linkon's breakout system

linkon7

Well-Known Member
#11


As per the strategy, I hold on to the bear spread till 4588 is hit.
My first target is 4501 and second target 4460

Note : The RSI Guppy is distinctly going into a negative signaling power shifting to the bears.
 

linkon7

Well-Known Member
#15
Hy

Is this thread still going on ?

DanPickUp
I stopped using this method long time back. NO one found it useful to continue discussion on this, i guess...
 
#17
This guy is just amazing :clapping:


hey linkon you keep making all these systems ,,,,,,,,, nice :thumb:


PS: Also big Thanks to Kenneth, nice code ;)
 
Last edited:
#18
Linkon, appreciate that u are trying to design an option trading system here. All the best.

I think on of the important consideration for options system is the selection of strike and right strategy.. Keeping in mind the objective.
You can use TA to form the view about the market and get trading bias but that's where TA's job is over and you have to wear the hat of option trader from now on.
My observation on the spread that u have selected - 4500-4600 Bullish Call spread @ cost of 37. Max value that this spread can achieve is 100, and that's too when
1) you hold this till expiry and
2) market expires above 4600.
If mkt goes above 4600 before expiry, the spread will not be worth 100 because of the time value component of the option.
Max profit potential is 100 - 37 = 63 points. On two contract, i.e. 6300 rs.

Compare this with the 4200-4300 Call spread . At closing price today, it was available at net price of 57 rs (i.e. =281 - 224 ). The spread is already deep in the money.
There is very high probability of mkt closing above 4300 (look at the huge built up of puts at 4300 and 4400).. So you have much higher probability of this strike giving u full value of
100 (i.e. profit of 43 rs) then your spread which still have to see the light of the day. With each passing day, OTM spreads will have lesser probability of getting into the Green whereas the probability of ITM
spread keeps going up with each passing day..

Hope you are able to see my point here.. The trade off of both spreads from options traders mindset will be
trade 1 = 63 rs profit on the risk of 37 but low probability of success
trade 2 = 43 rs profit on the risk of 57 but much higher probability of success

Another points is important to notice with Spreads is that they are slow moving trade. Ex. in 45-4600 spread to gain 63pts market needs to move 150 points and stay there for next 15 days. They are ideal for laid back trading but doesn't give that fast pace action of daytrading NF on 5 min chart. Trading Deep ITM spreads is my favourite strategy for limited risk income generation. I know that we are on different path to same destination of financial freedom and I found spreads a perfect strategy that fits towards that goal.

Hope you have checked out my thread on "Low risk option trading ...." where I have written a lot about spreads.
Hope you won't mind me posting the link to this post there so that people can benefit from it in future as well.

Happy Trading
Can some1 plz explain how the break-even point is calculated in the above 2 examples. LETS ASSUME THAT THESE SPREADS WERE TAKEN WHEN THE NIFTY WAS AROUND 4457 (thats the EOD close on 12/08/09 on which that post was posted)

(btw how to calculate BEP of a bearish spread ?)

thanks in advance :)
 
Last edited:
Thread starter Similar threads Forum Replies Date
linkon7 Options 170
linkon7 AmiBroker 129
VJAY Options 10
linkon7 Options 36
linkon7 Day Trading 477

Similar threads