Options Thread

How options allows to change and adjust view dynamically.
Let’s understand with a live example.

Example : Nifty is at 11921 and you are bullish on Nifty.

1) Buy Naked 11900 CE(call) at 167

Breakeven : 12068
Max Loss : Rs 12555
Max Profit : Unlimited

One of all time favourite motivational song & I listen to it almost daily😊

Underrated song but a true nasterpiece with amazing lyrics & music👌🏻

https://t.co/Omhz4gyJqI

Let me know if you had heard this song before & how did you find it!

#music #inspiring

Thread
How to manage strangles dynamically incase of a violent move or IV spike ?

1) Yesterday and infact entire last week if you had created strangles you would have experienced that during upmove only call side were increasing but puts weren’t decaying.

#trading #Options

2)In morning I had created a short strangle
200 lots 25000 PE sell at 102
200 lots 27000 CE sell at 161

You can sell from below image that if I had waited in this strangle till day end I would have lost around -4.5 L

So lets see what all adjustments did I do logically.

3)After creating strangles the premiums strarted increasing as puts were not decaying and calls were increasing.
So I had kept 100 lots buy on 26500 CE at 400(day high)
My buy got executed at 400 around 12:15 pm & I exited 25000 PE at 75

4) I had kept more 100 lots buy at 435 (recent high made during upmove till now)

The buy got executed at 12:15 pm
So my current open postions now were

200 lots 26500 buy at average 420
200 lots 27000 CE sell at 161

5) Logic:
As short strangles are basically short vol so if there is a movement on one side with no decay then one can start buying atm calls.
What this does is it converts your strangles into ratio spread and if move continues eventually into a debit spread

How to manage straddles :

1) As bnf open was within yesterday range created a 29000 straddle at around 9:30 am

29000 PE sold at 528 and
29000 CE sold at 453

#trading #OptionsTrading

2) Instead of keeping SL on sold legs. I keep SL on otm options in the system

SL was on 28000 PE at 220 (day high)
SL was on 30000 CE at 165 (day high)

3) At 10:15 am, Bnf started to trend down and 28000 PE was bought at 220 and I immediately bought 30000 CE at 110

4) If you look at the straddle chart, there were lot of intraday spikes and your SL would have been hit if you had kept SL on atm sold legs

5) But after lot of intraday spikes the straddle from 980 closed at 880. A 100 point decay intraday.

But even if both your buy option got triggered you would have made around 15-20 points inspite of such violent moves on both sides.

Trading Mistakes & Lessons Learnt 🧵

1) I always keep my mistakes & lessons learnt in front of my screen while trading.
Bcz we as traders tend to commit the same mistakes everytime.

So seeing your learnt lessons everyday ensures that you avoid them.

#trading #mistakes

2) In 2017, I analysed all my trades and saw that I have majorly lost in stock futures and profits came only via index trading.

I accepted that I am not great at stock trading & been trading index only majorly since then & have never missed a day trading BankNifty

3) I decided to adjust all of my past losses to 1 % of capital to see the effect of capping the downside.

I would have had a gain of more than 230 % if I had capped losses at 1% of cap.

Lesson: Keep losses per trade less than 1% of capital no matter what !

4) While trading index options, I lost sometimes due to IV rise,flash crash, and option freezes.

Lesson: Never take markets lightly & Always keep protective stops in the system (and not in your mind) to keep loss in control in case of blackswan.

5) Being an option seller, I have a tendency to manage my position by rolling up/converting to calendar etc.

So many times I have wasted 1 or 2 weeks just to close a loss making trade at cost😢

Lesson: I do manage now but exit as soon sold options become ITM or 2 x in value.