money management for directional trading system

bunti_k23

Well-Known Member
#1
Hello guys seniors/option experts i need your suggestions/ideas/views here im confused to design proper mm in option .here is the plan im concerned only in buying the options,

Instruement = nifty options.
Capital = 10000.
No. Of lots =1 i.e 25qty.
Trading system type = directional trading system pure intraday
Trades per day = 1 or 2 .
Stoploss = 10pts.
Target = 15 pts .


Keeping aside the characteriscts of trading system drawdown etc.
Here the main confusion iam having is how will i choose the strike price considering abv target and stoploss of trading system .what shd be the parameter that i shd look for? Theta value ? Premium ? Delta? Any other thing?

Lets consider a scenario Here if i consider strike price of same delta,

For call.(coming 2 Strikes otm from cmp)

29Jan14ce8250
Delta = 0.51
Theta = -3.24
Premium = 156

Capital needed = 25 *156 = 3900.

For put.( coming 2 Strikes itm from cmp)

29Jan14pe8250
Delta = 0.49
Theta = -0.64
Premium = 124.25

Capital needed = 25*124.25 = 3106.25


Now, if i had a buy signal in call and stoploss hits im loosing 5.10 Pts technically considering delta only , but what abt theta here see the theta value we have -3.24 , compared to the theta value of put which is only -0.64 .simply i will be lossing more on call compared to put isnt it? While this will not happen in cash market if i got my stoploss hit i will be loosing straight 10pts and winning 15pts clearly on every trade .

Pls give ur important suggestions/thoughts/views /criticism all will be accepted in a positive spirit.

Thankyou
Amit:)
 
#2
Hi

Playing options that way is a bit difficult. Why? As an option is not a future, other facts can and will have a bad or even positive impact on such kind of stop losses for any option. So be careful with such calculations, specially with our friend dear "Option". Any other way of stop loss you can think of or must it be the way you posted?

H C and take care / Dan :)
 

manishchan

Well-Known Member
#3
Hello guys seniors/option experts i need your suggestions/ideas/views here im confused to design proper mm in option .here is the plan im concerned only in buying the options,

Instruement = nifty options.
Capital = 10000.
No. Of lots =1 i.e 25qty.
Trading system type = directional trading system pure intraday
Trades per day = 1 or 2 .
Stoploss = 10pts.
Target = 15 pts .


Keeping aside the characteriscts of trading system drawdown etc.
Here the main confusion iam having is how will i choose the strike price considering abv target and stoploss of trading system .what shd be the parameter that i shd look for? Theta value ? Premium ? Delta? Any other thing?

Lets consider a scenario Here if i consider strike price of same delta,

For call.(coming 2 Strikes otm from cmp)

29Jan14ce8250
Delta = 0.51
Theta = -3.24
Premium = 156

Capital needed = 25 *156 = 3900.

For put.( coming 2 Strikes itm from cmp)

29Jan14pe8250
Delta = 0.49
Theta = -0.64
Premium = 124.25

Capital needed = 25*124.25 = 3106.25


Now, if i had a buy signal in call and stoploss hits im loosing 5.10 Pts technically considering delta only , but what abt theta here see the theta value we have -3.24 , compared to the theta value of put which is only -0.64 .simply i will be lossing more on call compared to put isnt it? While this will not happen in cash market if i got my stoploss hit i will be loosing straight 10pts and winning 15pts clearly on every trade .

Pls give ur important suggestions/thoughts/views /criticism all will be accepted in a positive spirit.

Thankyou
Amit:)
Without getting into too much of technicality, I can tell you one thing. I you plan to trade naked options, then your best bet is to trade ATM strikes. Trading far OTM is quite dangerous as decay will kill if you if the move aren't very fast. Also.. at times far OTM doesn't move always as per the market especially in range market. If not.. then better trade spread and not naked options.

As far as the MM is concerned.... you can take the quantity that you get in ur capital based on the stop loss.
 

bunti_k23

Well-Known Member
#4
Hi

Playing options that way is a bit difficult. Why? As an option is not a future, other facts can and will have a bad or even positive impact on such kind of stop losses for any option. So be careful with such calculations, specially with our friend dear "Option". Any other way of stop loss you can think of or must it be the way you posted?

