strangle on icicidirect

#1
Hey guys,
This mite sound like spoon feeding.... or a bit dumb.... but i am a complete newbie to the icicidirect Options platform. I am very much afraid of buying a straddle ( heard from a lot of ppl that newbies shud never go directly on sell strategies) instead of a strangle.

I have done paper trading in options for last 6 months...and want to commit a small amount to options trading to wet my hands so to speal:thumb:

Can any of u members help me ????

I will be highly obliged if someone can tell me the steps to use icicidirect platform to buy nifty strangles.

something of the format step A>>step B>> step C

I have seen that the members help ppl new to trading a gr8 deal on this forum....... hope to get some help to start out into the world of options trading.

Thanks,
hbkhrushikesh
 

rssheth

Active Member
#2
Hey guys,
This mite sound like spoon feeding.... or a bit dumb.... but i am a complete newbie to the icicidirect Options platform. I am very much afraid of buying a straddle ( heard from a lot of ppl that newbies shud never go directly on sell strategies) instead of a strangle.

I have done paper trading in options for last 6 months...and want to commit a small amount to options trading to wet my hands so to speal:thumb:

Can any of u members help me ????

I will be highly obliged if someone can tell me the steps to use icicidirect platform to buy nifty strangles.

something of the format step A>>step B>> step C

I have seen that the members help ppl new to trading a gr8 deal on this forum....... hope to get some help to start out into the world of options trading.

Thanks,
hbkhrushikesh


If nobody offers you a help here , Ask ICICI they are conducting regular training on this , probably they have a calendar on www.icicidirect.com too or find out from phone banker

Thanks
Rs
 
#3
Hi RS,
Thanks for the reply :)

I am currently not in India and hence havnt managed to attend ne of their training sessions :( Thats why I was asking if ne experienced members of traderji can help me out....

Thanks ne ways.... for taking time to answer my querry

Regards,
hbkhrushikesh
 

AW10

Well-Known Member
#4
Have u done any option transaction on ICICIDirect so far or not ? They have really crappy user interface and I am not surprised that u are confused.
Do the following there..

1) Goto F&O trading area.
2) Goto "Place order" link. You will be thrown a screen with 3 fields.. but if u select "option" in 1 of the drop down, u will get new field to pickup Call/ PUT.
Idea here is to select the right option chain (strike, expiry, call/put). On the list result screen, u get the buy/sell and link for each strike. Just select the right entry and click on the
appropriate action link.

Will suggest to save the interesting option chains as your Favourite, so that next time u can navigate bit faster and avoid 2 extra screen navigation.

3) you are given order entry screen.. just fill in Qty / Limit Price or market, and Trigger price (if any)..

4) You can go to order book / trade book / open position / portfolio detail etc links for further info.

But this is the easy part. But trading is more then just placing buy/sell order.

More important is - Do you know when to use Strangle Strategy ? In which market conditions it works and when it doesn't ?
Which strike price to select ? Have u planned your strangle trade completely and know you entry/exit/breakeven point etc.

In my experience, By its nature, Strangle will always have 1 loosing leg. Long strangle position needs a breakout type of scenario so that the winning leg wins more
then the loosing leg. If that is not the case, then this strategy doesn't work. And if you are stuck in range bound mkt then effect of timedecay is double here.
Both Long positions will loose value every day... and that reduces the probability of success as time passes.

And plz get over the crap given by others that Option selling is not for novice. Naked option selling is risky, but you can always buy other option to limit your risk.
Refer to my Low risk option thread.. and u will know why I say.
If you are in options trading then think and act like option trader.. If you behave like stock or Futures trader there, then you are using wrong tool at right place.
How well can u play cricket with hockey stick or tennis racket ?

Happy Trading
 
#5
Hi AW10,

First of all thanks a lot for taking time out to answer my querry :)

As i had written earlier, i have done some paper trading in options. As far as my (stunted) knowledge goes, shouldnt there be 4 types of options buy call/put and sell call/put????

In the icicidirect interface, the available options are call/put. is it BUY call/put or sell ( write ) call/put??? and do u know why there are only 2 possibilities instead of 4??? is that icicidirect way of dealing in options???

to buy a strangle, i need the buy call/put variety of option. based on your answer, i am inclined to think thats what i am getting into ( rather the only variety option i have) with icicidirect. is that right???

Also, just a newbies querry, wud a strangle be succesful in the last weeks trading ( almost consistant loss throughout the week) and then again todays 2% jump??? I mean if the strangle would have been profitable last week ( the put part) having sold that part of strangle ( assuming, the call option will lose value) and then todays rise in value adding some value to the call part...thus giving decent return ( over n above the profit of strangle last week & and mon tue this week)

thanks for all your inputs and time. Really appreciate it.

