BC OPTIONSLEARNINGS
Saved by @SAnngeri

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.

More from Sarang Sood

Sarang Sood
Sarang Sood
@SarangSood
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 🙏

👇👇

https://t.co/PKoiCFSrXJ


https://t.co/Qd3VpXcBlN


https://t.co/5AtqFPYFgA


https://t.co/imMobLg7fv
OPTION MASTER THREAD , ALL
Sarang Sood
Sarang Sood
@SarangSood
THREAD ON IRONFLY

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)

You can also view the position as a combination of Cal & Put credit spreads, if that makes it more easy for you.

There are 3 important things to understand while trading this strategy:

1) Initial size of the Wings
2) Risk Management
3) Adjustments

(2/n)

Since we are selling an ATM straddle, the 1st question is how far our wings should be? Ideally i sell .50 delta straddle & buy .20 or .10 OTM strangle, depending on my view on volatility. So the distance of wings depends on the IV setup. Higher the IVs, greater the distance.(3/n)

If you don't understand greeks, then ideally with 30 days to expiry (dte), wings should be around 300pts either side. If your trading in weekly then it should be not more than 200pts. Higher the premiums, higher the distance as we have more cushion of theta. (4/n)

It is important to understand that we need to reduce the distance of wings with time so as to manage our RISK in gap openings or sudden volatile move. So for eg. if you started with 300pt wings with 30dte, the wings wouldn't give the same protection when there is 7dte. (5/n)
FOR LATER READ , ALL
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Sarang Sood
Sarang Sood
@SarangSood
Understanding HIGH & LOW VIX

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/

VIX at 20: The same delta move will be more fierce, coupled with rise in premiums. When premiums rise with movement, then the adjustment cost increases exponentially. The premiums can fall back at EOD, but the damage is done if caught in the spike.

2/

After talking to few traders, their backtest result was in favor of high VIX of 2020, rather than 2017-19. The key flaw in the backtest were the adjustments which are not easy to calculate. Combination of high theta & fixed SL during high VIX, the IV crush is cashed at EOD.

3/

Neutral option sellers who don't adjust & have fixed SL on a static straddle will not be able to benefit highly in low VIX. The straddle which moves away from ATM will increase no matter what. But if we keep on rolling our strikes, then we get good realisation of theta.

4/

I have made majority of my profits in option selling when VIX was at 13-15, mostly just relying on my adjustments. Since 2020 with high VIX, adjustments stopped working because of increase in the frequency of delta + IV spike combos & so had to shift to directional trading.

5/
STOCKSLEARNINGS , ALL , LOW VIX
Sarang Sood
Sarang Sood
@SarangSood
FINDING EDGE IN OPTIONS

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)

I soon realised that theta decay with sound adjustments is not an edge, which i earlier thought was & which gave me good returns over the years. After that i went deeper in understanding volatility behaviour, how/where it manifests & all the discrepancies in option chain. (2/n)

With finding edge in logistics i mean how to keep the greeks in check, SL in place & optimum ways of adjustments with minimum slippages. So the main aim here is to write theta without following vol behaviour & having any actual knowledge of what's going on in the markets. (3/n)

A dedicated trader can learn all this in few years & it is something which is 'obvious' to become successful. But majority can't reach this level, as this also requires consistent hustle in live markets. All the seminar/webinar business teaches you till this level only.(4/n)

If you get passed this level though, the real work starts, when you have to find your real edge. This can't be taught in a webinar. It needs serious introspection of your trading skills, psychology & strategies in use, which ultimately allow you to book excellent profits. (5/n)
TRADING
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

More from Optionslearnings

itrade(DJ)
itrade(DJ)
@ITRADE191
For your understanding https://t.co/U89feuPEhC
OPTIONSLEARNINGS , OPTIONS
Maahi_hooda
Maahi_hooda
@Mahipal30361452
Thanks @ITRADE191 bro. I'm following your setup from last few months.
PDL
PDH
VWAP
PDVWAP
PIVOTS
Its help me a lot .
I compiled your last tweets as pdf, hope it's help others also. I learn a lot of from this.

If you find it useful please retweet and follow
OPTIONSLEARNINGS
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HMK alias MANOJ
HMK alias MANOJ
@scorpiomanojFRM
#Learning Those who are interested in options... Here is an old tweet on gamma scalping ...
OPTIONSLEARNINGS
HMK alias MANOJ
HMK alias MANOJ
@scorpiomanojFRM
#Knowledge
#Options
Ever wondered y gamma is the enemy of straddle / strangle sellers and what it means?

Presume readers are aware of option Greeks meaning...

To understand , first ...

Relationship between delta, gamma, theta and option premium.
....

....

Theta + (int Rate x Underlying price x Delta) + ( 0.5 x variance of underlying x Underlying price x Underlying Price x Gamma ) = Int rate x Option premium.

Strangle and straddles are delta neutral setup;For a delta neutral setup, the second term becomes zero; Hence,
...

....

Theta +
(0.5 x variance of UL x UL price x Underlying price x Gamma)
= Int rate x option premium

Straddle and strangles have typically zero delta at initiation; they also have positive theta, meaning they gain over time assuming other components of option r constant ..

...
In a delta neutral portfolio, if theta is largely +ve , Gamma will be -ve by a large extent to satisfy the above relation mathematically, which means that as expiry nears the strangles and straddles will have large -ve gamma; This is wat u see traders telling gamma effect.
OPTIONSLEARNINGS
itrade(DJ)
itrade(DJ)
@ITRADE191
Some helpful things for my new follower😇


https://t.co/iwpVQrRwEt


https://t.co/v2VZkuZWx2
OPTIONSLEARNINGS

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5. Copy/paste again on Medium.
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