NIFTY Options Trading by RAJ

How do you use OAT tool?

  • For Intraday Naked Options trading

    Votes: 58 37.7%
  • For Intraday Pair trading of Options

    Votes: 27 17.5%
  • For Intraday Futures trading

    Votes: 18 11.7%
  • For Positional Naked Options trading

    Votes: 35 22.7%
  • For Positional Pair trading of options

    Votes: 29 18.8%
  • For Positional Futures trading

    Votes: 11 7.1%
  • To trade in Cash market

    Votes: 13 8.4%
  • Overall trading has improved with OAT

    Votes: 27 17.5%
  • Understanding of Options has improved with OAT

    Votes: 57 37.0%

  • Total voters
    154
  • Poll closed .

VJAY

Well-Known Member
deleted......
 
Last edited:

john302928

Well-Known Member
Rule 1: If the MAX (CHG in OI) @ PE > MAX (CHG in OI) @ CE, then it is a Bullish market.

Why MAX (CHG in OI) PE will be a Bullish signal?
For the Market to exist we should be Have Bears and Bulls. Market is always trading in a specified range for any day. So we have to assume that BULLs will try to Protect the Bottom of the Range and Bears will Try to Protect the Top of the Range (Not let the market beyond the Range). BULLs have LONG Positions in the market. So to protect their LONGs they take the Opposite positions in the Options market by Selling the PUTS (PE) to hedge their positions, so that if the market goes in the opposite direction of their Longs they can make money using Options. But normally the market makers make money both in the Equities and in the Options market. When They build a Huge volume around a Strike Price, they are basically sending a signal to the BEARS saying "This is our area - We will not let you go below this level". So BULLs normally control a Lower Strike and BEARS normally control a Upper Strike. For a given day this Range would act as the Intraday Range.
Heathraj bro
I would like to bring it to your notice that your statement in rule one is contradicting. Correct me if I am wrong.
you have mentioned "BULLs have LONG Positions in the market. So to protect their LONGs they take the Opposite positions in the Options market by Selling the PUTS (PE) to hedge their positions,"
If bulls have Long position in the market to hedge their position either they sell CE or buy buy PE. but you have mentioned they will sell PE. its not correct. Could you please check.
or anybody else could you please check. thanks
 
The original post you are quoting is years old . . .
Not sure the OP is around to answer your query . .

But you are correct on this part
If bulls have Long position in the market to hedge their position either they sell CE or buy PE.
Selling PE would be adding to their long position.



.
 

john302928

Well-Known Member

john302928

Well-Known Member
The original post you are quoting is years old . . .
Not sure the OP is around to answer your query . .

But you are correct on this part


Selling PE would be adding to their long position.



.
@Happy_Singh are you following the rules mentioned by healthraj. How is it working for you? I would like to know your views and feedback. It would help. thanks
 
@Happy_Singh are you following the rules mentioned by healthraj. How is it working for you? I would like to know your views and feedback. It would help. thanks
Hello John
I am not following these rules,
in fact even after trying very hard I was not able to bring up my level of understanding
of these concepts, to develop enough confidence for trading.

Besides this thread, you can try reading posts from Subhadip, amrutham, and SarangSood


All the best.


.
 

mohan.sic

Well-Known Member
Heathraj bro
I would like to bring it to your notice that your statement in rule one is contradicting. Correct me if I am wrong.
you have mentioned "BULLs have LONG Positions in the market. So to protect their LONGs they take the Opposite positions in the Options market by Selling the PUTS (PE) to hedge their positions,"
If bulls have Long position in the market to hedge their position either they sell CE or buy buy PE. but you have mentioned they will sell PE. its not correct. Could you please check.
or anybody else could you please check. thanks

John302928,

That's right. What you pointed is correct.
Don't waste your time on this method. The person who created this knows nothing about practical trading.
I have already pointed these mistakes to him long back, but irresponsible man dint care to edit the posts and still creating confusion in minds of readers.
 
Replying to john302928, Happy_Singh, mohan.sic on your linked posts.....

There is lot more to it than what usually meets the eye.... There is more than one way to hedge a trade using options.....

If you hedged a LONG position on stock by buying a PUT (ATM or ITM strike), it would be protective put and act more like simple term insurance against loss. If stock goes bullish as anticipated. purchased put expires worthless.

However with two purchases, your net cash outflow is negative... and if you were to also sell a lower strike put, you could recover some of the cost as well as do a synthetic trade that resembles "Bear Put Spread"....

There is a book named "The Option Trader Handbook. Strategies and Trade Adjustments" by George Jabbour that talks of all this mind-numbing brain-confounding heart-wrenching ideas and it is not a light read. I have read it four times and still it is good book to put anyone to sleep in a jiffy (way better than a pill)

Extract from page 92 of the book reads thus
Code:
.... assume you purchased 100 shares of EBAY at $100 and it has moved to $110. Due to your fears of a price
reversal, you wish to hedge your stock position with a protective put. A 2-month EBAY $110 Put is trading for $4.60 and an EBAY $105 Put with the same expiration is trading for $2.00. The stock position can be hedged simply by purchasing the $110 Put for $4.60. If this price seems a little high for protection for EBAY, you could purchase the $110 Put and then sell the $105 Put for a net debit of $2.60. The maximum profit from the bear put spread at expiration is $2.40 ($5.00 strike price difference minus net debit of $2.60).
 

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