3 Day SMA Trading

augubhai

Well-Known Member
#31
Ntrader,
Would u kindly elaborate it. I understand that the premium will be much lower; but then the time dacay will also be much higher. At the same time the volatility also increases towards the expiry. I'm not sure whether that would be to our advanatage or disadvantage.

Laksh
Here are my observations for the last week before expiry:

ITM options - Price of far month option increases/decreases slower than the near month option

OTM options
If underlying does not move much - Price of far month option decreases slower than the near month option
If the underlying gives a favourable move - Price of far month option increases faster than the near month option, until it becomes ITM
If the underlying gives a unfavourable move - Price of far month option decreases slower than the near month option, until a point where the near month options doesn't have much premium to lose. :)

For now, my preference is the near month option, but that may change.

Here's the link that contains the Close of Nifty Futures and near and far month ITM and OTM options - data from 13 Feb to 23 Feb. Lack of liquidity in some options is an issue - so even the Close price will not show the correct picture in those cases.
https://docs.google.com/spreadsheet/ccc?key=0ArXbrH1rDEu0dEhmS2lPUzJEM3o1enJMZVhWQjFsMkE
 

augubhai

Well-Known Member
#32
Hi

Here is some basic analysis without the options data

Code:
For mechanically arriving at the SP for the trade, I have used the logic of rounding Nifty to nearest 00 Value and then adding 200 points for SP of Calls for a Bullish signal and subtracting 200 points for SP of Puts for a Bearish signal.

During the same period, trading with same logic Nifty Future shows a TOTAL GAIN OF 3695 Points.

The signals are genrated at close of every day depending if the 3MA slope is up or down.

PS: Will need to substitute the closing rates for options with specific expiry and SP on those days that give the signal. The above will also need to be adjusted for expiry and rollover

Thanks
NT
Thanks NT. That's a quick analysis. Yes, we may need to look at the actual option prices on those dates.

I consider Nifty and stocks to be a risky instruments, which is why I avoid carrying Futures position overnight. I am comfortable carrying overnight futures positions some commodities (definitely not Crude Oil) and currencies, but not Nifty.

So that also means that I can trade only Nifty on NSE, since none of the other options have sufficient liquidity.
 

augubhai

Well-Known Member
#36
Bhai, if I felt capable of analyzing this, I wouldn't ask you, would I ?? :).
:)
What I meant is that I ignore gaps while trading this "system". I only look at the current price, usually after 10 AM.

There is no need to even look at the charts to trade this system. Just need to know the Nifty Futures Close 3 days earlier. If current price > Close 3 days back, then i should be long, else short. I may not even know that the price gapped, since I do not look at the charts until much later in the day.
 

Laksh

Active Member
#37
:)
What I meant is that I ignore gaps while trading this "system". I only look at the current price, usually after 10 AM.

There is no need to even look at the charts to trade this system. Just need to know the Nifty Futures Close 3 days earlier. If current price > Close 3 days back, then i should be long, else short. I may not even know that the price gapped, since I do not look at the charts until much later in the day.
In that case u r not really trading the 3sma; rather u r trading 3 day ROC though the results may be quite similar. Excuse me if i am mistaken.

Laksh
 

augubhai

Well-Known Member
#38
In that case u r not really trading the 3sma; rather u r trading 3 day ROC though the results may be quite similar. Excuse me if i am mistaken.

Laksh
No, you are right. I am trading the direction of the 3 SMA, which is the same as what you call 3 day ROC.

Actually, since I take my trades at around 10 AM, I am actually trading the 2.25 SMA direction, or 2.25 ROC :). But since all my analysis is based on the 3 day timeframe, I prefer to call it the 3 day SMA trading.
 

augubhai

Well-Known Member
#40
Now u hv traded the option strategy for 2 months with 3sma. I am curious to know the result.

Laksh

Option Strike Series Entry Date Exit Date Points
CE 4800.00 Jan 93.20 Jan 4, 12 76.80 Jan 6, 12 -16.40
PE 4700.00 Jan 96.40 Jan 6, 12 60.05 Jan 10, 12 -36.35
CE 4800.00 Jan 95.31 Jan 10, 12 249.70 Jan 23, 12 154.39
CE 5000.00 Jan 73.40 Jan 23, 12 114.80 Jan 25, 12 41.40
PE 5100.00 Feb 88.86 Jan 25, 12 78.00 Jan 27, 12 -10.86
CE 5200.00 Feb 107.80 Jan 27, 12 105.24 Feb 1, 12 -2.56
PE 5100.00 Feb 71.75 Feb 1, 12 49.30 Feb 2, 12 -22.45
CE 5300.00 Feb 98.00 Feb 2, 12 308.20 Feb 17, 12 210.20
CE 5500.00 Feb 120.80 Feb 17, 12 18.62 Feb 23, 12 -102.18
PE 5500.00 Mar 150.20 Feb 23, 12 146.80 Feb 29, 12 -3.40
CE 5600.00 Mar 103.45 Feb 29, 12


Jan series: 143 points
Feb series: 72 points (last trade lost 102 points)
Mar series: -3 and still in loss.

Still long 5600 call... was not able to trade today.

For the all the above, note that I have only around 1/2 hour in the morning to watch and decide my trades. Some days I do not watch the markets at all.

Due to delta of less than 0.5 for OTM options, I take double the positions that I would have initiated with futures.
 
Last edited: