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If today Nifty moves further 2% from here, will it be UP or DOWN?


  • Total voters
    11
  • Poll closed .

jamit_05

Well-Known Member
#1
This is an attempt to chalk out a directionless approach to earning from Options.

I have worked on a rough template of a method. Will evolve it and make it ready for "full-sized deployment" in due process.

Primary Objective: Keep it very simple and hassle free. Rest will follow. :thumb:


Template:

Entry:​

Buy 100 points OTM options on either side when option prices have "shrunk".

Consider the following:

Setup 1:

On Thurs and Fri prices have not rallied. Then weekend. So we have 4 days of price erosion. Then purchase on Monday after opening volatility has settled, simple.

Setup 2:

Sat, Sun, Mon, Tue and Wed. Five days of price erosion, then buy on Thurs 11 a.m.

The above two setups happen almost every week.

Now the more important part: EXITS

To begin with, we need to first set the defense. This is a little more interesting.

After all the waiting, comes a rally. And at EOD we want to exit.

Logic: After this rally the prices will not sharply increase. Unless, there is a rally back to back, which is much to ask for. In that light, this is the best you could get from this trade. So, take whatever profit or loss. Mostly, it will be near breakeven. However, lets trade and see what assumptions need to be reassessed.

Ty.
 
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jamit_05

Well-Known Member
#2
First Trade:

Bought 4800 PE and 4900 CE. Total Cost. Rs.85. (exp not included).
Lets see what is in store.


PS: Market collapsed. Current Value Rs.97. Gaining 15% in a day is a good enough move. Keeping in mind the ebb and flow of Volatility. It is best to exit now. Take a fresh trade on Monday afternoon.
 
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jamit_05

Well-Known Member
#3
Exits is the place where a methods success or failure gets decided.
In Entry, we try to have a few edges in our favour. In this we enter after some value erosion of the pair.

By month end, even if we are able to get one or two successful (about 15% gain each) then this method becomes a keeper. More so, because we are anticipating the loss will be zero to 15%. Lets see if that is even true. :)

The first trade turned out to be good. It matched expectation. 15% gain. Tension free. :)

Will take the next trade on Thursday most likely. Or unless a situation develops. Will keep the forum posted.

By situation, I mean, if it looks as though the prices are set to move 100 points. This may happen if nifty rallies (up) 50 points or more.

later.
 

jamit_05

Well-Known Member
#4
Just keeping a follow up of the value of 100 OTM spread.

Currently, at spot 4800, the value is around Rs.90;

4900 CE at 34.50
4700 PE at 56.30

A little high, we purchased at 84. But that is not the point. It is, we need a decent fall in this value before we purchase.

June month pair costs.

4900 CE at 100.00
4700 PE at 108.50

A total of 208.50; We may have to purchase this pair due to expiry of the above pair on Thursday, which won't give enough time for profit to show. We need a Friday.
 
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jamit_05

Well-Known Member
#5
Just keeping a follow up of the value of 100 OTM spread.

Currently, at spot 4906

5000 CE at 33.00
4800 PE at 42.20

total = 75.20

June month pair costs.
Currently, at spot 4906

5000 CE at 95.3
4800 PE at 97.5

total = 192.8 ; this has reduced from 208.50. A few more such days and we will take a new position.

Remember, our objective is easy money. No need to guess direction, do analysis. Keep it simple. And if we can consistently make 10 to 20% then we will price this strategy for A million Dollars :) till then the search is on :)


PS: Observed one thing, that the cost was 208.50 on Friday before the move. And even after a jumbo move the cost is still only 214! Goes to show, that being with the ebb and flow of volatility is almost half the profit, the other half is sharp price movement.
 
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jamit_05

Well-Known Member
#6
As in any trading method, we have to set a stop loss in this one too.

Went through several perms and combs... this one fits the bill.

A flat stop of 50% (did it sound like a discount :)

Yes, of whatever I invest in the pair, if the value becomes 50% then I am out. There may be a sharp move soon after (a strong possibility), yet.

That means the stop is 50%. If I set profit as 20% then Risk-Reward is 2.5:1; In that case this method better have a very good strike rate :)
 

jamit_05

Well-Known Member
#8
yes we need a good strike rate and some techincals too...for guessing whethere market is volatile or range bound...isn't it??

Absolute bare minimum though. Something which a 12 yr old can understand.

So far, we are only calculating the cost of the pair. Once we see it going down a few days in a row and nifty has not made strong move, we enter. Simple.

As of now, the pair has lost most of the "heat" due to three days of lull (sat, sun, and Mon). Tomorrow, may be a good day to enter.

Note the drop in the cost of June pair.

Friday: 208.50
Monday: 192.80

Rs.16 down;
 
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jamit_05

Well-Known Member
#9
Just keeping a follow up of the value of 100 OTM spread.

Currently, at spot 4924

5000 CE at 34.35
4800 PE at 33.15

total = 67.50

June month pair costs.

5000 CE at 102.00
4800 PE at 88.60

total = 190.60 ; this has reduced from 208.50 yesterday. A few more such days and we will take a new position.
 

jamit_05

Well-Known Member
#10
Just keeping a follow up of the value of 100 OTM spread.

Currently, at spot 4929

5000 CE at 31.80
4800 PE at 31.50

total = 63.30

June month pair costs.

5000 CE at 99.50
4800 PE at 88.50

total = 188.00 ;

A 10% drop from 208;
If this continues, then on Thursday Morning we will make our move. Quick in Quick Out. Easy money.
 

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