Option Buy Recomendations

[TraderJunkie]

Hi TJ

You did not get the point, did you ?

Why do you think should I post a strategy like that now at this moment after your post ?

DanPickUp

I agree its the same outlay Dan (but at a higher cost since a NIFTY future will cost you more). 100 delta on the future since its a future of-course and 2 CALLs.

My sense is, since the contacts on the NIFTY are so far apart, no hedge strategy can be a perfect HEDGE. Why ? Because its literally impossible to get a CALL and PUT at the exact same strike price with same DELTA. This is also true for a futures + options pair.

The idea with a straddle is to buy ATM call and ATM put. I have come to the conclusion that in India, the straddle or strangle or any hedging strategy is never NEUTRAL but ends up being slightly bullish or bearish anyways.

That said , what is possible is (once a trend emerges) one can close the losing side of the leg and let the winning leg continue for a bit and close it.

Just my thoughts

 

[TraderJunkie]

Dear TJ,

Its not that I do not believe in hedging. I do believe in hedging, it all depends on intraday volatility, in case I am taking intraday trade.

If I am getting a clear trade up or down then, will prefer not to hedge my position, yes, will maintain SL. In case I am carrying my position next day, will do so after hedging only.

Nowadays, market being volatile, its important to hedge once postion while taking any trade.

Regards

I agree completely

I have reached a conclusion for NIFTY that these neutral strategies (strangle, straddle, guts) are infact slightly bullish or bearish because of how far apart the strikes are. What do you think ?

Do you think its a good idea to take a straddle or strangle and close out the losing part as soon as a trend emerges and close the winning leg a little bit later ?

 

[DanPickUp]

I agree its the same outlay Dan (but at a higher cost since a NIFTY future will cost you more). 100 delta on the future since its a future of-course and 2 CALLs.

My sense is, since the contacts on the NIFTY are so far apart, no hedge strategy can be a perfect HEDGE. Why ? Because its literally impossible to get a CALL and PUT at the exact same strike price with same DELTA. This is also true for a futures + options pair.

The idea with a straddle is to buy ATM call and ATM put. I have come to the conclusion that in India, the straddle or strangle or any hedging strategy is never NEUTRAL but ends up being slightly bullish or bearish anyways.

That said , what is possible is (once a trend emerges) one can close the losing side of the leg and let the winning leg continue for a bit and close it.

Just my thoughts

Hi TJ

Good post and good thoughts.

Normally a long straddle with only option is done when low volatility.

In such high volatile markets like now, you not will buy a long straddle. If you still want to trade a straddle, then you trade it the way I explained it.

So the point is : Low volatility and high volatility.

Low = For each leg you use options

High = Use the future for one leg and use the options for the other leg.

Have a successful week.

DanPickUp

 

[TraderJunkie]

Hi TJ

Good post and good thoughts.

Normally a long straddle with only option is done when low volatility.

In such high volatile markets like now, you not will buy a long straddle. If you still want to trade a straddle, then you trade it the way I explained it.

So the point is : Low volatility and high volatility.

Low = For each leg you use options

High = Use the future for one leg and use the options for the other leg.

Have a successful week.

DanPickUp

I agree with you on the low volatility front. In addition I think - if one believes that a stock or index is going to move from low to high volatility - then the straddle is good.

How to know if volatility will peak ? I think looking at historical volatility for a stock and index and comparing it to current volatility might be a good indicator.

If the volatility is low and historical volatility is high - then we can expect the stock or index to move rapidly till historical volatility is reached. That's probably one way to know.

The future + 2 calls payoff of a straddle is very interesting in volatile markets like we find ourselves currently in..

Great discussion going on thanks a lot Dan !

 

[ghosh_ak34]

Dear Friends,

For Nifty Future traders who would like to trade as per trend check strategy posted in 1st post of the thread, Nifty levels for tomorrow are as under:

Resistance at 5710
Support at 5620

If you go short 1 lot then, buy 1 lot at money or near money call and if you go long 1 lot then, buy 1 lot at money or near money put to hedge. Reco. to trade as per trend check strategy posted in 1st post of this thread.

Regards

 

[TraderJunkie]

Dear all,

So this week I started trading with my options system , which is now a combination of a lot of feedback given by people here plus I've incorporated some rules from Ghosh Sir's system. So a big thanks is in order to everyone who gave me their feedback - thanks a lot guys !

The 1st two days have been very good (maybe I'm having beginner's luck) and I've captured 103 points across 6 winning trades with no losing trade yet. I've attached the details of 6 trades if anyone is interested.

Some findings (maybe too simplistic and already you guys must have known this, but its just for my documentation )

1 - A trading system with so many rules generates signals all the time, you cannot act on all signals.

