Option experiments...

aimer

Well-Known Member
#1
Hello Seniors and forum members....

Starting a new thread on options where in will try to experiment different ideas in scrips as well as indices, but the basic idea would revolve around support and Resistance...
Would request seniors and everyone interested in options, plz pour in ur ideas....

By the way just want to know whether Danpickup and Somatung are same or different person...Sorry, to be ignorant but if different would like both of them to plz mentor and spare few minutes to this thread...

Had gone trough the thread by Danpickup and thought to do explore the ideas here under his mentorship if he aggrees...
 

comm4300

Well-Known Member
#2
Hello Seniors and forum members....

Starting a new thread on options where in will try to experiment different ideas in scrips as well as indices, but the basic idea would revolve around support and Resistance...
Would request seniors and everyone interested in options, plz pour in ur ideas....

By the way just want to know whether Danpickup and Somatung are same or different person...Sorry, to be ignorant but if different would like both of them to plz mentor and spare few minutes to this thread...

Had gone trough the thread by Danpickup and thought to do explore the ideas here under his mentorship if he aggrees...
Dan and Somatung are same.
 

aimer

Well-Known Member
#3
Thanks Com on clearing my doubt;) regarding Dan,
Would start the experiment with some basics that I follow so that it would be easy for others to understand...
I generally try to trade sup/res and will use the same here to take positions...

There are various criterias to select support and resistance and I would use Open interest as one of the criteria as that would serve better for our experiment...

Regarding open interest, i would use the OI of call and put as resistance and support...basically the idea is to consider the maximum oi as a zone of sup/res...

will start with a scrip...Asian paint...
For that max oi call is @ 800 and Put is @ 700 so would consider these as res and sup respectively...

Gone for 810 call @ 34.5
and 810 put @ 23.5

considering volatility to be low so gone for long straddle...

require mentors comments...
 

aimer

Well-Known Member
#5
Are these trades having a better risk:reward???
Mentors plz comment and guide...
rt now bankbaroda in profit but asian paints in loss...
These are real trades and not paper trades....
 
#6
@Aimer

Nice to see you starting a thread about option trading. As you have gone through my thread and most probably through other option threads, you already showed that you are interested in the subject. As options are a bit like chewing gums it is some times not so easy to understand why they are priced the way they are at that certain moment we buy or we sell them. So some time is needed to get a grip on the concept of options and how they are priced. You already toke that time and congrats from my side to do that. :thumb::clapping:

You requested mentoring from me and of course from others, as there are other good option traders as well in this forum. Mentoring on a forum is time consuming and not an easy task. So I can take my time to follow your post and will do a note from time to time when needed. Real mentoring is a bit difficult and not what I can do, but helping a bit I can do.

As you did read all the posts about the option greeks in my thread, I guess that part is understood, as to explain them under different conditions is most difficult and that time again to do so I do not have.

Now to your trading idea you posted. I quickly checked the daily chart here http://chartink.com/stocks/asianpaint.html and here the option chain http://www.nseindia.com/live_market...t=OPTSTK&date=-&segmentLink=17&segmentLink=17 The daily chart show a typical ascending triangle in any way which is explained here http://thepatternsite.com/at.html . But patterns are patterns and trading purely on them would be to dangerous. So using OI as an other tool gives a more neutral look at. If we now add the OI to that pattern and even take notice of the S&R levels in the end of day chart (08. Dec. 2014), we start to see why the max OI range at the moment in this share is placed between the 700 put and at 800 call. People either expect a break out through the current resistance at around 800 or a correction down to the support at around 700. The pure chart pattern loses its value through that analyzes and brings us back to what is behind the chart and not only what could be seen on the chart.

Some words to the long straddle:http://i61.tinypic.com/dbh1u9.png and here is the end of day screen shot which shows a number which is not in line to other numbers http://i62.tinypic.com/2n7fh4j.png This numbers (IV, move in the underlying and itm or otm option strike level) you have to understand and then it will be clear why the price of any option on your used strike levels is like it is.

