Professional Traders know how to turn a losing trade around

[Somatung]

Is there a better and safer alternative to covered calls?

https://www.youtube.com/watch?v=OR2Ir3OvwjE

Kurt Frankenberg is well known in the trading world in the USA as seller of strategies and books and nothing else. He is well know to give some simple cookies to the public with the idea to sell the real stuff later if he even has it, specially when it comes to advanced option strategy trading.

Keep that in mind and then request what ever he tells in that video twice and you will find your answer: Is there a better safer alternative to covered calls?

 

[suri112000]

Thanks Dan.

It is equally important to discard crap in the trading arena. You are doing a great job in helping me to do that job.:clap:

 

[SaravananKS]

Is there a better and safer alternative to covered calls?

https://www.youtube.com/watch?v=OR2Ir3OvwjE

Thanks Suri for this Thread which forced me to write this article
http://www.traderji.com/general-trading-investing-chat/70551-saravanan-notes-16.html#post1033637

 

[suri112000]

Covered Calls exit strategies.

https://www.youtube.com/watch?v=OJPKeUpbnxM

To many traders, it seems the covered call is the perfect strategy. Too perfect, perhaps?

Its fans point to the great "win no matter what" features:

1. If you pick a strike above your original cost, exercise produces a capital gain.

2. You receive a premium for selling and it's yours to keep.

3. To avoid exercise, you can roll forward, producing even more income.

4. The short call falls in value due to time decay, and you can sell it any time you want before expiration.

5. If the call expires, you keep all of the premium and can write another, and another without limit.

6. You earn dividends as long as you own the stock.

7. The call premium discounts your basis, providing protection against price decline.

That is a lot of benefit to a single strategy. In fact, covered call writing is considered one of the safest strategies around.

What could possibly go wrong?

The stock price may easily fall below your net basis. For example, on April 2, 2012, Research in Motion (RIMM) reached a high of $14.99 per share. If you had bought 100 shares at that moment and sold an April 21 call with a 15 strike, you would have earned 2.30 ($230). However, by April 4 two days later, the stock's price had fallen to $12.82 and the option was worth 0.12. Closing at this point would produce an option profit of $234; however, the stock had declined by $217. When you count the transaction costs, you would be at or below zero on the overall trade. So if RIM continued to fall, your net breakeven would turn into a net loss.

In this situation you can take several steps to avoid a loss:

1. Sell the stock. Avoid losses and accept outcome.

2. Close the short call and sell another, maximizing income with strike or expiration selection. You can still produce extra option profits and, hopefully, avoid a net loss on the stock.

3. Convert the position to a collar by buying a put. Any further price decline in the stock will be offset by growth in intrinsic value of the put.

4. Cover the position with a long call and dispose of the stock, converting the covered call to a spread.

Risk does not go away, it is only reduced. The downside market risk of a covered call is less than the market risk of owning stock, due to the premium income of that call. The upside risk (that stock will be called away and you will miss out of larger profits) is a different kind of risk that you have to accept in order to write covered calls.

The strategy is not a "sure thing" given that you still have to live with market risk. Even so, would you rather hold stock or maximize it with added income? That is the big question for covered call writers. For many options traders, the key to timing of trades is as important as picking the right stock and strike. To make this simple and easy, check Volatility edge for ideas on how to find great covered call positions. But remember, you also need to develop in advance both an adjustment and an exit strategy.


Source :WWW

 

[suri112000]

The below mentioned strategy can optimise the hit ratio of Supertrend upto 80%.

This is a Strategy which combines the following

1. Supertrend as the indicator

2. Nifty trading

3. Delta Neutral Option Strategy

Supertrend is a trend following indicator, which has around 40-45% hit ratio in five minute time frame. This means out of hundred trades (long + short) taken on basis of supertrend, approximately 45% will hit the target and in 55% the stoploss will be taken out. Even with this hit ratio supertrend is a clear winner because of using trend following. In the cases when target hits, the profits are big and in cases where stoploss hits, the losses are small. So on an average if we keep on capturing less number of big profits compared to more number of small losses, in the end , the overall portfolio would be in profit over a period of time.

Now just imagine, if we can make a trading system, where we can capture only profit making trades and eliminate the loss making trades, what an invincible system it will be. It is not possible to eliminate the loss making trades by 100% but using this trading strategy we can minimise the loss making making strategy by atleast 60-70%. This 60-70% elimination of loss making trades on an average will take the hit ratio of supertrend to approximately 80% hit ratio.

