Trade Nifty Options Using Open Interest

[rkkarnani]

The Position Shld have been close at 3.05 isn't it......

Yes! , if we go strictly by the SL level. I though prefer to use some filter and more so when the SL is at 50/100 etc etc. Many a times the momentum breaches such SL level by a small margine only and reverts back as it happened in this case. Did a low of 6246 and closed at 6256 !
Ankur can best explain it.

 

[DanPickUp]

Dan, Ankur did not seem to have added any position in Nifty Futures in his strategy!!! OR am I missing something.

Maybe I did miss interpret this and not you: StopLoss: 6250, 6450 level. So I thought he is placing the stop loss with the future at 6450 and at 6250. This would mean we got filled at those levels when future touches it. But that would not be the way to use such kind of stop loss. Guess, I did miss interpret the word: Level. If it would be the way I thought he meant it, then it would be a high risk strategy. Thanks to spot on it. Take care / DanPickUp

 

[pakatil]

Please note: Stop loss mentioned above are for Nifty future price and not for Nifty Spot price.

One more advice to Investors:
Stop Loss need to followed in same passion while trading Options as you have passion for your Children to give them everything in life as per your capability levels.

Advice meant for Investors, not we Traders.......right.... ???

 

[ankurpcl]

Dear All,
First I would like to thank you for throwing questions at me and asking questions which once I answer let every reader who read this thread understand the beauty of Options Play in days to come:

I will try to answer questions 1 by 1:

1. The strategies that I will apply based on Open Interest are carry and hold type strategies, so people who are working in their jobs can just looking at the nifty futures quotes can refresh the strategy and take decisions accordingly. So you need not to worry much if Nifty tanks in day like today by more than 150 points in just 2 hours. If any strategy can work in volatile market like this can be considered as best strategy to work around if you in end come out with good returns or with minor losses.

2. Other thing is Nifty futures long or short I never considered as part of my strategy till now and in fact there is no need to mix futures with options as it makes calculations more tougher and makes you confuse in end. I am here to teach people simple strategies which make their life easier and by months expiry they will have 10% to 15% have in their pockets as monthly payouts.

I am not giving any lucrative offers that you will richer in 1 night, as that will be miracle and not even right method to earn money in longer period.

3. Stoploss gets hit once Nifty touches 6250 levels. Its rightly said but this is where people majorly do mistakes. When you trade options you have sufficient time to plan your trade once stoploss gets hits if your strategies are simpler and difficult to crack. After hitting stoploss you need to watch for 2 things:
a) Is the stoploss hit false or true?
What if nifty after touching 6250 levels gives closing of 6300+ levels. Though your strategy still holds good but since SL gets hit so you end up with losses which is not right way of applying SLs especially in options which involves hedging for both fall and rise using Sell positions.

Conclusion: Never Apply stoplosses while trading options on to your trade terminal screens unless its verified yes its now time to book losses.

Booking loss doesn't mean you are bad trader, it only means this time your strategy not workable as market always unpredictable for everyone.

b) On SL hit spend some time in understanding Open Interest which will tell exact picture and let you know what needs to be done next.

Todays analysis of OI have confirmed 6200 levels not going to break so easily for tomorrow and if its get break same will be confirmed first at Open Interest build up and then it actually reflect to small traders like us.

It means your losses are very limited for tomorrow, now next question will i be profitable as my last night premium of 205 captured after selling 6350 put and call option turns to 220 levels in today's closing. Carry forward loss of 50*15= 750 Rs.

On looking at 6300 Put Open Interest in last few trading sessions it seems Options writers which are big FIIs and which generally ride our market will come under losses if Nifty future starts trading below 6250 levels during intial 1.5 hrs of trading tomorrow. So as per Open Interest theory irrespective of where market opens for tomorrow it will regain levels of 6250+ soon which may be as quick as 15 minutes after actual trading starts at 09:15 am.

Today's fall was majorly due to profit booking by local traders and many FII's not participate in today's trading due to holiday in US Markets.


