanation.... it may be wrong or right I really don't trade based on GREEKS and VIX... I trade simply by LOGIC of OPTION SUM....

still I will NOT short options on Thursday's, NOT because of ANY logical strategy, backed by historical data- just based on simple and common observations like-

1. options are highly leveraged because it made to hedge/save/protect NOT TO TAKE RISK EVEN BY IT and BY SHORTING where you are open to unlimited risk
2. NO Shorting on Thursday simply bcz majority of times market see a big move on friday
3. NO Shorting on Thursday and holding till Monday bcz...

a. gap up or gap down opening risk
b. overnight risk
c. global markets risk over four nights

4. what would be the risk reward ratio (if you make 10 points also 1.2% of margin blocked and risk is open)

5. MOST importantly all these for what "just few points which we MAY get from time decay, unprotected,that too if nothing of above is factored" NO NO NO... WHAT's Necessary


these are my conservative views... all others may differ and fair.:thumb:

You must have a good direction sense if you are trading options long. I am new to trading and have difficulty getting a direction sense. Would appreciate if you can help with that.

If you can track VIX, the gains are more than just time decay. 1 point drop in IV can give you about 7 rs depending on the IV levels. Compare this to the following scenario: 1 ATM long call, nifty moves by 40 points, IV drops by 2 points. Final output: Gain - Rs 20, loss in time value - Rs 3, loss due to IV - Rs 10-15. Not much.

I do not deny that option writing is risky. But for going long on options, direction sense is an absolute must.

 

[toughard]

You must have a good direction sense if you are trading options long. I am new to trading and have difficulty getting a direction sense. Would appreciate if you can help with that.

If you can track VIX, the gains are more than just time decay. 1 point drop in IV can give you about 7 rs depending on the IV levels. Compare this to the following scenario: 1 ATM long call, nifty moves by 40 points, IV drops by 2 points. Final output: Gain - Rs 20, loss in time value - Rs 3, loss due to IV - Rs 10-15. Not much.

I do not deny that option writing is risky. But for going long on options, direction sense is an absolute must.

I never said ONLY LONGs also...

 

[toughard]

You must have a good direction sense if you are trading options long. I am new to trading and have difficulty getting a direction sense. Would appreciate if you can help with that.

If you can track VIX, the gains are more than just time decay. 1 point drop in IV can give you about 7 rs depending on the IV levels. Compare this to the following scenario: 1 ATM long call, nifty moves by 40 points, IV drops by 2 points. Final output: Gain - Rs 20, loss in time value - Rs 3, loss due to IV - Rs 10-15. Not much.

I do not deny that option writing is risky. But for going long on options, direction sense is an absolute must.

on your other question other thread i have posted this
http://www.traderji.com/options/93522-nifty-options-intraday-trading-strategy-4.html#post962539

when you say "You must have a good direction sense if you are trading options long. I am new to trading and have difficulty getting a direction sense. Would appreciate if you can help with that."

I think we both in a same boat

:thumb::thumb:

 

[Options_Trader]

on your other question other thread i have posted this
http://www.traderji.com/options/93522-nifty-options-intraday-trading-strategy-4.html#post962539

when you say "You must have a good direction sense if you are trading options long. I am new to trading and have difficulty getting a direction sense. Would appreciate if you can help with that."

I think we both in a same boat

:thumb::thumb:

Can I ask if you are consistently profitable?

 

[toughard]

Can I ask if you are consistently profitable?

yes on a quarterly basis as well as yearly basis:thumb: