Premium Eating Strategy - BankNifty Weekly Options

[mycall]

Thanks my call...
I don't know what exact reason But I observed options rates are in tight bid/ask rates in these timings may be due to auto square off mis positions....

You are right on the money, boss.

 

[mycall]

Conservative Bank Nifty Option Strategy - 1

This strategy is proving to be the best one in terms of risk and reward so far for us. Till we are using this strategy (since this January) our position was challenged only once... that is last week... well it was my fault as we took position right on the S/R level. Currently we use this strategy most of the time for our own trades. My target profit is about 12-15pts per wk. Even if the trader forgets or unable to close/exit his/her trade before expiry the loss is capped. There is no chance of Unlimited Loss.

In this strategy we rip benefit of 2 option greeks (Theta and Vega) that are up for grab every day. Along with these we take important monthly/weekly Support Resistance (S/R) levels for choosing our entry positions. This strategy needs some understanding how these two greeks work.

Theta is a measure of the rate of decline in the value of an option due to the passage of time. It can also be referred to as the 'time decay' on the value of an option, which the option loses as time moves closer to the maturity of the option. The closer the expiry is Theta value of option will erode faster.

Vega is the measurement of an option's sensitivity to changes in the volatility of the underlying asset. Vega represents the amount that an option contract's price changes in reaction to a 1% change in the implied volatility of the underlying asset. During high volatility Vega makes option price rise faster and the moment Bank Nifty starts to stabilize the option price drops.

S/R Levels: Traditionally 25000, 25500, 26000, 26500 are support resistance levels for Bank Nifty or every 500 interval of these strikes. These are natural S/R levels. Apart from these there are indicator based Support and Resistance levels. We try to find the S/R levels from the Bank Nifty spot level while entering. If we don't get any clear indicator based S/R level we consider traditional levels.

Strategy: We use Credit Spread strategy. Credit Spread is formed by shorting a greater value (lower strike call option or higher strike put option) and buying a lower value (higher strike call option or lower strike put option). It is called 'credit' spread because received amount (for selling) is bigger than paid amount (for buying).

Trade Entry

We start looking for taking position on Tuesday onward upto Thursday morning. For taking entry we wait for some volatility in BankNifty a 200-300-400 pts fast move and once this move happens we try to find strikes (beyond S/R level) towards the trend where at least 12-15 pts as credit shows up. The shorting strike should be at least 1 or 2 strikes beyond the S/R level with. The far the better.

Trade Exit

We Exit from the trade whenever our desired profit is reached or wait for expiry.

Trade Management

Simple management: Exit from the position when Banknifty touches our buy strike.

NOTE: We modify this trade during holding or expiry day to enhance profit. There are multiple modifications can be applied to increase profit. Novice traders if following this strategy, must do paper trading for as long as they don't feel good.

 

[VJAY]

Conservative Bank Nifty Option Strategy - 1

This strategy is proving to be the best one in terms of risk and reward so far for us. Till we are using this strategy (since this January) our position was challenged only once... that is last week... well it was my fault as we took position right on the S/R level. Currently we use this strategy most of the time for our own trades. My target profit is about 12-15pts per wk. Even if the trader forgets or unable to close/exit his/her trade before expiry the loss is capped. There is no chance of Unlimited Loss.

In this strategy we rip benefit of 2 option greeks (Theta and Vega) that are up for grab every day. Along with these we take important monthly/weekly Support Resistance (S/R) levels for choosing our entry positions. This strategy needs some understanding how these two greeks work.

Theta is a measure of the rate of decline in the value of an option due to the passage of time. It can also be referred to as the 'time decay' on the value of an option, which the option loses as time moves closer to the maturity of the option. The closer the expiry is Theta value of option will erode faster.

Vega is the measurement of an option's sensitivity to changes in the volatility of the underlying asset. Vega represents the amount that an option contract's price changes in reaction to a 1% change in the implied volatility of the underlying asset. During high volatility Vega makes option price rise faster and the moment Bank Nifty starts to stabilize the option price drops.

S/R Levels: Traditionally 25000, 25500, 26000, 26500 are support resistance levels for Bank Nifty or every 500 interval of these strikes. These are natural S/R levels. Apart from these there are indicator based Support and Resistance levels. We try to find the S/R levels from the Bank Nifty spot level while entering. If we don't get any clear indicator based S/R level we consider traditional levels.

Strategy: We use Credit Spread strategy. Credit Spread is formed by shorting a greater value (lower strike call option or higher strike put option) and buying a lower value (higher strike call option or lower strike put option). It is called 'credit' spread because received amount (for selling) is bigger than paid amount (for buying).