This trading system works perfectly in nifty as there is good liquidity in different strike prices of options and also in near-far month contracts.

The trading system

Important points

All buy signals should be executed in current month contract of nifty
All sell signals should be executed in next month contract of nifty (Alternatively, you can trade current month contract in a separate trading account).
All option selling should be done in current month only
First trade in single lot and master the system before scaling up

Entry

Buy one lot(current month) when the supertrend gives a buy signal

Sell one lot(next month) when the supertrend gives a sell signal

Exit (if in profit)

Square the profit making position.

Exit (if in loss)

If you are long in nifty and stoploss hits, don’t square the position, just make it delta neutral using nifty options.
Eg: you are long in nifty at 8741 and stoploss hits of 8720, hold the long position and sell 3 lots of 8800 CE at 51. How this works, the delta of one lot nifty is 1 and delta of one lot nifty 8800 CE is 0.37 (todays value), so we are 1 delta long in nifty and 1.11 delta short in call. After executing this, we are delta neutral on this position and as time passes, this delta neutral position will become profitable and we can square off entire position without taking a loss

If you are short in nifty and stoploss hits , don’t square the position , just make it delta neutral using nifty options.
Eg: You are short in nifty future at 8797 and stoploss hits of 8820, hold the short position and sell 3 lots of 8700 PE at 58. How this works, the delta of one lot nifty is 1 and delta of one lot nifty 8700 PE is 0.43(todays value), so we are 1 delta short in nifty and 1.29 delta long in puts. After executing this, we are delta neutral on this position and as time passes, this delta neutral position will become profitable and we can square of entire position with out taking a loss.

Using this above Strategy we can take the Hit ratio of supertrend upto 75-80%. This has been tried and tested for Nifty only. Kindly first trade in small quantity to master the system before taking huge positions. Basic knowledge of Delta Neutral hedging strategies is required.

How to execute Delta Neutral Strategy. http://www.marketcalls.in/trading-lessons/constructing-a-delta-neutral-strategy.html

 

[suktam]

The below mentioned strategy can optimise the hit ratio of Supertrend upto 80%.

This is a Strategy which combines the following

1. Supertrend as the indicator

2. Nifty trading

3. Delta Neutral Option Strategy

Supertrend is a trend following indicator, which has around 40-45% hit ratio in five minute time frame. This means out of hundred trades (long + short) taken on basis of supertrend, approximately 45% will hit the target and in 55% the stoploss will be taken out. Even with this hit ratio supertrend is a clear winner because of using trend following. In the cases when target hits, the profits are big and in cases where stoploss hits, the losses are small. So on an average if we keep on capturing less number of big profits compared to more number of small losses, in the end , the overall portfolio would be in profit over a period of time.

Now just imagine, if we can make a trading system, where we can capture only profit making trades and eliminate the loss making trades, what an invincible system it will be. It is not possible to eliminate the loss making trades by 100% but using this trading strategy we can minimise the loss making making strategy by atleast 60-70%. This 60-70% elimination of loss making trades on an average will take the hit ratio of supertrend to approximately 80% hit ratio.

This trading system works perfectly in nifty as there is good liquidity in different strike prices of options and also in near-far month contracts.

The trading system

Important points

All buy signals should be executed in current month contract of nifty
All sell signals should be executed in next month contract of nifty (Alternatively, you can trade current month contract in a separate trading account).
All option selling should be done in current month only
First trade in single lot and master the system before scaling up

Entry

Buy one lot(current month) when the supertrend gives a buy signal

Sell one lot(next month) when the supertrend gives a sell signal

Exit (if in profit)

Square the profit making position.

Exit (if in loss)

If you are long in nifty and stoploss hits, don’t square the position, just make it delta neutral using nifty options.
Eg: you are long in nifty at 8741 and stoploss hits of 8720, hold the long position and sell 3 lots of 8800 CE at 51. How this works, the delta of one lot nifty is 1 and delta of one lot nifty 8800 CE is 0.37 (todays value), so we are 1 delta long in nifty and 1.11 delta short in call. After executing this, we are delta neutral on this position and as time passes, this delta neutral position will become profitable and we can square off entire position without taking a loss

If you are short in nifty and stoploss hits , don’t square the position , just make it delta neutral using nifty options.
Eg: You are short in nifty future at 8797 and stoploss hits of 8820, hold the short position and sell 3 lots of 8700 PE at 58. How this works, the delta of one lot nifty is 1 and delta of one lot nifty 8700 PE is 0.43(todays value), so we are 1 delta short in nifty and 1.29 delta long in puts. After executing this, we are delta neutral on this position and as time passes, this delta neutral position will become profitable and we can square of entire position with out taking a loss.

