Options and their price action analysis.
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A small write up on how the OPTION PRICES BEHAVES AT SUPPORT & RESISTANCE pic.twitter.com/eBlXAZU4Ma
— Bijay (@Bijay_reborn) July 17, 2021
More from Subhadip Nandy
IV - A thread
In financial mathematics, implied volatility of an option contract is
that value of the volatility of the underlying instrument which, when
input in an option pricing model ) will return a theoretical value equal to the current market price of the option (1/n)
Implied volatility, a forward-looking and subjective measure, differs
from historical volatility because the latter is calculated from known
past returns of a security. .
https://t.co/iC5wVf7kvj (2/n)
To understand where Implied Volatility stands in terms of the underlying, implied volatility rank is used to understand its implied volatility from a one year high and low IV.
https://t.co/NFPOidRRcH
https://t.co/qNqinEqaKY
(3/n)
Options traders are always looking at the IV and IVR/IVP. For option
buyers, a low IV environment is best to initiate positions as the
subsequent rise in IV actually helps their positions . Even if the IV
remains flat, the position is not hurt by volatility (4/n)
Option sellers on the other hand are looking for high IV scenarios, where
the subsequent fall in IV ( known a vol crush , most often seen after
earnings/events) helps their positions. Here also, if the IV does not
rise, it does not hurt a seller's positions (5/n)
In financial mathematics, implied volatility of an option contract is
that value of the volatility of the underlying instrument which, when
input in an option pricing model ) will return a theoretical value equal to the current market price of the option (1/n)
Implied volatility, a forward-looking and subjective measure, differs
from historical volatility because the latter is calculated from known
past returns of a security. .
https://t.co/iC5wVf7kvj (2/n)
To understand where Implied Volatility stands in terms of the underlying, implied volatility rank is used to understand its implied volatility from a one year high and low IV.
https://t.co/NFPOidRRcH
https://t.co/qNqinEqaKY
(3/n)
Options traders are always looking at the IV and IVR/IVP. For option
buyers, a low IV environment is best to initiate positions as the
subsequent rise in IV actually helps their positions . Even if the IV
remains flat, the position is not hurt by volatility (4/n)
Option sellers on the other hand are looking for high IV scenarios, where
the subsequent fall in IV ( known a vol crush , most often seen after
earnings/events) helps their positions. Here also, if the IV does not
rise, it does not hurt a seller's positions (5/n)
Ok here is the explanation. Grab a cup of coffee and read on. If you have not read/noticed this, you will see intraday options movement in a new light.
Say we have two options, one 50 delta ATM options and another 30 delta OTM option. Normally for a 100 point move, the ATM option will move 50 points and the OTM option will move 30 points. But in a high volatile environment, the OTM option will also move nearly 50 points
To understand why this happens, first understand why an ATM option is 50 delta. An ATM option has the probability of 50% of expiring as ITM. The price just has to close a rupee above the strike for the CE to be ITM and vice versa for PEs
Now think of a highly volatile day like today. If someone is asked where the BNF will close for the day or expiry, no one can answer. BNF can close freakin anywhere, That makes every option of an equal probability of being ITM. So all options have a 50% probability of being ITM
Hence, when a huge volatile move starts, all OTM options behave like ATM options. This phenomenon was first observed in the Black Monday crash of 1987 at Wall Street, which also gave rise to the volatility skew/smirk
In a high IV environment or when the market is very volatile
— Subhadip Nandy (@SubhadipNandy16) January 21, 2022
" OTM options will behave like ATM options", one will get almost the same delta movement
Say we have two options, one 50 delta ATM options and another 30 delta OTM option. Normally for a 100 point move, the ATM option will move 50 points and the OTM option will move 30 points. But in a high volatile environment, the OTM option will also move nearly 50 points
To understand why this happens, first understand why an ATM option is 50 delta. An ATM option has the probability of 50% of expiring as ITM. The price just has to close a rupee above the strike for the CE to be ITM and vice versa for PEs
Now think of a highly volatile day like today. If someone is asked where the BNF will close for the day or expiry, no one can answer. BNF can close freakin anywhere, That makes every option of an equal probability of being ITM. So all options have a 50% probability of being ITM
Hence, when a huge volatile move starts, all OTM options behave like ATM options. This phenomenon was first observed in the Black Monday crash of 1987 at Wall Street, which also gave rise to the volatility skew/smirk
Rule 4 : If buying a naked option, always ensure that implied volatility is low. This can be understood from the level of IV vis a vis historical IV levels. Use IVR or IVP etc.