4. Regarding holding position is concerned I hold both 6350 put and 6350 call option on sell side.

I will update more on this once Market opens for tomorrow. Till then try to understand whatever written. You will have lot more to learn from today's sudden fall in nifty by 150 points.

There are lot of hidden surprises which will unfold once markets open for tomorrow.

Good Night!

 

[DanPickUp]

@Ankurpcl

Thanks for the time you toke to spot on that specific topic with your own words and to give some more insights into your knowledge. :thumb: Take care and have a nice evening / DanPickUp

 

[Taiki]

Whats the Open Interest?
Open Interest tells number of contracts which are opened but not yet closed.

Considering Options, OI is most important to watch for as big institutional investors generally take view of market direction after calculating build up of OI positions.

Lets understand same using example:

1. In Jan series of 2014 max OI Build up seen at levels of 6300 Puts and 6500 Calls. what does this signify??

It tells us that Nifty major support will come at levels of 6220 as premium of 6300 put available is near 80 and resistance will come at levels of 6545 as 45 premium available with 6500 Call.

2. How to plan the trade based on trend which is emerging?
If you are an options trader you can use multiple strategies to maximize your returns, but i will share my trading recommendation free of cost which viewers can initially watch and later they can start following if they find
recommendations given are profitable over 1 month period.

Thanks
Ankur

Hello Ankur bro,

Thanks for such nice initiative. :thumb:

I have little doubt. As per today's OI build up, now max OI are at 6200 PE and 6500 CE. So does it mean the the support area has now shifted to 6120 from earlir support area of 6220 ?? Because 6200 PE is trading with a premium of 80.

Next what is the reason behind choosing 6350 strike price for initiating the trade and stop loss for 6250 - 6450 NIFTY future price ??

Regards
Taiki

 

[ankurpcl]

Dear Taiki,
Let the market opens. Every trader who wants to work in Nifty options should remember that Open Interest change very rapidly once future price cross any level ending with 00 like 6100,6200,6300.

If you checked the OI when Price wa quoting at 6395 yesterday around 11:00 am we have 40,00,000 + OI in 6300 put options and by close it reduces to 35,00,000 + levels so any writing which has done gets square off by big investors. Does this mean big investors have booked losses. Answer is NO, as they are the only who make the market to fall, so its never possible to bring them in losses.

For small traders like you and me, Our target should be to learn techniques which they apply while trading. And when you explore more Open Interest theory in Options more your questions will be answered automatically.

Just remember one thing, no one can predict the market, even bigger FII'S too. But they have art of remain profitable irrespective of where market goes, and for learning same I have created this thread.

To earn independently with out any help and plan trades accordingly what FII'S have in their minds.

Thanks
Ankur

 

[ananths]

Dear Ankur,

Good initiative. Tracking OI is very important for trading options. Healthraj has done lot of work on this and he tracks max pain which basically uses OI data. Columbus also tracks this on daily basis in his thread.

I also trade in options and track OI to identify support and resistance levels.

Your timely update on OI changes would help option traders.

 

[ankurpcl]

Option Update at 09:38 AM:

Open Interest start decreasing at 6300 Put and gets increasing at 6300 Call as market makes gap down opening, ratio currently in range 1:1

As long as 6300 Put not reduces net OI below 20,00,000, Nifty tends to remain above 6200 thus creating chances of nifty reversal after touching levels say 6210.

But if Nifty starts trading below 6200 any time today and 6300 Put reduces net OI below 20,00,000 then time to square off Put writing at 6350 done. Keep holding 6350 Call writing till the time your losses not get recovered completely.

As of now nifty seems to be trading in between 6200 and 6300 for today.

 

[ankurpcl]

Options Update at 10:24 AM
6300 Put option witnessing continuous decrease in OI since last 1 hour which may prompt sudden fall in nifty any time. Although chances are just 5% out of 100 as per OI Analysis as 6200 Put OI Keeps increasing same time.

But to avoid any loss due to nifty crash I have put final SL as 200 in 6350 Put Sell Option whatever loss occurred in this position will be covered from 1 more new leg which will create once SL gets hit plus earlier taken position in 6350 Call sell.