Experiment in Trading Options

DSM

Well-Known Member
#1
In the last expiry have traded a larger qty. of options in the direction of the trend - when there has been a dip intraday or at close. In 3/4 cases, have got 5 digit gains in the short term - but messed up on the last trade. So want to check out experimentally (basis paper trades), how an intutive portfolio of would fair, over a period of month.

The experiment :
Starting capital : 25K
Strategy : Conservative.
Wins to be added to available capital.
Losses to be deducted from available capital.
Brokerage : Fixed 2,000 (to be deducted at end of month)
Taxes : 30/lot (15+15)

The trades may be few, as looking to capitalize on good opportunities.
Will update with MTM.
Will post the rational for the trades.
Will avoid trading in volatile/uncertain market conditions.
Will update soonest that I can, but will refer to the screen quote as reference.
Any changes/additions to the above will update.

Present status :
No position/Available capital 25K

***

Any trader wanting to post their trades basis above, are welcome.
 

DSM

Well-Known Member
#3
Hi Sangram,

* Yes, will only trade options naked and with a directional view.

* Noted. However, had noticed that my previous trades were in direction of the LT trend, but technically intraday would have been considered a sell. But holding overnight, gave good returns. So let's see if such opportunities are available, and will post with charts.

all the best. :thumb:

are you going to trade naked or strategies??

one sincere request: whenever time permits pl explain with charts rather than limiting the thread to a trading journal only.
yhanks
 

DSM

Well-Known Member
#4
Edit :

Long 4 lots Nifty CE 8600 @ 94.55 + (30*4 Brokerage) = 9,575.00
Long 2 BankNifty CE 18800 @ 285.00+30 + (30*2 Brokerage) = 14,310.00
Total Capital Employed = 23,885.00


***

So we have no trade yet in options, and the paper capital of 25K is intact. Today the market is NOT EXPECTING ANYTHING from RBI. The negatives are thus factored in ans so don't see much downside, and will look to buy the index here. Secondly, considering Dec. (yearend for valuations of MF & Hedgefunds, and which decide the bonuses) it is expected the market will only move higher from here, and the strategy should be buy on dips, keeping the trend in mind. Many factors are converging positively - fall in crude and commodity prices for one are good for the economy. This adds a feel good factor. Yesterday's down move has been a good place to start. But avoided the closing trade. So will look to buy at open. Trading is all about timing, and think this is a good place to be long today. Will update later.

In the last expiry have traded a larger qty. of options in the direction of the trend - when there has been a dip intraday or at close. In 3/4 cases, have got 5 digit gains in the short term - but messed up on the last trade. So want to check out experimentally (basis paper trades), how an intutive portfolio of would fair, over a period of month.

The experiment :
Starting capital : 25K
Strategy : Conservative.
Wins to be added to available capital.
Losses to be deducted from available capital.
Brokerage : Fixed 2,000 (to be deducted at end of month)
Taxes : 30/lot (15+15)

The trades may be few, as looking to capitalize on good opportunities.
Will update with MTM.
Will post the rational for the trades.
Will avoid trading in volatile/uncertain market conditions.
Will update soonest that I can, but will refer to the screen quote as reference.
Any changes/additions to the above will update.

Present status :
No position/Available capital 25K

***

Any trader wanting to post their trades basis above, are welcome.
 
Last edited:

amitrandive

Well-Known Member
#5
In the last expiry have traded a larger qty. of options in the direction of the trend - when there has been a dip intraday or at close. In 3/4 cases, have got 5 digit gains in the short term - but messed up on the last trade. So want to check out experimentally (basis paper trades), how an intutive portfolio of would fair, over a period of month.

The experiment :
Starting capital : 25K
Strategy : Conservative.
Wins to be added to available capital.
Losses to be deducted from available capital.
Brokerage : Fixed 2,000 (to be deducted at end of month)
Taxes : 30/lot (15+15)

The trades may be few, as looking to capitalize on good opportunities.
Will update with MTM.
Will post the rational for the trades.
Will avoid trading in volatile/uncertain market conditions.
Will update soonest that I can, but will refer to the screen quote as reference.
Any changes/additions to the above will update.

Present status :
No position/Available capital 25K

***

Any trader wanting to post their trades basis above, are welcome.
DSM

Are these trades based on analysis of Technical Charts or Analysis of Options Data ?

Please elaborate if possible.
 

DSM

Well-Known Member
#6
Hi Amit,

Good question. Mostly, have given the rational for the trade which is :

1. Market is in an uptrend.
2. 'No rate cut' already factored in.
3. Expect market to have peak valuation by 31st Dec. due to fund valuation.
4. Falling crude/commodity prices are positive for the market.

Considering the above, long on retracement seemed to be an assymertical trade. Though the rate cut did not happen (as expected) and which was factored in, an unexpected rate cut would have given a good appreciations on the CE's, and with no possibility to get into the trade at a favourable price.

So we are holding the CE's and will review @ 69 for Nifty. As had stated : that our capital is restricted to 25, will continue to hold/trade within these limits. It is my personal opinion however that CE's if they move lower, provide a good opportunity to add to the trade.

Have marked NiftyCE chart with comments. There is limited data points for BankNiftyCE. However both charts attached.






DSM

Are these trades based on analysis of Technical Charts or Analysis of Options Data ?

Please elaborate if possible.
 

amitrandive

Well-Known Member
#7
Hi Amit,

Good question. Mostly, have given the rational for the trade which is :

1. Market is in an uptrend.
2. 'No rate cut' already factored in.
3. Expect market to have peak valuation by 31st Dec. due to fund valuation.
4. Falling crude/commodity prices are positive for the market.

Considering the above, long on retracement seemed to be an assymertical trade. Though the rate cut did not happen (as expected) and which was factored in, an unexpected rate cut would have given a good appreciations on the CE's, and with no possibility to get into the trade at a favourable price.

So we are holding the CE's and will review @ 69 for Nifty. As had stated : that our capital is restricted to 25, will continue to hold/trade within these limits. It is my personal opinion however that CE's if they move lower, provide a good opportunity to add to the trade.

Have marked NiftyCE chart with comments. There is limited data points for BankNiftyCE. However both charts attached.



DSM

Thanks for the explanation and charts !!!
:clapping::thumb:
 

trader_ks

Active Member
#8
Hi DSM,
I think you could have taken half positions and should have done add on later once market comes down. Now your all eggs are in one basket and down move will hit positions very badly and you have no more capital for add on.

In my view market may consolidate for few more days before moving UP and in that case same options can be brought cheap because of time decay.

What is your opinion?
 

DSM

Well-Known Member
#9
Hi KS,

You do have a point. Preferably, it is better to avoid having 'all the eggs in one basket'. But this is in retrospect. As traders, we have to consider all alternatives. One is : WHAT IF, the rate cut had happened? In which case, it would have seemed to be a very good trade..... I would have expected the capital to appreciate 100% within 2-3 days (has been my previous observations on options) The rational and timing for for going long has been that it has an Assymertical payoff - Big gains for taking small risk.

Now the rational for holding.... I see a limited downside, and a lot of reasons for going/holding long. Today's Gap Up was an opportunity to book profit, but again, this is not the intention to nibble at small profits, but to trade with the trend. Looking ahead, would like this thread to be a record of thinking process of trading options. Mistakes will be made. But having decisions posted and scrutinzed will only help to understand where if, the thinking was wrong. And how we can do better.... So let's see.

Would like to continue this thread looking for Assymetrical trades - Logic of it, analysis of returns, and own psychology, thinking and discipline....


Hi DSM,
I think you could have taken half positions and should have done add on later once market comes down. Now your all eggs are in one basket and down move will hit positions very badly and you have no more capital for add on.

In my view market may consolidate for few more days before moving UP and in that case same options can be brought cheap because of time decay.

What is your opinion?
 

DSM

Well-Known Member
#10
Oops... Gave my view, and did not answer your question.... about market consolidating and time decay. Today was a Gap up, though got sold into. What happens next time this happens, and the market just blows away? A trader will rue not taking the opportunity to trade in line with the trend.... And this is what the market is good at i.e Moving with momentum, so that late entrants are shut out, or pay a heavy penalty. Surely, there will be no warning signals given before hand that this is likely to happen.... Last time this happened Nifty moved 300 points+ Taking a 30-50-60 odd points risk is acceptable in comparison. My 2C.

Hi DSM,
In my view market may consolidate for few more days before moving UP and in that case same options can be brought cheap because of time decay.

What is your opinion?
 

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