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NIFTY Options Trading by RAJ

Discuss NIFTY Options Trading by RAJ at the Trading Diary within the Traderji.com; Originally Posted by escape gmt900, Based on assumption NIFTY gonna close on expiry, anything above ...


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  #21  
Old 23rd July 2013, 06:10 AM
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Default Re: NIFTY Options Trading by RAJ

Quote:
Originally Posted by escape View Post
gmt900, Based on assumption NIFTY gonna close on expiry, anything above is max pain for CALL and anything below is max pain for PUT.

For this month, my best bet is NIFTY will not cross above 6200 and will not go below 5800, so anything above 6200 is max pain for CALL and any thing below 5800 is max pain for PUT as of now. As we come close to expiry day, things will be much clear.

So as of now, do not trade any CE above strike 6200 and any PE below 5800.

Raj, hope my understanding is correct and this is what you also what to convey.

Happy Trading.

Regards,
Escape
Yes. Thanks Escape


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  #22  
Old 23rd July 2013, 06:26 AM
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Default Re: NIFTY Options Trading by RAJ

Quote:
Originally Posted by healthraj View Post
Yes. Thanks Escape
I was thinking that there is a single strike price at which Nifty has max pain, while from escape's explanation , it appears that there are separate strike prices for max pain for Call and Put
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  #23  
Old 23rd July 2013, 06:35 AM
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Default Re: NIFTY Options Trading by RAJ

Quote:
Originally Posted by healthraj View Post
Rule 8: Respect the Strike Price where the MAX Pain is situated

The Strike where the MAX Pain is like the Centre of Gravity. So especially during the Expiry the market will try to move and will try to expire around the MAX Pain. So in the last week of expiry one should avoid any OTM call around the MAX Pain because the OTM calls around the MAX Pain will expire worthless.

For Example in Jul13 Expiry the MAX Pain on 22-Jul-13 is at 6000. So any 6100, 6200,... Calls will expire at Zero value. Similarly for 5900PE, 5800Pe, etc,,,


This is the reason why I believed that there is a single strike price where there is max pain
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  #24  
Old 23rd July 2013, 07:48 AM
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Default Re: NIFTY Options Trading by RAJ

Quote:
Originally Posted by gmt900 View Post
I was thinking that there is a single strike price at which Nifty has max pain, while from escape's explanation , it appears that there are separate strike prices for max pain for Call and Put
Quote:
Originally Posted by gmt900 View Post
[/COLOR][/B]

This is the reason why I believed that there is a single strike price where there is max pain
Yes the MAX Pain is ultimately at a single Strike Price. But what Escape tells is also true. In essence you should avoid calls or puts in the Deep. Or when you are nearing the Expiry make sure your calls are in "In the money" and not "Out of the money"
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  #25  
Old 23rd July 2013, 08:19 AM
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Default Re: NIFTY Options Trading by RAJ

Quote:
Originally Posted by healthraj View Post
Yes the MAX Pain is ultimately at a single Strike Price. But what Escape tells is also true. In essence you should avoid calls or puts in the Deep. Or when you are nearing the Expiry make sure your calls are in "In the money" and not "Out of the money"
Thanks, but still that doesn't answer the question how does one decide a single strike price.
Is it the maximum OI for Call and Put at a given time?

Rule 8 says always respect strike price at which Max pain is situated. This is like a centre of gravity. Is this important mainly during expiry week? how does one " respect"
Strike price at max pain at other times?

Last edited by gmt900; 23rd July 2013 at 08:25 AM.
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  #26  
Old 23rd July 2013, 09:29 AM
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Default Re: NIFTY Options Trading by RAJ

23-Jul-13 Option Analysis

MAX CHG in OI at 6000PE-6300CE - Favouring Bulls
MAX OI at 5900PE-6100CE

Early morning Calls are being squared - Profit booking

Yesterday's pullback rally started from 6033. So the initial top could be 6093. If 6093 breaks then expect more.

so be cautious on Longs above 6093.

Volatility Chart indicates a SELL on Calls.
Since there is a GAP UP, it is mildly bullish.
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  #27  
Old 23rd July 2013, 09:35 AM
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Default Re: NIFTY Options Trading by RAJ

Options Pair Trading

Since the Max PAIN is still at 6000, I am selling the pair 6000PE-6000CE at 105. It is still Risky.

The Volatility also confirms the above... PE VOLT @ 19.6 CE VOLT@ 23.21. So you can see the Calls being Short
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  #28  
Old 23rd July 2013, 09:42 AM
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Default Re: NIFTY Options Trading by RAJ

Hello does any one know how to add open interest change in nest trader option chain!!???
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Old 23rd July 2013, 09:42 AM
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Thumbs up Re: NIFTY Options Trading by RAJ

Hello Raj

Nice thread, thanks for your efforts and sharing.

Quote:
Originally Posted by healthraj View Post
Options Pair Trading

Since the Max PAIN is still at 6000, I am selling the pair 6000PE-6000CE at 105. It is still Risky.

The Volatility also confirms the above... PE VOLT @ 19.6 CE VOLT@ 23.21. So you can see the Calls being Short
on this pair more than 90% of the value is from the calls, then why sell the pair?
if max pain is at 6000 then why sell the puts, something that is going to increase in value . . . as we go near 6000??

the RR will improve if we short only the call instead of pair . . .


Happy
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  #30  
Old 23rd July 2013, 09:51 AM
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Default Re: NIFTY Options Trading by RAJ

Quote:
Originally Posted by gmt900 View Post
Thanks, but still that doesn't answer the question how does one decide a single strike price.
Is it the maximum OI for Call and Put at a given time?

Rule 8 says always respect strike price at which Max pain is situated. This is like a centre of gravity. Is this important mainly during expiry week? how does one " respect"
Strike price at max pain at other times?
There is a formula to calculate the Option Pain. For US markets there are sites like OptionPain.com to calculate the MAX pain. For the Indian markets Yesterday I posted a link.

http://www.traderscockpit.com/?pageV...chain-analysis

In that please look at the Bar chart given at the bottom.

Whichever bar has the lowest value (Total PE+CE) has the Maximum pain, which is at 5975. So you can expect this market to expire around 5975.

So if you have taken Naked calls above 5975, then better to close it now.

There are also Excel spreadsheets available. You can google to find out.

MAX Pain is another indicator for Option Trading. Like any other indicator this is not 100%. The MAX Pain could shift to 6100 also. But right now it is at 6000. So it should be used only as a Caution. It applies more during the expiry because when we have just 5 days left we cannot expect any magic in the last 5 days because normally the Market makers come and eat the premium.

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