Directional credit spread

My updates are becoming monotonous. I will not be able to add more and unfortunately I am not getting any New thing. So the strategy evolved so far hope is follow-able. When the market is trendy I follow directional credit spread and when it is range bound I will follow IC.
 

Subhadip

Well-Known Member
My updates are becoming monotonous. I will not be able to add more and unfortunately I am not getting any New thing. So the strategy evolved so far hope is follow-able. When the market is trendy I follow directional credit spread and when it is range bound I will follow IC.
how do u know these: i.e. Trending or Range Bound?
 
Trend is identified by price action. If latest significant resistance is broken, then it is uptrend and when significant support is broken then it is downtrend.
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When trend is alternating, it is rangebound.
 
Trend?

Consecutive higher low denotes UPTREND, and consecutive lower high denotes DOWNTREND.
I am attempting to evolve a strategy for trading options.

Option selling gives more successes than option buying.

Option buying is lucrative, but Probability of Profit (POP) is less.

I have no profit target. My aim is growing my capital.

I am successful in this type of trade.


Let me refresh this strategy.


What to trade? Calls or Puts?

I am following Directional credit Spread.

Credit Spread is selling an option(Call/Put), for earning from Premium on that Option Strike.

Buying an further away option(Call/Put) for hedging.

What is meant by directional?

This strategy is trend following strategy.

If trend is up sell PUT and if trend is down sell CALL, so that POP is more.


Which Strike to sell?

When selling an option, we have to select a strike, where underlying will not reach, within the expiry of the contract. (i.e. Resistance/support) Maximum open interest in option chain denotes such Resistance/ support as per option traders. So selection of strike will be at that stage.


Trend?

Consecutive higher low denotes UPTREND, and consecutive lower high denotes DOWNTREND.


How many?

I will arrive at Max Loss per lot. On my Capital I am treating 10% as RISK money. Risk money divided by the Max Loss gives me the number lots I can trade.


Adjustments

As Max open interest undergoes change in that month, I am replacing the options, so that I can earn still more profit. I am booking loss, when positional loss exceeds the income on that credit spread. If there is no change in the Max open interest, replacing of options need not be done.


When the retention of income exceeds 60% of the Max profits, and options for next series days to expiry is between 50 to 30, I am switching to next series.


Presently my strategy is as above.
hi nice thread,
i got one doubt about the trend

Can you please explain is this on daily chart ? and also with example of trend change with chart if possible please?

thanks
 

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