Nifty Options Vertical Spread Trading

[ananths]

Hi Dan,
Thanks for the article, please post in this thread whenever you have such informative contents. It will help many of us.

One thing i just want to mention here, in Indian market i think we have only Index(NIFTY) options which are very liquid for options traders. If you pick any other stock, the ask and bid price are not very healthy and also not very liquid.
In index options the strike prices are 100 points apart..this is really not very encouraging for Credit spread. If we play with credit spread with far OTM, the difference between the two strike prices are not good enough. Yes, we have the news that NSE will introduce the strikes of 50 points which is yet to come..let us see how it helps.

Also I'm not very comfortable with the adjustment we do in Credit spread. In case of trend goes against me and once the short leg is ITM, if we go with adjusting it by buying deep ITM option, it will become another overhead to manage it. It is difficult to keep a SL for it because within mins it can go to losses. So there is only one choice i believe is to cover with losses.
At the same time if we are playing in Debit spread, I bet on ATM and OTM. If market goes against me, I have two choices. one cover the long leg and wait for the OTM to recover some loss(This is the best because you have time in your favor)..or cover the short leg with small profit and short the ITM option to make it a Credit spread (again i dont like this - because short selling an ITM option is very risky business)
So my way of trading is have a SL level of the underlying in mind before enter the trade and at that point don't hesitate to exit or to adjust the spread.

 

[ananths]

Pivots for the day,
R3-5632, R2-5597, R1-5558
Pivot - 5522
S1-5483,S2-5447, S3-5408

I have recently started looking at charts and started learning TA...so im a beginner in TA...
For time being im doing TA only based on below 3 indicators
1) ADX - to find the direction of the market
2) MACD - cross overs confirms the trend
3) Stochastic - to find out oversold & over bought situation also the crossovers suggests the direction (Its a leading indicator)

My strategy is to check these for all the sectors..like Bank, Pharma, IT, FMCG etc...

For time being my analysis is below,
Nifty is in downtrend but looks like oversold. However IT, Pharma which had a bull run is getting tired now. BankNifty is heavily oversold and can rest.
These are all major sectors in Nifty and Nifty movement will be balanced based on these sector moves. Still I'm bearish on market....:thumb::thumb:

Many questions may arise when we talk about TA..but as i said i may not be able to answer as im also beginer!

 

[DanPickUp]

@Ananths

Do not lose to much time on TA as for debit and credit spread trading you do not need deep TA knowledge. Seeing if the market is trending or in sideways mode does not need sophisticated TA. Just drawing trend lines, comparing different time frames and some Math will do that job. That is somehow what you have done any way and that is fine. :thumb:

You now have chosen three indicators you want to work with. That is also fine and do not take more, as otherwise you will get to many signals which will start to confuse you. This you already know and I guess that is the reason you took only those indicators. :clapping:

To expand knowledge about how to do a simple, non linear charting setup, here a webcast for those which are interested in it or are beginners and do not want to lose to much time on finding out how to do it or being on an endless search for the holy grail. The one shown is presented from an option pro. It is a basic setup including price actions tools. Important with such setups are that at the moment we have one, we keep it and we work with it. Always changing such setups will not help us to fine tune them. The once who always change there setups are the once which are on the endless, non money making search for the holy grail which not exist.

https://optionvue.webex.com/optionv...29041817&DAK=2B7000EF3583DC3829D35BBD0D2CAFE5

Enjoy / DanPickUp

 

[ananths]

Today's trade,

Bull debit spread 5600ce/5700ce @ 95/50

SL at 5559 levels.

 

[ananths]

Today's trade,

Bull debit spread 5600ce/5700ce @ 95/50

SL at 5559 levels.

Covered today's position as below,

5600CE/5700CE @ 112/61

Total profit = 6 points per lot. :thumb:

At one point it was 9 per lot but did not book Bank nifty dropped suddenly bringing down nifty with it

 

[ananths]

Huh...could not trade today.
I was expecting a down move in NIFTY..but its going in other direction.
Its good I did not trade :clapping: but missed a good trade on the long side

 

[ananths]

Going out of station for a week..so may not access TJ frequently..

 

[ananths]

Wow..market crashed.
Todays trade,
5700Pe/5600Pe @ 77/42

Covered @ 192/115
Profit 40 points per lot

 

[ananths]

So far this vertical spread fared well this month..total profit 71 points per lot, with only one losing trade. That means my prediction was almost right every time. Its not rocket science in this type of trending market. Need to see how we can manage the trade during range bound market.

I think ratio spread better for range bound market.

I dont think people are following this thread..may be because of too much margin requirement for the spread.

 

[DanPickUp]

So far this vertical spread fared well this month..total profit 71 points per lot, with only one losing trade. That means my prediction was almost right every time. Its not rocket science in this type of trending market. Need to see how we can manage the trade during range bound market.

I think ratio spread better for range bound market.

I dont think people are following this thread..may be because of too much margin requirement for the spread.

Ananths

Ratio Spreads in your market have an incredible margin request as ST posted (70'000). Seems to be a spread only for good financed traders in India.

Credit Spreads are much better with around 16'500 (I think it was Pakatil which posted that amount).

People may also do not follow to much this thread, as every body wants the quick big money. They prefer threads which give them just ideas for quick bangs and that;s it. Some call poster had luck yesterday and they are now the gods for the next few days until the market starts again to whipsaw. Don't worry and move on with your thread as you do. :clapping:

Take care / DanPickUp

Edit: The Credit Spread from Pakatil appers in the next few post to be a debit spread and not a credit spread. But read on to see what is going on.