FINDING EDGE IN OPTIONS
— Sarang Sood (@SarangSood) January 9, 2021
24/08/15: Nifty gap down 250 points & another 250 after that. Previous few months return gone, but since I'm quick to take my losses, was saved from ruin. Before that my only edge in option selling was adjustments & my forever edge of following PA. (1/n)
Hello! Welcome to my profile.
This is Master thread of all the useful tweets (imo) that i have shared in the past. Going through them may provide some knowledge on options, volatility, greeks & trading psychology. Will keep updating in the future.
Thanks for following 🙏
👇👇
AN ESSENTIAL THREAD ON OPTION ADJUSTMENTS
— Sarang Sood (@SarangSood) June 8, 2020
Adjustments can be done in variety of ways & depends totally at the discretion of the trader. To get a clear mind we need to know the following:
1) What to follow,
2) How to make the adjustment,
3) When to make the adjustment. (1/5)
THREAD ON DELTA (The most important GREEK)
— Sarang Sood (@SarangSood) January 2, 2021
Many traders don't indulge in understanding GREEKS because they think they are very complicated.
There are 4 primary greeks:
Delta
Gamma
Theta
Vega
In my experience, understanding DELTA is enough to take benefit of greeks.(1/n)
My trading journey started at the age of 17. Coming from a family of professional traders it was easy to get a headstart & i quickly got accustomed to it. But at that time i didn't have a clue of what I'm getting into. I very well knew how money is made & lost in the markets(1/5)
— Sarang Sood (@SarangSood) August 1, 2020
THREAD ON RATIO SPREADS
— Sarang Sood (@SarangSood) November 29, 2020
Whenever vol is on the rise, my go to strategy is always RS. Apart from Jan, Feb & Jul this year when i traded in straddle, 2020 has all been about RS. It's the flexibility of the strategy to trade in both direction & non-direction which i like.(1/n)
THREAD ON IRONFLY
— Sarang Sood (@SarangSood) December 12, 2020
These days the most preferred strategy for option sellers due to improved margins is IRONFLY. It's essentially a short straddle with long strangle. Long strangle acting as 'WINGS', which help in capping the unlimited risk associated with a short straddle.(1/n)
Friday's specially after the introduction of weeklies have become very unpredictable for option sellers IMO. Usually I'm able to forsee a volatile move & if not then through hindsight analysis I'm able to understand how a spike manifested, which ultimately adds to my system.(1/n)
— Sarang Sood (@SarangSood) January 16, 2021
Many traders feel that trading is a lonely profession, always sitting in isolation facing the computer. Anyone who is serious about trading needs to be prepared to spend lots of time on his own managing trades, improving strategies, developing mindset, controlling stress.(1/5)
— Sarang Sood (@SarangSood) September 12, 2020
Options volatility can rise in different ways. Below are few which i remain mindful of during market hours:
— Sarang Sood (@SarangSood) August 3, 2020
1) Small delta move, rise in IV.
This is not dangerous because you have received the same premium in your position though momentarily MTM is negative. (1/3)
Traders are majority of times trapped in the 'hindsight bias', which is the tendency to believe after learning the outcome, that he could have foreseen it. This is one of the biggest decision traps & it matters because it gets in the way of learning from our experiences.(1/6)
— Sarang Sood (@SarangSood) October 10, 2020
I have been exclusively (obsessively) tracking, objectifying, trading volatility since last 12 yrs. My father during his prime time in the 90s was a directional player because there were no options back then.
— Sarang Sood (@SarangSood) July 8, 2020
Volatility is hidden in the depths of vega & delta moves combined(1/3)
Nifty moves 100pts down and a strangle increases 10pts. Ways how options would react:
— Sarang Sood (@SarangSood) April 28, 2020
1) Cal only falls 2pts, put increases 12pts.
2) Cal falls 6pts, put increases 16pts.
3) Cal increases 1pt, put increases 9pts.
