Trading in Future based in Options price..

#1
Hi Experts,

Is it a good idea to trade in Futures based on Options price in two different months. For eg:

CNXBAN CE 12000 June is at Rs 13 now.
CNXBAN CE 12000 July is at Rs 130 now.

Doesn't it imply that people expect CNXBAN to go up by July expiry. So, will it be safe to buy CNXBAN July Future now at Rs 11,400 and wait?

Above was just an example with CNXBAN. Same can be applied to NIFTY or even stocks.

Please give your valuable suggestion.

Thanks,
Vikas
 

rh6996

Well-Known Member
#2
Hi Experts,

Is it a good idea to trade in Futures based on Options price in two different months. For eg:

CNXBAN CE 12000 June is at Rs 13 now.
CNXBAN CE 12000 July is at Rs 130 now.

Doesn't it imply that people expect CNXBAN to go up by July expiry. So, will it be safe to buy CNXBAN July Future now at Rs 11,400 and wait?

Above was just an example with CNXBAN. Same can be applied to NIFTY or even stocks.

Please give your valuable suggestion.

Thanks,
Vikas
I am no expert, but replying based on common sense !
Dont think, Options is a simple Maths! There are a lot of factors in the price you see for July ! Time value the foremost and volatility too governs here !

120 300
You have mentioned the closing rates of 20th June at 13 and 130.... seemingly the July expiry is 10X
Now just see the previous day's closing rates (19th June 2013)
June expiry closed at 120 and July expiry at 300 ! :D
Know the very basics only about Options hence cannot comment in detail. :p
 
#3
Thanks for the reply.

I too am a beginner in derivatives world (2 months or so)..

I think you are right. I just compared the PE 11,000 premiums and they show same trend. So, this doesn't seem to be a reliable way.

One way I'm now thinking is to compare CE & PE premiums at strike price almost equidistant from CMP. ie, if CMP is 12000, look at premium of CE 12500 and PE 11500 for same month. Can this be taken as an indication of trend?

Waiting for experts to offer any comments..
 
#4
its not an indicator of trend but that of sentiment


the market sentiment if bullish CE will be priced higher, if sentiment is bearish then PE are priced higher


sentiment is mostly based on recent past, it does not foretell the future, in-fact the turns/reversals happen when the sentiments are extreme


July is expensive compared to June as it has more time-value, it happens with all the series, more time to expiry more price.

Besides Time value. price also includes volatility, do study them properly, before putting ur money in options

Happy :)
 

ashu1234

Well-Known Member
#5
Directional trading on the based on premium comparison is not possible. Sometimes market do quote more premium for a particular call/put which may/may not indicate directional bias coz most of the time huge premium is quoted just to trap buyers and sellers profit from this overvaluation most of the time. Study option greeks to get into more details. We have discussed same things in options thread, so if you go through them you'll find more into.
The only way to exploit these inefficiencies is to draw suitable option strategies which in our indian market are a bit expensive(in the sense investment required is more.)
 
#6
Hai

There is saying and i keep reminding to me every day, You can also remind you this every day as option profits are very tempting gains of 100% and 200% etc.

ONLY FOOLS BUY OPTIONS WISE TRADERS SELL OPTIONS.

:rofl:

for selling options you need margin. so many people like me tend to buy options till the fingers are burned. Also learn to trade futures positional and not intraday which will be better for you.Happy trading.
 
#7
Hi,

Yes, I too am interested only in positional Futures and Options.

But, being a beginner, I prefer to buy CE & PE rather than write. I do not wish to take a strategy where the maximum loss is unknown.

Thanks,
Vikas
 

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