Put option writing

[drwriter]

Current outstanding Option trades
NIFTY Sold 6100 PE @57

ICICI Bank Sold 960 PE @ 9.2

21/10/2013 EOD Setup

NIFTY hourly close support at 6176 and then at 6127 -- 6104

Current outstanding Option trades

NIFTY Sold 6100 PE @57
ICICI Bank Sold 960 PE @ 9.2

22/10/2013 EOD Setup

NIFTY hourly close support at 6176 then at 6127 -- 6104
ICICI Bank hourly close support at 1002 and then at 989
It seems there might be one last exhausting push to be made by bulls before any pullback to happen.

 

[drwriter]

NIFTY Hourly chart

 

[drwriter]

ICICI BANK Hourly chart

 

[Mr.G]

Calls are definitely pricey in up trending market as most writers are doing covered calls.As more people write covered calls they will be buying in cash which creates supports for the stock and later they have to dump the stock to make their sold calls lose in value .So new buyers have to come in to absorb the selling of covered call writers which in essence create strong support for the stock. If no covered call writing is happening then a slow selling process will be initiated in the cash market.


But i write puts with a dual intention of getting premium and buying that stock it it falls below my strike and i write puts at strong supports and willing to buy the stock it if falls below my strike. In case of covered calls one need to go only for premium and can write covered calls on every stock which is in uptrend.

I was also playing with the idea of selling puts and calls to buy and sell stock instead of giving simple order. Your thoughts?

 

[drwriter]

I was also playing with the idea of selling puts and calls to buy and sell stock instead of giving simple order. Your thoughts?

If you want to build a portfolio of index stocks which has strong balance sheets with nil/very low debt and great execution capabilities you can follow the approach of writing puts at key support levels on those stocks instead of buying directly in cash.

Writing index puts it is a very good option than individual stocks and selling naked calls is always risk as exuberance can happen quickly than fear.

 

[Mr.G]

If you want to build a portfolio of index stocks which has strong balance sheets with nil/very low debt and great execution capabilities you can follow the approach of writing puts at key support levels on those stocks instead of buying directly in cash.

Writing index puts it is a very good option than individual stocks and selling naked calls is always risk as exuberance can happen quickly than fear.

I am a fundamental investor sir. I know my fundamentals and investing very thoroughly. I was just thinking about selling options to buy and sell my stocks.

 

[drwriter]

I am a fundamental investor sir. I know my fundamentals and investing very thoroughly. I was just thinking about selling options to buy and sell my stocks.

Hi Mr.G,
If you are a fundamental investor i don't know any other better method than writing puts and acquiring good stocks.Make sure you write on index stocks in uptrend or about to start an uptrend but never on down trending/already down stocks even they are good.

 

[ananths]

Hi drwriter,

Initially your idea of writing puts were not very clear..now after reading your posts (Q&A's) it looks very attractive alternate way to enter into stocks at low price. However main hurdle is identifying the stock trend and ensure not to be wrong most of the time.

 

[drwriter]

Hi drwriter,

Initially your idea of writing puts were not very clear..now after reading your posts (Q&A's) it looks very attractive alternate way to enter into stocks at low price. However main hurdle is identifying the stock trend and ensure not to be wrong most of the time.

Hi Ananths,
Identifying stock trend should be easy if you can understand any indicator like RSI (the stock price while crossing 50 level), ADX +DI/-DI( identifying price candle lows and highs during crossovers and sustaining during pull backs).

To ensure not be wrong, which may not be possible all the time you stick to stocks you love to buy without fear or you can focus only on index puts as good premiums always available for rollover.

 

[drwriter]

NIFTY must close below 6167 to go to next support of 6104 or close above 6190 to go up further and ICICI to close below 1011 to go to next support of 997