IV on the call and put side are quit different. The call 810 has an IV of 36.04 where as the 810 put itm has an IV of 27.10. So if you speak about the low vola then I consider you speak from the vola from Nifty http://www.nseindia.com/live_market/dynaContent/live_watch/vix_home_page.htm ? Kindly correct me if I am wrong and if so, then where do you get your data from to see the vola of the share?

Now if the share makes a drop back to around 750 or maybe even 700, the long put will rise in value because of getting deeper itm and it will rise in value because most probably the IV of the options could rise as it in most cases does when market moves south.

Now if you go long with an option strategy, it is better to have a bigger time frame until expiration, as time decay will less hurt you (In this case at the moment the call will be hurt as it is otm compare to the put which is itm). This is a safer way and still all opportunities to handle the trade are open. As far as I see, this way of going for the further out of month options seem to be a problem in your market in this share. Kindly correct me if I am wrong. So the question I would ask: Do you need to trade options on shares or would it be fine for you to do it on Nifty or even BNF?

Hope the above post does well for you. Today over here we got the first snow in the place I live. I love it. Take care and good trading / Dan :)

Edit as I see you ask about R:R for your trades:

If you spend, as you did 58 Rs x 50 = 2'900 Rs per straddle, the outcome is not predictable at the moment you enter. So any question about R:R is at the moment you enter the strategy open. Your break even points you have to know. Do you know them? Your post gives no clue about what you want to risk. Do you want to risk the whole amount, so your risk is 2'900 Rs per straddle. Now if you take this as Risk, then R is one. If you expect a reward of one, then you will need a profit of 2'900 Rs. Now on which side do you expect that to happen? On the put side or on the call side or by legging with new legs or by legging out leg/s? Even here your post says nothing atoll. That is why you may ask for live mentoring over the forum. What I guess at the moment is that you are more bearish in both examples you showed, as you in both cases bought the itm put which will add quicker value compare to what the call as a whole value can lose. If this should work to the end, then both of your shares must move down to certain levels. Further I have posted the basic in my thread about strangles and straddles, but this basics can be improved in many ways. To teach such, advanced stuff over a public forum in dept is too time consuming, at least from my side in the long run. If others want to take the time to try to do so, I will support them from time to time, but no time to do that live from over here.
 
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gmt900

Well-Known Member
#7
@Aimer

Nice to see you starting a thread about option trading. As you have gone through my thread and most probably through other option threads, you already showed that you are interested in the subject. As options are a bit like chewing gums it is some times not so easy to understand why they are priced the way they are at that certain moment we buy or we sell them. So some time is needed to get a grip on the concept of options and how they are priced. You already toke that time and congrats from my side to do that. :thumb::clapping:

You requested mentoring from me and of course from others, as there are other good option traders as well in this forum. Mentoring on a forum is time consuming and not an easy task. So I can take my time to follow your post and will do a note from time to time when needed. Real mentoring is a bit difficult and not what I can do, but helping a bit I can do.

As you did read all the posts about the option greeks in my thread, I guess that part is understood, as to explain them under different conditions is most difficult and that time again to do so I do not have.

Now to your trading idea you posted. I quickly checked the daily chart here http://chartink.com/stocks/asianpaint.html and here the option chain http://www.nseindia.com/live_market...t=OPTSTK&date=-&segmentLink=17&segmentLink=17 The daily chart show a typical ascending triangle which is explained here http://thepatternsite.com/at.html According to that chart pattern and according to the daily chart, you see why the max OI is at 700 put and at 800 call. People either expect a break out through the current resistance at around 800 or a correction down to the support at around 700.

Some words to the long straddle:http://i61.tinypic.com/dbh1u9.png

IV on the call and put side are quit different. The call 810 has an IV of 36.04 where as the 810 put itm has an IV of 27.10. So if you speak about the low vola then I consider you speak from the vola from Nifty http://www.nseindia.com/live_market/dynaContent/live_watch/vix_home_page.htm ? Kindly correct me if I am wrong and if so, then where do you get your data from to see the vola of the share?

