Hi tnsn2345
(t25 from next time .. and I hope u will not mind as typing full id will be ....)
Can u give some strategies wid Options ... like I've know about the normal straddle, strangle, butterfly etc etc BUT something which you may have developed/heard/experimented etc ..
Dear Murtaza,
You may address me by whatever pleases and is convenient it you
....
Most of the Options strategy are mentioned in books, no need to get into complex set ups, but what is not mentioned in details in the books even with simple strategies, is the Greeks, which are very important for Options strategies.
In Options, you should always have
simple setups which are easier to understand and unwind. So practice with simple ones which are given in the books. But a few words if you still want me to tell you what I do when I set up an Options trade...
1) Get the direction right (obviously)
2) Get the speed right (important if the set up has adverse time decay impact)
3) Get the distance right (preferably)
4) Get the strike prices right (very very important to get this thing right, for this you will need to take greeks into account)
5) Get the equation of the set up right (so at all times you know your net greeks of the set up)
6) Have a plan to manage your set up (in favourable and unfavourable circumstances)
For all of the above, you will basically need to have a good Options analysis software, which can give you all the information of the set up at one glance.
Secondly a good charting software which would give you graphic representation of your set up, this would help you in the same was as what a chart of a stock or index does in basic trading.
Thirdly and preferably you should have independent accounts for Options trading and your other trading portfolios, the reason being, a) Options prices (in absolute terms) are very volatile hence if you cannot resist watching your set up now and then, you will be tempted to make changes (adds, reductions, going unhedged, over hedging etc) if you keep on looking at Option prices frequently b) this also affects your performance with other trading portfolios. Hence keep multiple accounts and with different brokers.
Before setting up the strategy, also plan for course correction (very important) and also how and what will you unwind if the direction is happening in your favour. This is essentially nothing but managing your set up, this would call for adding, reducing, going unhedged, over hedging, changing strike prices etc as the time passes and under different circumstances.
Options strategies are very rarely used for intraday kind of setups (unless it is the last week or so to expiry, where intraday setups can also be planned). Option strategies should be for periods of atleast 3 / 4 days, to a week or even larger periods. Hence a proper knowledge of margin requirements is a must (a good Options software should help to track this). Once you are successful with simpler set ups, you can the get into more complex setups involving different months Options.
Overall, it may look complex to trade Options strategies over conventional directional stock / futures trading (long / short) where you just need to get the direction right, but if you sincerely create a system to help you track all of the above mentioned points and if you have patience to allow your set up unfold, you can very easily make living out of Options trading alone. If you have been exposed to Structured Products offered by leading private wealth / financial institutions in India and abroad, they are all primarily built on Options
To conclude,
1) Trade a simple Options strategy, which you can understand. You do not want to prove anything to the world, prove it to yourself. All basic bookish strategies are good enough for all of us in our entire life time, let us not reinvent the wheel (unless you are a hedge fund manager or want to impress a girl
, which you still can more easily do by buying her what she loves from the profits generated by trading simple strategies)
2) There is always a Options strategy for any kind of market, only payoffs differ.
3) The Options strategies setups are not static, they have to be managed, until they are unwound.
4) Trading Options strategies does not mean that you have only Options positions, many set up use Futures positions too. So a combination of both Futures and Options positions still constitute trading in Options setups.
5) Without Options software you should not trade Options set ups.
6) For trading Options strategies, you need patience.
Regards,