What could be a reasonable stop loss in options trading?

[jamit_05]

The way I classify rangebound mkt is as below.. (There might be other approaches as well but I use this framework)
1) Go to higher TF chart.. (i.e. If my trading TF is 60m then goto daily chart, if I am trading 5min then goto 30min chart etc). My rule of higher TF is a trading TF approx 5times of trading timeframe.
2) Find out most recent PH / PL on this TF
3) If Current price is between PH/PL band of step 2, then it is in Range.
4) If it is not in range as per step 3 then it is in Trend.
Thats how simple it is.

Very clear and lucid way of defining a range bound market... thank you.

Also, it was a nice illustration of how one can be have more flexibility with options... thanks again.

Amit.

 

[AW10]

excellent AW10 as usual..

with this aggressive plan. is our SL at 3500 means that is a resistance first & resistance if crossed will become support ...so on that belief should we place SL at 3500..?

vineet

Vineet, you are right that 3500 should act as support now. We had convicing break of this (6% above this levels by no mean can be a false breakout) level.

But when I am using aggressive strategy then I will be equally aggressive to book profit on first sign of weakness (maybe I have not yet developed my psychology to ride the trend with such an aggressive strategy).. So I might not wait for mkt to come back to 3500. So my stops will be driven more by the break of PL on 60m chart or by amount of loss on the trade.

Happy Trading

 

[jamit_05]

So I had following options on Monday
1) close the 3400 short call leg and leave 3400 short PUT leg as it is..
2) close short 3400 CALL leg and open bullish 3400 - 3500 call spread (i.e. 3400 Call and sell 3500 Call) .
3) Forget the complexity of adjustment, and just close the position and take the loss.
.
.
Doesn't it give me more control then futures trading ?

Hope I have not made any typo in explaining it. Else pls highlight it and I will correct it.

Happy Trading.

Sir,

With the above guidelines, the following is my attempt towards formulating a method to trade options. However, due to the little experience, i am clueless about is the favorable conditions/specifics to lay such a spread. Pls provide guidelines on that and your feedback on the following. After your approval, I will be posting this method on the other thread where a bunch of us plan to trade it.
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The method:

1) Wait for daily/weekly (depending of the rift) PH and PL to be formed
2) When the prices get right in the middle of those two pivots act
3) Sell OTMs to the nearest century of the Pivots, and wait and watch
4) One of the two, say the PUT, soon becomes ATM. Now two opportunities emerge:
a) If we square off the erstwhile OTMs we gain.
b) We now have a direction and wish to ride it.

If in case a) the gain is reasonable then we square off the spread. (this exit needs to be specific)

If case a) does not happen we will have to get a cover for one leg of the spread (an expense).

Additionally, to ride the direction we simply buy another ATM or place any of the bearish spreads that seem suitable with the current option pricing. (an expense). (specifics required here too)

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Thank you.