The Giant thread of options

[beginner_av]

Very interesting and well said.

That makes volatility breakouts the best breakouts to trade - right?

Regards,
Kalyan.

Works great for me...provided you know in advance that if it does not move in x days/hrs...you are going to get out of it...no matter what.

 

[subratabera]

May I request all members to post real examples of their trades. This will be far more educative to new option traders...

 

[beginner_av]

I thought you pay $1000 to buy stuff that shows real example of trades (mostly successful trades out of the entire lot)

 

[subratabera]

Let me first make $2000 by following those examples...

 

[kkseal]

Let me first make $2000 by following those examples...

Well said Subrata.

 

[kkseal]

Works great for me...provided you know in advance that if it does not move in x days/hrs...you are going to get out of it...no matter what.

Thanks BAV.

Would like to know the time thresholds you normally follow with Options (that is if you don't mind revealing the same) in hrs., days. (You can leave out intraday trades as far as i am concerened. In fact the prime reason for my exploration of Options is to get a way & mean of positional trading during down swings/trends).

I would also suggest that in your future posts you may please discuss the pitfalls of Options trading in general & in the context of the Indian markets in particular. Like i'm more interested in stock options than index o.(for the outperformance factor) but here liquidity might be a problem. From what i know the Indian context has many limitations & peculiarities which can be learned only from someone who has experience trading Options in Indian markets.

Regards,
Kalyan.

 

[GRORICH]

Hi Ramdas,
dont worry...when limit is reached you can ALWAYS square off existing positions. You cannot initiate new positions. The limit is reached only when a certain no of contracts are created. Unlike stocks where there are a certain no of company shares floating in the market, options (and futures) are intangible assets (options are also wasting...but more on it later)..they are created when one buyer and a seller enter into a contract...both of them anticipating a future price for the underlying instrument. Obviously the buyer anticipates a higher price...and seller a lower price. Every such new buyer AND seller adds to a contract. But suppose you already hold a buy contract with some unknown seller (hypothecally say say m). now a new buyer n comes to you and you sell your contract to him. actually you have transferred your ownership to n...who now holds the buy contract with m the seller. No new contract is created here. In cas of limit wide position being reached...the people holding the buy and sell contracts can trade with each other and reverse the positions...thereby reducing the number of contracts (since no new contracts can be formed). So you can always square off your position.

New + New = 1 New contract
Existing + New = No New contract (just transfer of ownership)
Existing + Existing = 1 contract reduced

Hello Beginner,

Many many thanks for starting such a wonderful thread. Only today I stumbled upon this thread and it is simple and worth reading and adopting.
Please keep it up.
Mohan

 

[beginner_av]

Thanks BAV.

Would like to know the time thresholds you normally follow with Options (that is if you don't mind revealing the same) in hrs., days. (You can leave out intraday trades as far as i am concerened. In fact the prime reason for my exploration of Options is to get a way & mean of positional trading during down swings/trends).

I would also suggest that in your future posts you may please discuss the pitfalls of Options trading in general & in the context of the Indian markets in particular. Like i'm more interested in stock options than index o.(for the outperformance factor) but here liquidity might be a problem. From what i know the Indian context has many limitations & peculiarities which can be learned only from someone who has experience trading Options in Indian markets.

Regards,
Kalyan.

sorry to disappoint you...but this is something that only u can answer with your own research....other than simple excel (which I greatly value now), if u want to follow the rocket science authors, i can only point to cycles using MESA (I have never used), FFT (needs long history) and detrended MAs.


Biggest limitation is liquidity and wild card pricing....so very difficult to use volatility systems on stocks...when u think that high volatility has disappeared, what actually happens is that quotes disappear!!! WHen the tone is set for the day by some fool, say buying at an absurd price in one moment, others will not budge from around that price through most of the day(may be thinking that its the correct price). Such problems are hardly there in nifty futures.

 

[kkseal]

Thanks for the info BAV.

Seems like i better stick to index options.

MESA is one s/w i'd like to have when i'm ready for it.

And do keep posting on this thread whenever you have the time.

Regards,
Kalyan.

 

[beginner_av]

i was reading somewhere about how to take profits...let profits run etc...etc. well truisms and sweeping statements are not for everyone in the markets. according to me the greatest fallacy is in the statement that you will never make it taking small profits and wait for the big ones (many books/authors say that). the decision depends entirely on what your system is all about and what instruments you trade. take for example a call/put writing system...as soon as it moves in your favor, take profits. Why? because after sometime only time value will be left, blocking your margin, and reducing only marginally day by day. u can use your money somewhere better. worst, the underlying volatility can change and your written P or C may become more expensive.
another sweeping statement in the market is that its a zero sum game...if i play with you and win, you will have to lose. not always in options trading. can you give any examples?