Now if the share makes a drop back to around 750 or maybe even 700, the long put will rise in value because of getting deeper itm and it will rise in value because most probably the IV of the options could rise as it in most cases does when market moves south.

Now if you go long with an option strategy, it is better to have a bigger time frame until expiration, as time decay will less hurt you (In this case at the moment the call will be hurt as it is otm compare to the put which is itm). This is a safer way and still all opportunities to handle the trade are open. As far as I see, this way of going for the further out of month options seem to be a problem in your market in this share. Kindly correct me if I am wrong. So the question I would ask: Do you need to trade options on shares or would it be fine for you to do it on Nifty or even BNF?Hope the above post does well for you. Today over here we got the first snow in the place I live. I love it. Take care and good trading / Dan :)

I have tried to trade mainly short strangle and also long strangle in stocks. But the liquidity as well as bid / ask spread is not condusive to make money.
Therefore, I , for one, stick to nifty. Banknifty is another scrip to play options.
Another aspect is the margin requirement which is lower for index than for stock.
 

aimer

Well-Known Member
#8
@Aimer

Nice to see you starting a thread about option trading. As you have gone through my thread and most probably through other option threads, you already showed that you are interested in the subject.
Thanks Dan for responding to my query...sorry to answer late as was busy with my daily scores...

Regarding mentoring, no probs...ur presence and comments will also be of great help...plz do give ur viewpoint whenever u are free...:thumb:

Regarding the strategy...you are correct, the volatility is too high, actually here going for a short strangle would have been better as we would have got at least the premium...I had downloaded the FOVOLT file from NSE and there the volatility(aplicable daily volatility) was around 0.0235 so got confused and went in for long straddle...and now the scenario looks to be a bit grave...as pointed out by "gmt900" the Bid/Ask spread is a complete mismatch and the closing of 810 PE shows LTP as 40 but the Bid(size) is 6.65 and Ask(size) is 35.8...totally confused...:confused:

Now such mismatch will cause a big dent in my account...better would shift to BNF/Nifty...

Regarding the trades...yes I was bearish for both the trades...My Breakeven for Asianpaint is 48 and was 65.45 for Bankbaroda(excluding brokerages)....after reading ur post I just got out in bankbaroda with some profits but Asianpaint is troubling me at the instance...waiting for tomorrow to see the out come...

Regarding the trades and looking at the volatility it would have been better to go for a short strangle instead of the long straddle which I took...am I correct Dan?, or had I better options looking at the little knowledge that I have( as with such knowledge I want to apply basic strategies which I can understand)...

Now what is the possibility of getting the Asianpaint trade in profits...Is it possible to profit out or should I exit tomorrow...:confused:

Ur valued comments required...
Thanks once again for guiding/helping me out here...
 

aimer

Well-Known Member
#9
@Aimer

and here is the end of day screen shot which shows a number which is not in line to other numbers http://i62.tinypic.com/2n7fh4j.png This numbers (IV, move in the underlying and itm or otm option strike level) you have to understand and then it will be clear why the price of any option on your used strike levels is like it is.
Please can u give the reasons regarding that volatility rise, what impact can it cause to the trade tomorrow?

Regarding what I have understood of volatility is mkt is bearish when volatality increases and here there is an increased vola means it should push the rates even more lower...but here what I have seen is the CE rates are eroding faster but the PE rates have got stuck...totally confused:confused:
Ur views appreciated...
 
#10
@Aimer

As I do not know how deep your whole trading knowledge is, it is difficult to recommend you any specific strategies. Any kind of mentoring does not mean to show what the mentor knows. Mentoring is to know what the student knows and according to that to discuss what could be done as next.

So how long do you plan to stay in any of your trades? What is your maximum time frame you want to trade such a straddle you implemented and how much of your invested capital is valued as risk for you?

About the option greeks: As told: You must understand them in dept as I do not have the time to explain them again and again. The spike in IV on the 810 itm put seems to me a mistake which you will see after the opening tomorrow.