Same result, but all scenarios have different meaning. (1/3)
My father made tremendous returns trading in the mid 90s in the markets. A time came when his broker (a well reputed at that time) started replicating his trades & to such extent that he started punching his trades before my father's orders. (1/4)
— Sarang Sood (@SarangSood) June 6, 2020
It is an ironic habit of humans to run faster when we have lost our way. When we know the way we are going steady on the path. But the moment we get lost, we run. We run thinking that if we cover as much ground as possible we can find the right path to walk on. (1/3)
— Sarang Sood (@SarangSood) July 25, 2020
Majority of times new traders are attracted in this profession by the ROI of pro traders. That's the last thing they should be looking for. Things like risk taken, capital employed, number of profitable years, trading psychology should be taken more into consideration. (1/4)
— Sarang Sood (@SarangSood) September 19, 2020
On option selling vs buying: In 2009 when i was just one year into option trading, i carried a long strangle in big quantity when Manmohan Singh was re-elected & Nifty opened gap up. I booked a huge profit on my position, only to give half of it away in the next 4 months. (1/5)
— Sarang Sood (@SarangSood) May 25, 2020
There's volatility in the delta moves & then there's is volatility in the IV moves. Both are different but equally significant for option traders. While the former is to exhaust the directional traders by hitting their SL, the latter is the same for neutral option sellers.(1/n)
— Sarang Sood (@SarangSood) October 2, 2020
In trading you'll continually find urself coming back to some of the things you previously thought you understood very well. It's a natural process, but something which every trader should be mindful of. Going back to the same things over&over again can hamper the progress.(1/3)
— Sarang Sood (@SarangSood) September 26, 2020
If the OTM strangle is not falling (%age wise) as compared to ATM straddle, then it's a sign of volatility coming ahead. OTMs generally tell the truth in advance.
— Sarang Sood (@SarangSood) December 2, 2020
Writers usually track a straddle or a strangle, but we need to track both to improve our decision making. https://t.co/c5hvEO4Nkq
All the anxiety that is caused due to over-leveraged, highly speculative positions is stored somewhere in our body. You might not remember consciously the fear that SGX nifty created for a wrong overnight position taken, but your nervous system remembers it very well. (1/2)
— Sarang Sood (@SarangSood) November 21, 2020
OTM cals are believed to be harmless, but are used smartly to increase IVs.
— Sarang Sood (@SarangSood) October 27, 2020
Many a times when index falls, OTM cals don't fall reflecting in increase in Vix. When index goes up then they don't increase resulting in fall in Vix.
Such phenomena is common leading upto an event.
CATEGORY OF DAYS FOR OPTION SELLERS
— Sarang Sood (@SarangSood) February 13, 2021
This thread is about how premiums behave in different setups. Though identifying them early takes years of practice, being mindful of what's happening in the present can give us an edge. So we can be better prepared with our strategies.(1/n)
https://t.co/EtQn0epgSM
What are your learnings from yesterday's expiry? Try to be specific.
— Sarang Sood (@SarangSood) March 26, 2021
https://t.co/UB7hQm42xH
A lot is said about achieving simplicity in trading. How we need to keep our strategies simple, with objectively defined entry & exits, position sizing, risk management etc
— Sarang Sood (@SarangSood) April 3, 2021
But if simple things work so well, why does one naturally complicate them in the first place?
1/
CHRONOLOGY OF SUCCESSFUL TRADING
— Sarang Sood (@SarangSood) May 29, 2021
\u2022 Learn basics of trading but no breakthrough for many months
\u2022 Find a good strategy or trading idea
\u2022 Implement that idea with some capital
\u2022 Start adding more capital because of good returns
\u2022 Start making decent returns for few months
1/
Understanding HIGH & LOW VIX
— Sarang Sood (@SarangSood) June 4, 2021
VIX at 16: If you check today's IV behaviour, they were not spiking much even with decent delta move in BNF. The movement was subtle, giving some time to adjust. So someone having good adjustment mechanism can stay in the game longer.