Trade Entry

We start looking for taking position on Tuesday onward upto Thursday morning. For taking entry we wait for some volatility in BankNifty a 200-300-400 pts fast move and once this move happens we try to find strikes (beyond S/R level) towards the trend where at least 12-15 pts as credit shows up. The shorting strike should be at least 1 or 2 strikes beyond the S/R level with. The far the better.

Trade Exit

We Exit from the trade whenever our desired profit is reached or wait for expiry.

Trade Management

Simple management: Exit from the position when Banknifty touches our buy strike.

NOTE: We modify this trade during holding or expiry day to enhance profit. There are multiple modifications can be applied to increase profit. Novice traders if following this strategy, must do paper trading for as long as they don't feel good.

Dear mycall,
Thanks for sharing your one of strategy in open forum.....Please guide through with live example of one trade for better understanding....mainly spot the strikes ...hope today is tuesday so you will plan a trade today

 

[arunkarthik]

Conservative Bank Nifty Option Strategy - 1

This strategy is proving to be the best one in terms of risk and reward so far for us. Till we are using this strategy (since this January) our position was challenged only once... that is last week... well it was my fault as we took position right on the S/R level. Currently we use this strategy most of the time for our own trades. My target profit is about 12-15pts per wk. Even if the trader forgets or unable to close/exit his/her trade before expiry the loss is capped. There is no chance of Unlimited Loss.

In this strategy we rip benefit of 2 option greeks (Theta and Vega) that are up for grab every day. Along with these we take important monthly/weekly Support Resistance (S/R) levels for choosing our entry positions. This strategy needs some understanding how these two greeks work.

Theta is a measure of the rate of decline in the value of an option due to the passage of time. It can also be referred to as the 'time decay' on the value of an option, which the option loses as time moves closer to the maturity of the option. The closer the expiry is Theta value of option will erode faster.

Vega is the measurement of an option's sensitivity to changes in the volatility of the underlying asset. Vega represents the amount that an option contract's price changes in reaction to a 1% change in the implied volatility of the underlying asset. During high volatility Vega makes option price rise faster and the moment Bank Nifty starts to stabilize the option price drops.

S/R Levels: Traditionally 25000, 25500, 26000, 26500 are support resistance levels for Bank Nifty or every 500 interval of these strikes. These are natural S/R levels. Apart from these there are indicator based Support and Resistance levels. We try to find the S/R levels from the Bank Nifty spot level while entering. If we don't get any clear indicator based S/R level we consider traditional levels.

Strategy: We use Credit Spread strategy. Credit Spread is formed by shorting a greater value (lower strike call option or higher strike put option) and buying a lower value (higher strike call option or lower strike put option). It is called 'credit' spread because received amount (for selling) is bigger than paid amount (for buying).

Trade Entry

We start looking for taking position on Tuesday onward upto Thursday morning. For taking entry we wait for some volatility in BankNifty a 200-300-400 pts fast move and once this move happens we try to find strikes (beyond S/R level) towards the trend where at least 12-15 pts as credit shows up. The shorting strike should be at least 1 or 2 strikes beyond the S/R level with. The far the better.

Trade Exit

We Exit from the trade whenever our desired profit is reached or wait for expiry.

Trade Management

Simple management: Exit from the position when Banknifty touches our buy strike.

NOTE: We modify this trade during holding or expiry day to enhance profit. There are multiple modifications can be applied to increase profit. Novice traders if following this strategy, must do paper trading for as long as they don't feel good.

Dear mycall,
Thanks for sharing your one of strategy in open forum.....Please guide through with live example of one trade for better understanding....mainly spot the strikes ...hope today is tuesday so you will plan a trade today

“hope today is tuesday” - Today *IS* Tuesday.

On a lighter note to start the day.



Cheers
AK

 

[mycall]

Hi @VJAY @arunkarthik ... I basically against the idea of putting live trades in forums and follow it bit by bit... primary reason behind is there are many novice traders who tends to follow these directly and get into trouble as these guys have no clue what to do when under stress... because all the 'in flight' managements are not updated 'live'... believe me... I personally am a victim of the same... in my initial years I used to follow people's trades and got hit for different reasons... some blames are on me also... as I was not psychologically or educationally sound enough to carry on the trades on my own...

My buddy in research forced me a few years back to start a website and put my trades to twitter or facebook live to just build a record... after much of his parsuation I do have an website where I try to post my daily trades EOD and a few months back started posting live trades on the site's facebook page... but the truth is that I am not able to put ALL my trades in facebook or update my site regularly... I am not a good (you can say most worst) record keeping guy...

