Nifty levels to watch

hai, did some reading of charts and concluded as follows

1. Short term Trend now is down with weekly low of 3072.
2. The high to watch is 3262
so trade lightly and profit.

the data available at 11 AM suggests that downtrend is continuing.so please exit atleast 25% of LONG positions and wait for bottom to emerge.You can hedge your portfolio by buying at the money PUTS and selling Calls out of money.ie, NIFTY 3248 now, buy PUT 3200 and sell CALL 3400 and watch.

can you explain me put and call options please...

ganeshhity

ganesh bhai, options are of two types. one is call and other is put.

call is a right to buy a share at a given value ie,Strike Price
put is a right to sell a share at a given value ie,Strike Price

Like a share, you can buy and sell call and put. buyer of a put or call is called holder .seller of a call or put is called writer.

CALL :

Example : TISCO cash price on 29/05/06 - is say 569/-

BUYING A CALL:
Suppose you want to buy a lot(for TISCO - 675 shares) of TISCO today, but do not want to take the risk of investing 3.86 lakhs. So in order to participate in the bull run you can buy 560 call expiry date 29/6/2006, paying a premium of Rs.27/-.ie,Rs18225/-.if the share price in cash crosses 560 + 27 = 587, you will start earning money. any time till expiry, you are eligible to exercise the option.ie, you can buy 675 shares @ 560 + 27.This strategy is called going long.In case the share price at end of month is less than 587/-, you will lose the premium paid.ie, even if value of TISCO goes down below 569/-, your loss is limited to the premium paid.Since it is naked long position, you use this only when you are sure of a bull run.

SELLING A CALL :

From charts, if you feel that the price in cash will not exceed 600, you can sell a 600 call for Rs.10/-.as long as the value of share is below 610/-, you are in profit. But as soon as it crosses 610/- you will start losing money.The buyer of your call is in profit.In this strategy, your profits are limited to the money received, but loss is unlimited after 610. so it is like shorting TISCO at 610.

PUT:
BUYING A PUT :

Buying a put is the right to sell a share. i buy a TISCO 520 PUT @ 22.45. Suppose the share price in cash falls below 520-22.45=497.45, i will earn a profit.Above this my loss is Rs.15153/- . The difference in price at expiry and strike rate will be your profit.Say on 29th June cash price of TISCO is 400.The your profit is 520-22.45-400=97.55 * 675 =65850/-.
Suppose you hold 675 shares of TISCO, and you are afraid that the share price will fall below 520 ie, your stop loss, but at the same time you want to participate in the bull rally, then you can buy 520 PUT. in case the share price stays above 520, you will lose 15153.But if the share price falls below 520 , you need not worry and sell your share, since you already have purchased a right to sell at 520.For this right, you have to pay a price, which in this case is 22.45.(premium).Any downside risk is protected, theoratically upto zero share price before month end.Bear strategy.

SELLING A PUT :
If you feel that share of TISCO will not fall below 520, you will sell a 520 PUT. You will receive a inflow of 675(lot size)*22.45= 15153.but in case the share price is below 497, you will start losing money. so limited profit, unlimited risk.

But normally you will employ strategy to minimise your loss. this is done on a continuous basis.

Say if your charts show NIfty to be in range of 3050 - 3250, then what you can do is sell 3250 call and 3050 put and pray!!! that on the expiry ie month last thursday, Nifty will be within this range.In case on 20th Nifty is at 3060 and there are chances of further fall, you can buy 3060 put .this will reduce your profit in case Nifty closes above 3050, but you will gain if nifty falls below 3050. Similarly on 20th if Nifty is about 3230, then you can buy 3220 call and protect your trade. many strategies are avaliable.the one i discussed will bring intial credit to your account. debit strategies are available. here intial outflow, with loss or profit.

Important thing to note is premium. this can be calculated with many option calculator's available in net for free.it require interest rate ( around 6% pa0, volatility rate (obtained from NSE website).we should be sure that we are paying a optimal rate for premium. using this calculator, you should sell a option at price higher than calculated value and buy a option at a price less than this calculated value. do not buy at extreme high rates as your chances of profit diminish as the rate moves away from the calculated rate

Hai, Overall trend for short term is down. The intraday level are for going long after 3249(with volumes) and target 3270. We are still over 154 EMA, which means that the overall long term trend is still up.so any buying at these levels combined with high volumes only will confirm uptrend.So please have strict stop loss and trade lightly.
bye

hai, the NIFTY may touch 3187 if it falls below 3215.level to watch is 3194 on down trend.

hai, i hope atleast someone would have earned some money with my Nifty levels. The short term trend continues to be down, with technicals pointing out to level between 3053 and 3071. so be prepared for this bottom level in a very short period of time.

For intra day on 31st May 2006:
a) If Nifty opens below 3172.31, be prepared for some wild swings, will hit 3129 and
bounce back.
b) Go long if Nifty crosses 3206 at 11 AM and target 3227(small resistance) and then
3240-45.
c) Go short if Nifty rises from low and is below 3198 at 11 AM and target 3177.

Please use strict stop loss and book profit if you get 1 to 1.5% on your trade.

For long or short always watch the volumes and then decide.
Has any one purchased 3200 put and sold 3400 call , as advised yesterday at 11.15 AM.? Please give your valuable feedbacks.
bye.

P.S. Edited original post at 8.45 PM to reflect adjusted close of NIFTY.

Good call ravi bhai,and i agree with u on this downside(sideways)movement,but in a couple of days we might see a reversal in trend.In my view maybe late afternoon tomorrow.BTW i have 3200 calls for this month hedged with 3300 puts(purchased at last months price when markets were high)

hai amitt29, thanks a lot for your encouragement. i too would love to see Nifty come out from the woods. The nice things seems that the sell off has slowed down.But i have a nagging feeling that HNI's are selling at every high, hoping to buy back at lower levels or it may be just profit booking from retail investor's booking profit at every rise.Lets hope that the down trend stablizes and Nifty be range bound a month or two, so that investor confidence stays put. With Bank interest rise in offing, i feel that if investor confidence is lost, they may book loss/profit and shift to Bonds and FD's.By the way does anyone share the feeling that the Business TV channels are contributing to the market swings?.
Bye
ravi

I agree with u,the tv channels contribute a lot as well as the print media,to lure the retail investors and trap them.Many times if u watch the shows where investors call up the anchor to ask for analysis of their stocks u will find 70% of them making losses.
The nifty i feel is in for a triangle formation where there maybe a volatility aspect to it,lookout for volumes increase and less volatility for a breakout and resumption of the uptrend.On a time frame basis i differ with u,1 month maybe too long a period for us to consolidate.Its mentality of ppl to jump in to see profits(especially)those bruised last week and caught unawares.Potentially i wud look for the volume to double up from the average of three days to see a breakout and level of nifty 3290 and holding.