Regards,
hbkhrushikesh
 

AW10

Well-Known Member
#6
ICICI or for that matter, any other borker, don't facilitate order entry for strategy.
So u have to plan your strategy.. and place individual order for each leg.
So for a strangle, u will end up place 2 order, one to buy call and other to buy put.
And same has to be done when u want to sell them.

They do have a interface where u can place order for a strategy but that interface is even worse then this.

Have you done backtesting of Long strangles ? I was holding Jan and Feb Long strangle when mkt was in tight range of 100 points at 5200/5300. Such narrow range eventually gets broken and we see expansion after that which we did. So the strangles did work there. But how frequently do we see such a massive move.
In last 5 days, market has been in 4800 to 4950 range.. so I think, strangles might have stayed in the range with gradual decay in value everyday.
Also don't forget the impact of volatility /fear on options. When volatility is high, option becomes costly.. so u pay more premium to buy 2 legs (as it was the case 3/4 days back when VIX was 28).. And as volatility drops, the option starts getting cheaper..i.e. market needs to move little bit extra to give u additional profit.

But if you buy 4800/5000 strangle today, u are paying 135 rs for this. i.e. mkt has to move out of 4800-135 or 5000+135 range.. for this to give u any return. If that doesn't happen, then u are loosing almost 9 rs per day on this long position due to timedecay.
i.e. you will buy strangle and hope that mkt goes beyond your range.. and every day keep seeing loss accumulating in your acct.

Can u handle this development in your strategy ?

And if you are thinking about breaking the legs and booking profit after some time.. then u are not trading strangle.. but reacting to mkt moves.. If u had booked profit on your puts.. then fine, u got some profit now.. but you call leg is still at the mercy of market.
If market falls further, then u will not win anymore but u will certainly loose on your call leg. And if market stays in a range.. then the OTM calls will not more much.
By doing this, you are breaking a direction neutral strategy to directional strategy. So if you are not got direction picker, then odds are that you will loose more then what u may win.

Because of all such odds that are stacked against you, I am not in favour of Long Strangle most of the time.. But when it is narrow range mkt, yes, I do use them..

Plz read first few posts on my NR7 thread where I have mentioned about how to use strangles to benefit from market contraction and expansion.

Happy Trading
 
#7
Hi AW10,

Thanks a lot for all your input!!!

can you clarify if buying call/put is the only way icicidirect allows option trading on their platform??? if no then where in the interface is the provision to place a short strangle???

How do you back test your strategies??? Is it by just noting the valuse of the call and put options that you wud have bought and then wait for the trade to pan out...??? or do you have ne pracatice options accounts??? like say khelostocks for stocks???
 

AW10

Well-Known Member
#8
Hi AW10,
can you clarify if buying call/put is the only way icicidirect allows option trading on their platform??? if no then where in the interface is the provision to place a short strangle???
Atleast that's what I know of. They have a link called Derivative World. don't know what that does. Maybe you can explore more on it.

To place short strangle. I have to exectute 2 sell orders seperately. The system doesn't care about the strategy whether it is short strangle or naked short sell, or come other kind of strategy.
They just consider each leg in isolation. but we as a trader need to know what we are doing.

How do you back test your strategies??? Is it by just noting the valuse of the call and put options that you wud have bought and then wait for the trade to pan out...??? or do you have ne pracatice options accounts??? like say khelostocks for stocks???
I don't know any site that will allow for option backtesting. Simplest is to just maintain the trade in excel sheet as if you have take the trade.
You can download historical data from NSE site and take paper trade for some previous dates.
It is tedious process and time consuming as well.. But that is where the hardwork of trading is.

Check out other thread by DipeshBajaj where he has tested 2 strategies. There are threads by Bandlab2 and Linkon07 where they were paper trading few strategies and tesing them.

But none of that was backtesting on previous data. They all were paper trading, rather then backtesting.

Happy Trading
 
#9
hey AW10,

Thanks a lot again........ for all u r timely help!!!

Now I get it..... the icicidirect platform is made by Apes!!!!!!

Now i get it........ to buy a strangle , i have to separately buy a call and then go back to the original page to buy put at the same strike price........

hmmm........... gosh these ppl have so many site designers etc. and yet cant come up with simple format!!!! that fact that you have to flip back and forth thru same links again and again.. is just stupid!!! confused the hell out of me...... Thanks again.... :)

Also, I will be paper trading for some more time...... and would love to share my thoughts ( and ofcourse yours and other members if they want to pitch it)
Also, I am going to read thru the threads you mentioned in your previous postings on this thread over the comin weekend :thumb:
 

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