Regarding my strategy... I don't know whether I will be able to put trades here live or not... but for your information I can tell you what I am looking for today... there is no pressure to take it today... it is open till Thursday... if and when opportunity present itself... no hurry at all for me...

Trade is taken only on volatility (to capture high Vega) and on opportunity... for this I have to wait... as per current chart... immediate S/R levels are 26800, 26950-27000, 27200 upside... downside 26500, 26200, 26000, 25800... I am comfortable on any strike beyond 27200... downside beyond 26000... so if market present any opportunity of my target points beyond this level... I will be ready to jump the gun today...

I have to do some other work now... more when I get some free time...

 

[VJAY]

Hi @VJAY @arunkarthik ... I basically against the idea of putting live trades in forums and follow it bit by bit... primary reason behind is there are many novice traders who tends to follow these directly and get into trouble as these guys have no clue what to do when under stress... because all the 'in flight' managements are not updated 'live'... believe me... I personally am a victim of the same... in my initial years I used to follow people's trades and got hit for different reasons... some blames are on me also... as I was not psychologically or educationally sound enough to carry on the trades on my own...

My buddy in research forced me a few years back to start a website and put my trades to twitter or facebook live to just build a record... after much of his parsuation I do have an website where I try to post my daily trades EOD and a few months back started posting live trades on the site's facebook page... but the truth is that I am not able to put ALL my trades in facebook or update my site regularly... I am not a good (you can say most worst) record keeping guy...

Regarding my strategy... I don't know whether I will be able to put trades here live or not... but for your information I can tell you what I am looking for today... there is no pressure to take it today... it is open till Thursday... if and when opportunity present itself... no hurry at all for me...

Trade is taken only on volatility (to capture high Vega) and on opportunity... for this I have to wait... as per current chart... immediate S/R levels are 26800, 26950-27000, 27200 upside... downside 26500, 26200, 26000, 25800... I am comfortable on any strike beyond 27200... downside beyond 26000... so if market present any opportunity of my target points beyond this level... I will be ready to jump the gun today...

I have to do some other work now... more when I get some free time...

Dear mycall,
I not meant to post live in market hours ....I know and experienced it how stressfull it is....I meant whenever time permits after your entry...like amutham posts....

 

[arunkarthik]

Hi @VJAY @arunkarthik ... I basically against the idea of putting live trades in forums and follow it bit by bit... primary reason behind is there are many novice traders who tends to follow these directly and get into trouble as these guys have no clue what to do when under stress... because all the 'in flight' managements are not updated 'live'... believe me... I personally am a victim of the same... in my initial years I used to follow people's trades and got hit for different reasons... some blames are on me also... as I was not psychologically or educationally sound enough to carry on the trades on my own...

My buddy in research forced me a few years back to start a website and put my trades to twitter or facebook live to just build a record... after much of his parsuation I do have an website where I try to post my daily trades EOD and a few months back started posting live trades on the site's facebook page... but the truth is that I am not able to put ALL my trades in facebook or update my site regularly... I am not a good (you can say most worst) record keeping guy...

Regarding my strategy... I don't know whether I will be able to put trades here live or not... but for your information I can tell you what I am looking for today... there is no pressure to take it today... it is open till Thursday... if and when opportunity present itself... no hurry at all for me...

Trade is taken only on volatility (to capture high Vega) and on opportunity... for this I have to wait... as per current chart... immediate S/R levels are 26800, 26950-27000, 27200 upside... downside 26500, 26200, 26000, 25800... I am comfortable on any strike beyond 27200... downside beyond 26000... so if market present any opportunity of my target points beyond this level... I will be ready to jump the gun today...

I have to do some other work now... more when I get some free time...

Hi

I wasn’t asking for it. I just made a correction to his statement.


Cheers
AK

 

[mycall]

Very Very rarely this kind of gaps sustain...

This is one of my core observations which I take benefit of for taking option positions.

 

[govindheg]

about delta enhancement... I generally do this in weekends and every time I have some hunch or some events happening during off hours (weekdays)... because BN is a very sensitive item and it gives 100-200-300 pts move within first 15mins... in such cases having some extra deltas give greater security and maneuverability to the position... if there is no major movement those extra options will not loose much... exit after 9.30

Time of taking this position is between 3.20-3.25. There is a reason for this particular timing. Friends... can you guess? I am not going to give it easily. This is an important bit of information for all option traders... specially who want to buy options.

Let me attempt.
At the fag end of the day, the levels reflect last minute cover operation related stress and might be a few pips lower for buying?

 

[mycall]

Well... I took Credit Spread @ 27200... credit point of 10.60