For a naked option to make money, it's better if IV rises or at least stays flat.
This is a thread I wrote on IV, IVR etc
For a naked option to make money, it's better if IV rises or at least stays flat.
Rule 3 : DO NOT run or trade everything that moves. Focus on a few stocks and master them. When a move comes, make the max out of that move.
— Subhadip Nandy (@SubhadipNandy16) October 14, 2021
Example : in this crazy mkt, I did not even trade TataMotors this week. Stayed focussed on ITC and it gave good returns https://t.co/41wkugZg1I
This is a thread I wrote on IV, IVR etc
IV - A thread
— Subhadip Nandy (@SubhadipNandy16) September 20, 2018
In financial mathematics, implied volatility of an option contract is
that value of the volatility of the underlying instrument which, when
input in an option pricing model ) will return a theoretical value equal to the current market price of the option (1/n)
More from Optionslearnings
Let me apply @Bijay_reborn 's strategies in options for some days and then share them.
2 Strategies I liked:
1. Plot ATM week CE/PE charts with VWAP & OI Change. Buy when prices move past VWAP while OI starts to move down.
2. Plot ATM Mth CE/ PE with AVWAP. If above, buy wk CE/PE
2 Strategies I liked:
1. Plot ATM week CE/PE charts with VWAP & OI Change. Buy when prices move past VWAP while OI starts to move down.
2. Plot ATM Mth CE/ PE with AVWAP. If above, buy wk CE/PE
master can you give few key points in english. Saw the entire video with subtitles but did not understand.
— bala (@BalaThink) March 13, 2022
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MDZS is laden with buddhist references. As a South Asian person, and history buff, it is so interesting to see how Buddhism, which originated from India, migrated, flourished & changed in the context of China. Here's some research (🙏🏼 @starkjeon for CN insight + citations)
1. LWJ’s sword Bichen ‘is likely an abbreviation for the term 躲避红尘 (duǒ bì hóng chén), which can be translated as such: 躲避: shunning or hiding away from 红尘 (worldly affairs; which is a buddhist teaching.) (https://t.co/zF65W3roJe) (abbrev. TWX)
2. Sandu (三 毒), Jiang Cheng’s sword, refers to the three poisons (triviṣa) in Buddhism; desire (kāma-taṇhā), delusion (bhava-taṇhā) and hatred (vibhava-taṇhā).
These 3 poisons represent the roots of craving (tanha) and are the cause of Dukkha (suffering, pain) and thus result in rebirth.
Interesting that MXTX used this name for one of the characters who suffers, arguably, the worst of these three emotions.
3. The Qian kun purse “乾坤袋 (qián kūn dài) – can be called “Heaven and Earth” Pouch. In Buddhism, Maitreya (मैत्रेय) owns this to store items. It was believed that there was a mythical space inside the bag that could absorb the world.” (TWX)
1. LWJ’s sword Bichen ‘is likely an abbreviation for the term 躲避红尘 (duǒ bì hóng chén), which can be translated as such: 躲避: shunning or hiding away from 红尘 (worldly affairs; which is a buddhist teaching.) (https://t.co/zF65W3roJe) (abbrev. TWX)
2. Sandu (三 毒), Jiang Cheng’s sword, refers to the three poisons (triviṣa) in Buddhism; desire (kāma-taṇhā), delusion (bhava-taṇhā) and hatred (vibhava-taṇhā).
These 3 poisons represent the roots of craving (tanha) and are the cause of Dukkha (suffering, pain) and thus result in rebirth.
Interesting that MXTX used this name for one of the characters who suffers, arguably, the worst of these three emotions.
3. The Qian kun purse “乾坤袋 (qián kūn dài) – can be called “Heaven and Earth” Pouch. In Buddhism, Maitreya (मैत्रेय) owns this to store items. It was believed that there was a mythical space inside the bag that could absorb the world.” (TWX)