2 - While entering a trade based on the system its also important to keep track of news flow (for NIFTY especially) because situations can change dramatically fast.

3 - To keep having winning trades its most important to ALSO close a winning trade fast. Getting a losing trade hurts, but when a winning trades turns into a loser, it hurts even more. So I've been taking my profits when I've thought I cant wait anymore at the cost of losing what I've gained. So a trailing stop is key here , that takes the decision out of one's hand.

4 - Options as we all know are very sensitive to many variables not just the underlying price move. So sometimes we might be trading volatility sometimes time decay or sometimes both or a combination. I think understanding of the greeks and their impact is most critical. Sometimes the underlying price moves but the option just does not, and that can frustrate - but the price eventually catches up in a few minutes - if the trend is still intact. Knowing this lag has been important to me.

Since I'm testing this system, I'm only committing around 50k. Attached are my trades for the past 2 days.

This community is great - very constructive and it is helping me a lot.

Thanks once again.

TJ

 

[ghosh_ak34]

Dear Friends,

For Nifty Future traders who would like to trade as per trend check strategy posted in 1st post of the thread, Nifty levels for tomorrow are as under:

Resistance at 5810
Support at 5720

If you go short 1 lot then, buy 1 lot at money or near money call and if you go long 1 lot then, buy 1 lot at money or near money put to hedge. Reco. to trade as per trend check strategy posted in 1st post of this thread.

Regards

 

[$ashpats$]

Dear all,

So this week I started trading with my options system , which is now a combination of a lot of feedback given by people here plus I've incorporated some rules from Ghosh Sir's system. So a big thanks is in order to everyone who gave me their feedback - thanks a lot guys !

The 1st two days have been very good (maybe I'm having beginner's luck) and I've captured 103 points across 6 winning trades with no losing trade yet. I've attached the details of 6 trades if anyone is interested.

Some findings (maybe too simplistic and already you guys must have known this, but its just for my documentation )

1 - A trading system with so many rules generates signals all the time, you cannot act on all signals.

2 - While entering a trade based on the system its also important to keep track of news flow (for NIFTY especially) because situations can change dramatically fast.

3 - To keep having winning trades its most important to ALSO close a winning trade fast. Getting a losing trade hurts, but when a winning trades turns into a loser, it hurts even more. So I've been taking my profits when I've thought I cant wait anymore at the cost of losing what I've gained. So a trailing stop is key here , that takes the decision out of one's hand.

4 - Options as we all know are very sensitive to many variables not just the underlying price move. So sometimes we might be trading volatility sometimes time decay or sometimes both or a combination. I think understanding of the greeks and their impact is most critical. Sometimes the underlying price moves but the option just does not, and that can frustrate - but the price eventually catches up in a few minutes - if the trend is still intact. Knowing this lag has been important to me.

Since I'm testing this system, I'm only committing around 50k. Attached are my trades for the past 2 days.

This community is great - very constructive and it is helping me a lot.

Thanks once again.

TJ

Hey TJ

Nice trades. Best of Luck for your system. Going smart & steady is imp.
Why dont you put ur trades in editgrid online spreadsheet. it will be easier for you to update & even all of us can view it also. U can just paste the link of it.
As attaching pdf file each time is prob some.

Thanks

AshPats :clapping:

 

[TraderJunkie]

Hey TJ

Nice trades. Best of Luck for your system. Going smart & steady is imp.
Why dont you put ur trades in editgrid online spreadsheet. it will be easier for you to update & even all of us can view it also. U can just paste the link of it.
As attaching pdf file each time is prob some.

Thanks

AshPats :clapping:

Thanks Ashpats - I will do so ...thanks for your encouragement. I am currently at the very fag end of learning this - Knowing the logic, options theory , strategies is all good. The real deal is the execution - and thats where I think most of us fail. Keeping control over one's mind etc.

I am very sure I will encounter losing trades soon and its how I deal with that, that even I want to see. That said, I think options trading is not just as simple as stock trading. We might get the direction right and still lose money ..

I'm waiting for my losing trades to come to me !

 

[$ashpats$]

Thanks Ashpats - I will do so ...thanks for your encouragement. I am currently at the very fag end of learning this - Knowing the logic, options theory , strategies is all good. The real deal is the execution - and thats where I think most of us fail. Keeping control over one's mind etc.

I am very sure I will encounter losing trades soon and its how I deal with that, that even I want to see. That said, I think options trading is not just as simple as stock trading. We might get the direction right and still lose money ..

I'm waiting for my losing trades to come to me !

Ya TJ
Options Trading is toughest part in this business. Even Shares trading, Futures trading are very much easier compare to Options trading. For option buying best time end by 20th. After that time starts killing premium in worst manner. Ver much tougher. Best of luck with your system.

Njoy

AshPats :clapping: