BC OPTIONSLEARNINGS
Saved by @SAnngeri

A THREAD

Topic: HOW TO TRADE IN RISING PREMIUMS SCENARIO

Option sellers specially Straddle sellers feel that rising premiums give them excellent opportunity to make easy money. So what they are seeing is the theta aspect of options & ignoring the delta/gamma/vega forces.

1/

 With rising premiums come high delta moves. There is a reason why premiums are all increasing up in the first place. High uncertainty & fear is what's controlling the markets during such times. So a volatile 200 point move in nifty is always on the cards.

2/
Adjusting during such delta moves involves high slippages. Such costs go in our system & are irrecoverable. So if the ATM straddle is around 400 & after 200 point downmove, the next straddle is at 450 & the loss is not just 50points but compounded much more.

3/
Also there are chances that there is no decay throughout the day. So a straddle seller has to take that heavy risk of carrying it forward & chances of gap openings are high during such times. If converted into Ironfly, then the cost of the wings is too expensive.

4/
Thus cutting down the initial credit significantly.

There will also be very few instances when premiums don't fall till expiry day. So with each delta move the cost of holding a straddle gets accumulated & pressure keeps mounting for the stubborn option sellers.

5/
So what should be done during such times?

Compulsive straddle sellers can keep a close SL & do quick scalping. But such profits don't give you much satisfaction, as speculation element is high in such trades.

6/
Better way is to trade directional. If you have a little sense of market direction, then one can make good use of rising premiums.

There are many option strategies like Ratios, Ladder, even far OTM naked/spread selling which can give good opportunity to take advantage.

7/
The advantage can also be taken without directional knowledge. The bias that the premiums will fall in one direction & rise in another. Example if premiums are rising in a downmove, then Call Ratios or OTM calls can be sold. It's because they will not rise much in an upmove.

8/
All said, sometimes premiums do fall heavily during such times. But it's better to not try to sell them speculating that the top is made. It's better to wait it out & let the premiums settle a little. Then one can enter cautiously & with decent gains go agressive again.

9/
So basic crux is to find an objective system to follow the market. There are lot of forces at play in option selling, apart from THETA decay.

If one can find a way to forsee how volatility or direction is going to play out, then it's a different ball game altogether.

10/
Idea is to not get caught up in wild moves when premiums are unstable. If we do get caught, then we are not in a good vantage point to take advantage of inflated premiums.

Patience is the key & being ready to let go of some premium decay. Don't get caught up in FOMO.

11/
A good example is today (18/06/21). Premiums were giving repititive spikes since morning, with a big spike at 11am. The spikes were only in the downmove which is important observation.

In this scenario, we could have sold inflated OTM calls, which were not falling.

12/
We can also use strategies like credit spreads or skewed call ratios. So we are trading direction here with the premise that premiums will fall in the upmove.

When market bounced back calls also fell at first. If market starts rising, we can start neutralizing our position.

13/
We can do it in two ways:

• If IVs are falling then sell otm puts
• If IVs are increasing then buy higher delta calls to make Call ratios

The above example is when we want to trade directional & take advantage of rising premiums.

14/
For non-directional best was to not enter till 11:30am. We can't really know where the top will be made. So let the dust settle & premiums to start falling. Then we can slowly build our position & ride the falling IVs.

I traded in both the ways in different counters.

15/
The risk was IV spike in upmove for my directional position, for which i would have bought higher delta calls to protect.

Risk for my non-directional straddle was an IV spike at EOD, for which i exited early (much regret), as profit received was high in short time.

16/

More from Sarang Sood

Sarang Sood
Sarang Sood
@SarangSood
THREAD ON DELTA (The most important GREEK)

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)

Delta measures the rate of change of options price based on the directional movement of the underlying.

So this means we can know in advance (theoretically) how much an option will move with the underlying & so we can prepare our strategies accordingly. (2/n)

Value of delta varies between 0 & 1 for calls and -1 & 0 for puts. This figure tells how much an option price will change, when the underlying moves 1 point. So example a delta of .2 of call indicates that for every 1 point change in the underlying, the price will move .2 (3/n)

For option writers who want to trade in neutral strategies like straddle, strangle, ratios, calendar etc, delta can be very helpful. So be it any complex strategy, knowing the NET DELTA can give you an idea of how your strategy will perform in different scenarios. (4/n)

Net delta is just the sum of the deltas of all the bull options (call+ & put-) minus the bear options (call- & put+).

So if we can track this, we will always be in the know of how much exposed our position is. It makes it easier then to adjust our position. (5/n)
TRADING
Sarang Sood
Sarang Sood
@SarangSood
Q: Sir why call option premiums are higher the put?

A: It usually happens when there is big difference between spot & future.

Example

BN Spot: 35110
BN Future: 35300
BN Synthetic Future: 35150

It depends on our perception of what is ATM & accordingly match the calls & puts.
OPTIONSLEARNINGS
Advertisement
Sarang Sood
Sarang Sood
@SarangSood
AN ESSENTIAL THREAD ON OPTION ADJUSTMENTS

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)

1) We need a way to measure the imbalance created by a delta move in an option strategy. We can measure through premiums, distance from index or delta of greeks (i personally use delta). So basically whatever way of measure we use, both sides should be equal in it. (2/5)

2) Adjustment can either be done by selling extra quantity of profitable side, buying the quantity of losing side or shifting both the sides. I personally shift the sides because with extra quantities our Gamma gets imbalanced & the risk increases if market reverses. (3/5)

3) While the first 2pts are objective, when to make an adjustment is totally subjective. It can be fine tuned through experience. It also depends upon what strategy u are using. For a short strangle the adjustment required is faster than a ratio spread or an IC. (4/5)

Straddle/strangle require faster adjustments because they are more vulnerable to delta or IV spike. Any other strategies like ratio spreads, ironfly, butterfly have some bought option, which can negate the spikes for a while. So we need a defined system as to WHEN to adjust.(5/n)
ALL
Sarang Sood
Sarang Sood
@SarangSood
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.
OPTIONS
Sarang Sood
Sarang Sood
@SarangSood
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.
OPTIONSLEARNINGS

More from Optionslearnings

Sarang Sood
Sarang Sood
@SarangSood
Q: Sir why call option premiums are higher the put?

A: It usually happens when there is big difference between spot & future.

Example

BN Spot: 35110
BN Future: 35300
BN Synthetic Future: 35150

It depends on our perception of what is ATM & accordingly match the calls & puts.
OPTIONSLEARNINGS
Aditya Todmal
Aditya Todmal
@AdityaTodmal
MASTER THREAD on Short Strangles.

Curated the best tweets from the best traders who are exceptional at managing strangles.

• Positional Strangles
• Intraday Strangles
• Position Sizing
• How to do Adjustments
• Plenty of Examples
• When to avoid
• Exit Criteria

How to sell Strangles in weekly expiry as explained by boss himself. @Mitesh_Engr

• When to sell
• How to do Adjustments
• Exit


Beautiful explanation on positional option selling by @Mitesh_Engr
Sir on how to sell low premium strangles yourself without paying anyone. This is a free mini course in


1st Live example of managing a strangle by Mitesh Sir. @Mitesh_Engr

• Sold Strangles 20% cap used
• Added 20% cap more when in profit
• Booked profitable leg and rolled up
• Kept rolling up profitable leg
• Booked loss in calls
• Sold only


2nd example by @Mitesh_Engr Sir on converting a directional trade into strangles. Option Sellers can use this for consistent profit.

• Identified a reversal and sold puts

• Puts decayed a lot

• When achieved 2% profit through puts then sold
OPTIONSLEARNINGS , ALL , OPTIONS STRATEGY
Advertisement
Kapil Dhama \U0001f1ee\U0001f1f3
Kapil Dhama 🇮🇳...
@kapildhama
For weekend learning.

1. Reverse buying (Iron Fly Adjustments) https://t.co/1HCmF6ej9e

2. Straddle setup and adjustments
https://t.co/MFvRjemrHw

3. In depth option chain analysis
https://t.co/W9iiCiBJaw

4. Expiry calendar setup
OPTIONSLEARNINGS , OPTIONSLEARNING
Benzinga
Benzinga
@Benzinga
How To Use VWAP In Options Trading With Zach Hurwitz | Christopher Uhl - 10 Minute Stock Trader | Benzinga
OPTIONSLEARNINGS
Aditya Trivedi
Aditya Trivedi
@itsAdityaT
WHAT IS OPEN INTEREST, HOW TO ANALYZE IT AND DOES IT WORK?

In the thread I'll explain everything about Open interest and also all the tools used to analyze it and my personal opinion.

THIS IS THE ONLY THREAD YOU'LL EVER NEED ON OPEN INTEREST.

1: What is Oi?

Support if Mr A buys 10 lots of 17000ce in Nifty and Mr B sells 10 lots of call in Nifty then the total Oi on 17000 strike price will be 10.

So Oi is basically the number of outstanding contracts which are not squared off.

2: What is Oi used for?

Oi is only used to determine support and resistance on a particular strike price.

For eg: Nifty 16000pe has the highest Oi and 16200pe has to highest Oi.

So 16000 and 16200 level can be considered as good supports.

In the same way, 16500 ce has highest Oi and it can be considered as a resistance.


3: But why?

Highest Oi at 16500ce indicates that highest number of people have sold it BUT it also means that highest number of people have Bought it!

If 16500 acts as resistance, the option will go to 0 and all the buyers will lose money.
OPTIONSLEARNINGS , TRADING INDICATORS

You May Also Like

History Of Rajputana
History Of Rajputana
@KshatriyaItihas
**Thread on Bravery of Sikhs**
(I am forced to do this due to continuous hounding of Sikh Extremists since yesterday)

Rani Jindan Kaur, wife of Maharaja Ranjit Singh had illegitimate relations with Lal Singh (PM of Ranjit Singh). Along with Lal Singh, she attacked Jammu, burnt - https://t.co/EfjAq59AyI


Hindu villages of Jasrota, caused rebellion in Jammu, attacked Kishtwar.

Ancestors of Raja Ranjit Singh, The Sansi Tribe used to give daughters as concubines to Jahangir.


The Ludhiana Political Agency (Later NW Fronties Prov) was formed by less than 4000 British soldiers who advanced from Delhi and reached Ludhiana, receiving submissions of all sikh chiefs along the way. The submission of the troops of Raja of Lahore (Ranjit Singh) at Ambala.

Dabistan a contemporary book on Sikh History tells us that Guru Hargobind broke Naina devi Idol Same source describes Guru Hargobind serving a eunuch
YarKhan. (ref was proudly shared by a sikh on twitter)
Gobind Singh followed Bahadur Shah to Deccan to fight for him.


In Zafarnama, Guru Gobind Singh states that the reason he was in conflict with the Hill Rajas was that while they were worshiping idols, while he was an idol-breaker.

And idiot Hindus place him along Maharana, Prithviraj and Shivaji as saviours of Dharma.
HISTORY
Cookie Cyboid
Cookie Cyboid
@CookieCyboid
“Why are Tumblr and Facebook cracking down on sex so much? And why is Facebook in so over zealous about it? It’s all Apples fault!” Etc etc

I can explain all. It is largely the fault of a set of US laws called SESTA and FOSTA.
TECH
Advertisement
Jaya_Upadhyaya
Jaya_Upadhyaya
@Jayalko1
SRI VARAHA NARSIMHA, SIMHACHALAM, VIZAG (AP)
#bharatmandir

One of the 32 Narsimha Kshetram of Andhra. It has a unique form of Narsimha, appearing like a shivlingam

It is said that Narsimha’s fierce nature is soothed by worshipping him with Varaha, considered a peaceful deity


The shrine is believed to have been constructed by Prahlada. With time, it crumbled.
In Treta yuga, King Pururava was passing from here in his vimana. The vimana was attracted to this place by a mystic power.
When the place was unearthed, the deity was found.
@GunduHuDuGa


Pururava’s wife, Urvashi, had a dream that the deity should remain covered in sandalwood paste for the whole year except on Akshaya Tritiya.
This practice has continued till date.
The mukhya mandap here, has a pillar kappam stambham believed to possess curative powers.


Chandanotsava/ Chandan Yatra is the most important festival celebrated on Akshaya Tritiya. The sandalwood paste is removed from the moolavar deity and nijarupa darshan (original form of deity) for twelve hours of the day are done by devotees.
ALL
Jaya_Upadhyaya
Jaya_Upadhyaya
@Jayalko1
MEENAKSHI AMMAN, MADURAI (TN)
#bharatmandir #navratri2021

A paadal Petra sthalam where Shiva took the form of Sundareswarar (the handsome one) and married Devi Parvati (Meenakshi).
Devi is also known by the name Angayarkanni (mother with the beautiful fish eyes).
@GunduHuDuGa


Devi Meenakshi emerged from yagna fire as a 3 year old girl when Pandyan King Malayadwaja and Kanchanamalai were praying for a child.
It is said that Devi was born with three breasts and there was a prophesy that her superfluous breast would melt away when she met her husband.


Devi ruled over Madurai and captured Indralok. She went on to capture Kailasha. When she saw Shiva, her 3rd breast disappeared and she realised that Shiva would be her consort.
The divine marriage was attended by all Devas and Sri Vishnu (as her brother) gave her hand to Shiva.


It is said that Indra found a swayambhu lingam at Kadamba Vanam. He placed it in Madurai where the kshetram stands. Here, Shiva is seen on the vehicle of Indra.
The Golden Lotus Tank is said to be the place where a golden lotus blossomed for the puja performed by Indra.


The Meenakshi Thirukalyanam festival is celebrated in the Chithirai month to mark the divine marriage of Meenakshi Amman. The festival includes a procession where Meenakshi and Sundareshwara travel in a chariot and Sri Vishnu gives away his sister in marriage to Shiva.
ALL
Karol296
Karol296
@Karol296
Wracając do sedna dzisiejszego zamieszania z artykułem autosportu / motorsportu. Kubica mówi w nim, że podejmie swoją decyzję w ciągu kilku dni. Rozważa opcję z Williamsem lub posadę kierowcy symulatora w Ferrari. Więc za kilka dni dowiemy się co go czeka za rok. #F1PL

Autosport / motorsport zmienił nagłówek swoje tekstu, bo pierwotnie sugerował on że Kubica jest numerem jeden na liście Williamsa na tytuł mówiący tylko tym, że nadal jest na liście kandydatów. Zrobili to po interwencji zespołu. Same wypowiedzi Kubicy z wywiadu się nie zmieniły.

Trudno powiedzieć czy autor się pośpieszył i wyciągnął inne wnioski niż powinien, a może wie coś więcej, ale nie mógł tego otwarcie napisać. Słowa Kubicy brzmią jednak jednoznacznie: decyzję podejmie w ciągu kilku dni.
SPORT