H C and take care / Dan :)

Sorry i havent understood ur last sentence :Diam still little challenged in english :pya if ur asking abt to rethink abt stoploss management , yes i have to and i will.thankyou for having ur thought on this topic:)
 

bunti_k23

Well-Known Member
#5
Without getting into too much of technicality, I can tell you one thing. I you plan to trade naked options, then your best bet is to trade ATM strikes. Trading far OTM is quite dangerous as decay will kill if you if the move aren't very fast. Also.. at times far OTM doesn't move always as per the market especially in range market. If not.. then better trade spread and not naked options.

As far as the MM is concerned.... you can take the quantity that you get in ur capital based on the stop loss.
Yes quantity will be taken considering the capital only, but my sole concerned is with stoploss only .yes totally agree with u for going with atm strikes or 2 strikes itm specifically:)
Thanks for giving a thought on this.
 

XRAY27

Well-Known Member
#6
Hello guys seniors/option experts i need your suggestions/ideas/views here im confused to design proper mm in option .here is the plan im concerned only in buying the options,

Instruement = nifty options.
Capital = 10000.
No. Of lots =1 i.e 25qty.
Trading system type = directional trading system pure intraday
Trades per day = 1 or 2 .
Stoploss = 10pts.
Target = 15 pts .


Keeping aside the characteriscts of trading system drawdown etc.
Here the main confusion iam having is how will i choose the strike price considering abv target and stoploss of trading system .what shd be the parameter that i shd look for? Theta value ? Premium ? Delta? Any other thing?

Lets consider a scenario Here if i consider strike price of same delta,

For call.(coming 2 Strikes otm from cmp)

29Jan14ce8250
Delta = 0.51
Theta = -3.24
Premium = 156

Capital needed = 25 *156 = 3900.

For put.( coming 2 Strikes itm from cmp)

29Jan14pe8250
Delta = 0.49
Theta = -0.64
Premium = 124.25

Capital needed = 25*124.25 = 3106.25


Now, if i had a buy signal in call and stoploss hits im loosing 5.10 Pts technically considering delta only , but what abt theta here see the theta value we have -3.24 , compared to the theta value of put which is only -0.64 .simply i will be lossing more on call compared to put isnt it? While this will not happen in cash market if i got my stoploss hit i will be loosing straight 10pts and winning 15pts clearly on every trade .

Pls give ur important suggestions/thoughts/views /criticism all will be accepted in a positive spirit.

Thankyou
Amit:)
Niftyoptions trading (intraday) better trade ....IN-THE-MONEY(ITM) ..
and depend on TA rather then option greeks for intraday trading..

Final advice
Draw your own conclusions after this experiment and result will act as better teacher ..:)
 
Last edited:

bunti_k23

Well-Known Member
#7
Niftyoptions trading (intraday) better trade ....IN-THE-MONEY(ITM) ..
and depend on TA rather then option greeks for intraday trading..

Final advice
Draw your own conclusions after this experiment and result will act as better teacher
..:)
Ya ur advice is indeed true:)i was just trying to figure out how much loss i have to take before jumping into the experiment:D
If u dont know the exact risk ur taking then u cant expect the probable outcome to be in your favour;)just a lill thought.
 

manishchan

Well-Known Member
#8
Ya ur advice is indeed true:)i was just trying to figure out how much loss i have to take before jumping into the experiment:D
If u dont know the exact risk ur taking then u cant expect the probable outcome to be in your favour;)just a lill thought.
Off the topic..... looking at your signature, your name should be Rahul.. not bunti.. ( u knw.. Shahrukh khan's common screen name :D )
 

bunti_k23

Well-Known Member
#9
Off the topic..... looking at your signature, your name should be Rahul.. not bunti.. ( u knw.. Shahrukh khan's common screen name :D )
:lol:well SRK is my idol and iam a hardcore fan of SRK,i take him as an inspiration/motivation in my life:).and thats why the signature:D
but i believe in trading that "KUCH" should be defined clearly.;)
 

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