Options - Price and premiums

[poniol]

I think I have not explained clearly the purpose is to compare todays straddle with yesterdays, last months and average price of straddle. Today straddle price is 5% of future price. Last month it was 7% of future price. Hence straddle is cheaper. We have VIX for nifty but nothing for stocks. Hence I ve done this jugad........


I dont mind posting the screenshot for every 1-2 days for straddle price % of future price. In that way we know straddle is cheap or expensive compared to last few months and compared to other stocks ....

Again then generally high price short strategy/ low price long strategy. you use the data the way you want..... run the strategies you want up to you

Your way of analysis is good. Perhaps you are doing trading with large capital. And I feel you make good money out of it!

 

[lemondew]

14-6-16 2:25 pm

 

[lemondew]

I ll try posting it at 11:00 am from tomorrow .

 

[vagar11]

Thanks Lemondew.

 

[lemondew]

Challenges before hand.
The margins are very high for spreads.

Best Setting for Options :: Use now
For zerodha
1. To keep overnight positions in now you need to have only span margin.
2. To get into a position you need total margin.
3. In the day before 3:00 pm they charge only intraday for now.

My observations have been. When IVs are high stocks generally dont expire more than the combined premium of straddle. Thats 1 in 4:5 trades provided you enter right time.

In US for spreads they charge only the max loss possible but here margin requirements are high so its a challenge to earn high returns. Even I am working out ways by which I can increase my return.

 

[tradingstudent]

Challenges before hand.
The margins are very high for spreads.

Best Setting for Options :: Use now
For zerodha
1. To keep overnight positions in now you need to have only span margin.
2. To get into a position you need total margin.
3. In the day before 3:00 pm they charge only intraday for now.

My observations have been. When IVs are high stocks generally dont expire more than the combined premium of straddle. Thats 1 in 4:5 trades provided you enter right time.

In US for spreads they charge only the max loss possible but here margin requirements are high so its a challenge to earn high returns. Even I am working out ways by which I can increase my return.

Hi Lemondew,

Kindly let me know if understood this correctly.

Say the total cost of straddle was 500. when the underlying stock was at say
Rs.3000.

So the stock will not expire beyond 3500 or 2500?

Thanks

 

[lemondew]

Ok lets consider INFY on a day before its results...

It was around 1190 the 1180 straddle was worth 93. Which is high. Now we are assuming the premiums have taken into account the possible move.

So the chances of it expiring beyond 1273 is less. Having said that it can go beyond 1273 in next few days for good news....

But there is again a 50% probability that it will retrace and expire below 1273.So if you r hedged and know in advance whats the possible you can loose you can just sit calmly. A naked seller will be confused when he sees stocks moving so fast.

So naked selling is big NO - NO both psychologically and monetarily

Hi Lemondew,

Kindly let me know if understood this correctly.

Say the total cost of straddle was 500. when the underlying stock was at say
Rs.3000.

So the stock will not expire beyond 3500 or 2500?

Thanks

 

[lemondew]

Same for SBI as well this month I guess the combined for 190 for SBI this month before result was 20-22. So even if SBI moves beyond 212 if you ask me there is a good chance it will come back and expire below 210. Again theres always loosers.... But if you see many cases the winners ar emore

Now with all the high margins there need to find way to figure out to make high returns

Ok lets consider INFY on a day before its results...

It was around 1190 the 1180 straddle was worth 93. Which is high. Now we are assuming the premiums have taken into account the possible move.

So the chances of it expiring beyond 1273 is less. Having said that it can go beyond 1273 in next few days for good news....

But there is again a 50% probability that it will retrace and expire below 1273.So if you r hedged and know in advance whats the possible you can loose you can just sit calmly. A naked seller will be confused when he sees stocks moving so fast.

 

[tradingstudent]

Lemon Dew,

It's nice of you to give a detailed explanation with examples. Couldn't have asked for more.

You have my gratitude.

 

[lemondew]

15-6-16 11:35 am