1/
A THREAD ON @SarangSood
— Aditya Todmal (@AdityaTodmal) March 6, 2021
Decoded his way of analysis/logics for everyone to easily understand.
Have covered:
1. Analysis of volatility, how to foresee/signs.
2. Workbook
3. When to sell options
4. Diff category of days
5. How movement of option prices tell us what will happen
More from Sarang Sood
Low VIX doesn't necessarily mean ideal time for option buyers. If premiums aren't falling consistently during the day in low VIX, it usually gives those small delta & IV spikes, just enough to irritate both option buyers & sellers. Same happens when VIX is ultra high.
@SarangSood Sarang bhai according to you what number of vix is ideal for option buyers and what is that for option sellers? And is there any common number which is ideal for both?
— Dhaval bhatt (@Dhavalb55011726) July 14, 2021
Since IRONFLY is the flavour these days, sharing my own thread. It has GREEKS incorporated which automatically reduces wing size & risk.
P.S. No one specifically invented ironfly & it's adjustments. A good trader can figure it out on his own. I've been doing it on & off for yrs.
P.S. No one specifically invented ironfly & it's adjustments. A good trader can figure it out on his own. I've been doing it on & off for yrs.
THREAD ON IRONFLY
— Sarang Sood (@SarangSood) December 12, 2020
These days the most preferred strategy for option sellers due to improved margins is IRONFLY. It's essentially a short straddle with long strangle. Long strangle acting as 'WINGS', which help in capping the unlimited risk associated with a short straddle.(1/n)
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1/ Some initial thoughts on personal moats:
Like company moats, your personal moat should be a competitive advantage that is not only durable—it should also compound over time.
Characteristics of a personal moat below:
2/ Like a company moat, you want to build career capital while you sleep.
As Andrew Chen noted:
3/ You don’t want to build a competitive advantage that is fleeting or that will get commoditized
Things that might get commoditized over time (some longer than
4/ Before the arrival of recorded music, what used to be scarce was the actual music itself — required an in-person artist.
After recorded music, the music itself became abundant and what became scarce was curation, distribution, and self space.
5/ Similarly, in careers, what used to be (more) scarce were things like ideas, money, and exclusive relationships.
In the internet economy, what has become scarce are things like specific knowledge, rare & valuable skills, and great reputations.
Like company moats, your personal moat should be a competitive advantage that is not only durable—it should also compound over time.
Characteristics of a personal moat below:
I'm increasingly interested in the idea of "personal moats" in the context of careers.
— Erik Torenberg (@eriktorenberg) November 22, 2018
Moats should be:
- Hard to learn and hard to do (but perhaps easier for you)
- Skills that are rare and valuable
- Legible
- Compounding over time
- Unique to your own talents & interests https://t.co/bB3k1YcH5b
2/ Like a company moat, you want to build career capital while you sleep.
As Andrew Chen noted:
People talk about \u201cpassive income\u201d a lot but not about \u201cpassive social capital\u201d or \u201cpassive networking\u201d or \u201cpassive knowledge gaining\u201d but that\u2019s what you can architect if you have a thing and it grows over time without intensive constant effort to sustain it
— Andrew Chen (@andrewchen) November 22, 2018
3/ You don’t want to build a competitive advantage that is fleeting or that will get commoditized
Things that might get commoditized over time (some longer than
Things that look like moats but likely aren\u2019t or may fade:
— Erik Torenberg (@eriktorenberg) November 22, 2018
- Proprietary networks
- Being something other than one of the best at any tournament style-game
- Many "awards"
- Twitter followers or general reach without "respect"
- Anything that depends on information asymmetry https://t.co/abjxesVIh9
4/ Before the arrival of recorded music, what used to be scarce was the actual music itself — required an in-person artist.
After recorded music, the music itself became abundant and what became scarce was curation, distribution, and self space.
5/ Similarly, in careers, what used to be (more) scarce were things like ideas, money, and exclusive relationships.
In the internet economy, what has become scarce are things like specific knowledge, rare & valuable skills, and great reputations.