Option Logics

[toughard]

I did 'actual trade" in Aug 2014 of miniature quantity.
On 31st July I bought One Lot around closing time 7900 strike Nifty CE at 53.xx
Around 10th or 11th Aug it went below Rs.10/-
Nifty did a low of 7565 or so during this period.
On 12th Aug market rose by 100 points and I bought 1 more 7900 CE at ~23 !
Yesterday it did a high of 67 and I exited 1 lot at 58 ! Now holding 1 lot with average cost ~20/-

Buying at 53, I could hold it even when it went down sub 10 was only because I was holding just 1 lot! Had I entered multiple lots I would have exited the very next day on 1st Aug when price plunged to below 25! Nifty had tanked by >100 points!

Any pointers how to handle such trade when aiming to trade say 50 lots !

Good that 7900 CE trade worked out by the way that is explained... usually this may not be the case most of the time... kindly explain your PE trades, did you sold or bought 7500 PE on the first day?

few things-
- Averaging the loss is not advised in options as we trade a very short time frame contracts
- With loss making positions one should try trade conversion techniques and implement it only if its reducing the loss or turning out to be beneficial.. ex- back spreads ( for which you can read Options as a Strategic Investment: by Lawrence G. McMillan )

"method should be constant" irrespective of quantity!

 

[rh6996]

Good that 7900 CE trade worked out by the way that is explained... usually this may not be the case most of the time... kindly explain your PE trades, did you sold or bought 7500 PE on the first day?

few things-
- Averaging the loss is not advised in options as we trade a very short time frame contracts
- With loss making positions one should try trade conversion techniques and implement it only if its reducing the loss or turning out to be beneficial.. ex- back spreads ( for which you can read Options as a Strategic Investment: by Lawrence G. McMillan )

"method should be constant" irrespective of quantity!

Still dont have guts to Sell Options! Its more of a mental block than anything else, of course lack of proper and basic knowledge adds to this 'fear' of shorting Options! I did not Sell PUTS, just bought the Call one lot on 31st July and 1 lot later when mkt jumped up by 100 points!
Dont have the book mentioned by you, though a friend has another book by same author, a soft copy of : Profit_With_Options_-_Lawrence_G_McMillan
Dont know whether the Subject of "Back Spreads" is covered or not in this book, will check.
Thanks for your time.

 

[rh6996]

Going by my Trade done in August, and using Call Back Spread, would it be correct to have bought 2 lots 7900 CE at 53 and Sold 1 Lot 7500 CE at ~280 !
But seems we would be in Loss , Now on 22nd Aug the closing rates are :
7900 CE is 60 (X2) Profit 14
7500 CE is 425 Loss Loss 145

 

[toughard]

Going by my Trade done in August, and using Call Back Spread, would it be correct to have bought 2 lots 7900 CE at 53 and Sold 1 Lot 7500 CE at ~280 !
But seems we would be in Loss , Now on 22nd Aug the closing rates are :
7900 CE is 60 (X2) Profit 14
7500 CE is 425 Loss Loss 145

its 7800CE not 7500CE...

 

[toughard]

 

[rh6996]

its 7800CE not 7500CE...

Okay, we Sell the nearest Lower calue Calls and not the Call where we think the support is?

So it would turn out something like this :
Going by my Trade done in August, and using Call Back Spread, would it be correct to have bought 2 lots 7900 CE at 53 and Sold 1 Lot 7800 CE at ~80 !
Now on 22nd Aug the closing rates are :
7900 CE is 60 (X2) Profit 14
7800 CE is 130 Loss 50 points

And my breakeven would be at 8026 and 7774 ! Is this correct?

 

[rh6996]

I did not see your post before posting, please ignore my above post. Shall come back after going through your Post!

 

[rh6996]

Thanks for this awesome effort to explain! Though Buy Sell figures may differ, but I am getting the hang of it !
Will post further after 'digesting' what you have posted!
On 8th actually it felt that mkt collapse as it was three days in a row it was tanking, so would not have bought any CE on that day!
Based on my figures, plz confirm if my break even points as posted above are correctly calculated.

 

[gkpc]

RH, A small request. ***********************deleted***************************************

No issues if you continue here. Just my suggestion. I came to this thread today only and found the same very interesting.
------------------delete-------------------------------------------
Please, please ignore my suggestion if it hurts!

(Deleted what I wrote , Sorry if it was inappropriate, )

 

[bunti_k23]

dear toughard pls clear my doubt,
Can we trade options in intraday like we trade stocks in cash market with proper risk and reward ratio by considering only charts and not looking to particular option strategies like straddle strangle butterfly condor etc .do price action works there or any other mechanical systems...?