My paper trade

hai, i am into a new segment of trade....FnO after some amount of reading i decided to do some paper trade so that i can keep a track...of my level of studies

(B) nifty 5500CE @ 89.60 time 9.37am

(S) infty 5500CE @94.80

dont paper trade, trade in deep OTM instead to get the real flavour of markets....

How did you decide to trade that particular option? Practice application of options theory in making trade decisions, options are too dangerous to trade with a gut feeling. Use a standard BSM or CRR binomial calculator online to calculate the greeks.

Since you are trading ATM/OTM contracts with a directional bias, track delta and vega in particular to see how the price changes with the underlying. Towards the expiry, monitor how theta changes cause the option to loose its value. Use NSE site to also track IV, buy on dips.

Good luck and keep posting updates.

nifty (B)5700CE @ 46.25...

i have been reading for a while about options...so i decided to do some paper trade realtime...any advice pls tell me ....

(s)@65........

Rahul, seeing the difference between your buy and sell quotes, I think you are doing fine. Since I do not look at option charts (just Nifty index), I cannot comment if it was optimal or not. But if you buy at support and resistance levels, wait for the IV to drop before buying (opposite for a short position). This way you maximize your profits and minimize your loss in the event of an adverse move. So make a habit of looking at IV values to get a feel of its expectation and gauge an optimal entry by looking at the movement of VIX. And shift to May contracts, but do look at April contract charts as well to get a feel of how quickly theta can kill your gains the nearer you are to expiry.

Btw sorry for suggesting the NSE site for looking at IV values. There are two problems with that: first the data is delayed by 3-5 minutes and second the values are incorrect. I am not sure what algorithm they use to arrive at those values, but the values are always significantly higher (for VIX it does not matter since we use it only for comparing drifts). So the best solution is, for now while you paper trade, search on google for an excel IV calculator based on the BSM model and bisection (preferred) or Newton's method, and use that. Don't worry if you are not a quant, you don't need to understand the algorithms as long as the back solved option price using the calculated IV value is same as the market price. And most excel sheets on the internet will do that readily. Good luck!