Using this above Strategy we can take the Hit ratio of supertrend upto 75-80%. This has been tried and tested for Nifty only. Kindly first trade in small quantity to master the system before taking huge positions. Basic knowledge of Delta Neutral hedging strategies is required.

How to execute Delta Neutral Strategy. http://www.marketcalls.in/trading-lessons/constructing-a-delta-neutral-strategy.html

Hi..Suri112000…
As per your view and as per my understanding in your example…
Buy nifty at 8741 and its stop level is 8720 and it is also a sell level for next month ..am I correct??
Now at stop level we not unwind buy position but sell call of 8800 and make new position of sell in next month…
Now if market goes down then we in profit in call option and sell position of next month… now if next buy signal comes at below our sell level means below 8720 then we unwind all position ???
Or… only profitable position and average old buy current month position ???
Another scenario … if after making position in call option and sell next month if market goes up and new buy signal generate at above means at 8735..then we sell put option OTM ???
My main confusion is when and which position unwind at which level ????
Wait for your reply…
Regards…

 

[comm4300]

The below mentioned strategy can optimise the hit ratio of Supertrend upto 80%.

This is a Strategy which combines the following

1. Supertrend as the indicator

2. Nifty trading

3. Delta Neutral Option Strategy

Supertrend is a trend following indicator, which has around 40-45% hit ratio in five minute time frame. This means out of hundred trades (long + short) taken on basis of supertrend, approximately 45% will hit the target and in 55% the stoploss will be taken out. Even with this hit ratio supertrend is a clear winner because of using trend following. In the cases when target hits, the profits are big and in cases where stoploss hits, the losses are small. So on an average if we keep on capturing less number of big profits compared to more number of small losses, in the end , the overall portfolio would be in profit over a period of time.

Now just imagine, if we can make a trading system, where we can capture only profit making trades and eliminate the loss making trades, what an invincible system it will be. It is not possible to eliminate the loss making trades by 100% but using this trading strategy we can minimise the loss making making strategy by atleast 60-70%. This 60-70% elimination of loss making trades on an average will take the hit ratio of supertrend to approximately 80% hit ratio.

This trading system works perfectly in nifty as there is good liquidity in different strike prices of options and also in near-far month contracts.

The trading system

Important points

All buy signals should be executed in current month contract of nifty
All sell signals should be executed in next month contract of nifty (Alternatively, you can trade current month contract in a separate trading account).
All option selling should be done in current month only
First trade in single lot and master the system before scaling up

Entry

Buy one lot(current month) when the supertrend gives a buy signal

Sell one lot(next month) when the supertrend gives a sell signal

Exit (if in profit)

Square the profit making position.

Exit (if in loss)

If you are long in nifty and stoploss hits, don’t square the position, just make it delta neutral using nifty options.
Eg: you are long in nifty at 8741 and stoploss hits of 8720, hold the long position and sell 3 lots of 8800 CE at 51. How this works, the delta of one lot nifty is 1 and delta of one lot nifty 8800 CE is 0.37 (todays value), so we are 1 delta long in nifty and 1.11 delta short in call. After executing this, we are delta neutral on this position and as time passes, this delta neutral position will become profitable and we can square off entire position without taking a loss

If you are short in nifty and stoploss hits , don’t square the position , just make it delta neutral using nifty options.
Eg: You are short in nifty future at 8797 and stoploss hits of 8820, hold the short position and sell 3 lots of 8700 PE at 58. How this works, the delta of one lot nifty is 1 and delta of one lot nifty 8700 PE is 0.43(todays value), so we are 1 delta short in nifty and 1.29 delta long in puts. After executing this, we are delta neutral on this position and as time passes, this delta neutral position will become profitable and we can square of entire position with out taking a loss.

Using this above Strategy we can take the Hit ratio of supertrend upto 75-80%. This has been tried and tested for Nifty only. Kindly first trade in small quantity to master the system before taking huge positions. Basic knowledge of Delta Neutral hedging strategies is required.

How to execute Delta Neutral Strategy. http://www.marketcalls.in/trading-lessons/constructing-a-delta-neutral-strategy.html

wehre do you get delta values that too on real time

 

[suktam]

Hi...
Suri112000...
Waiting for your reply Sir.....
Regards...