Great,man. You could be an asset to a trading school
If the calls are priced using the Nifty as a reference, an arbitrageur can make a risk free profit by buying the futures and selling the calls
What calls would you recommend in the current scenario. Since we are in a 1900-1970 range which could go either way, would you recommend calls around 1970 or as this is just the beginning of the month, maybe around 2000. Somebody was recommending selling a 1900 straddle today. Any comments?
If a call option is overpriced, that is, its implied volatility is higher than the historical volatility, buy the underlying and sell the call option. When the volatility comes back to its historical level, reverse the transaction. You make the difference.
I must specifically appreciate this. Very good tip. Supposing implied volatility is lower than historical volatility, is it vice-versa for arbitrage?
Nice of you to touch nifty futrures. There are lots of posts with wonderful graphs without explanation of some other points unless I have missed them?Let is focus on nifty futures alone. Help us weed out useless info briefly:-
1) I understand discount of 20 or more implies heavy shorting which implies mkt could reverse because of short covering. Any comments. Feel free to add whatever you want to if anything else to be kept in mind apart from selling calls which you have already recommended.
2) Is one supposed to monitor open interest- on the short or long side from nse website. Otherwise open interest would act as volume- increase with increase or decrease in price continuation of trend or reversal?
3) Cost of carry- This would apply more to individual stock futures.
4) Foreign mkts- ppl also monitor how asian mkts respond to foriegn mkts.
5) Total F&O turnover- is it worth monitoring? Isn't nifty volume and open interest enough.
6) Nifty put call ratio- god alone knows how relevant it is in India
Thanks a million once again. If there is anything grossly wrong, don't hesitate in point it out. Basically while trading nifty futures, what other things have to be kept in mind . This is a synopsis from moneycontrol website:-
Volumes low, turnover at Rs 7,989 crore (Rs 79.89 billion)
Nifty Futures shed 4.7 lakh shares in Open Interest
Nifty Futures trim discount to 9.5 points
Nifty Open Interest Put-Call ratio at 0.89
Activity seen in Nifty Put Options
Nifty Puts add 2.42 lakh shares in Open Interest
Nifty 1900 Put adds 1.12 lakh shares in Open Interest
Nifty 1880 Put also sees build-up
Top trades: Tata Steel, Tata Motors, RIL, Satyam, OBC, Arvind Mills
OBC adds 14.6 lakh shares in Open Interest
Satyam, Wipro, Infosys sheds Open Interest
Maruti adds 3 lakh shares in Open Interest
Tata Steel and SBI add 3 lakh shares in Open Interest
GAIL, NTPC, ONGC shed Open Interest
FII action: Net sell Rs 37.50 crore (Rs 375 million) on Friday
FII action: Net sellers in Nifty Futures, but buy Nifty Options
FII action: Open Interest at Rs 9,782.64 crore (Rs 97.82 billion)
It sounds very nice talking in parties like this and sounding knowledgeable in front of others but for individual trading, how much of all this is relevant? If you can just breifly enlighten us, we shall be deeply grateful. There is no end to information and analysis otherwise.Thanks