BC OPTIONSLEARNINGS
Saved by @SAnngeri

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.
So why do we consider it as resistance?

Why do we look at things from an option seller's perspective?
4: It is generally said that option sellers have deep pockets and they will do anything to protect their position.

And also most of the option sellers are positional hence considering things from their perspective can work .

But there's a catch!
5: Before that I'll explain the different tools/ways used to analyse oi

- Total Oi.
I've explained it already in the above example. 16200pe,16000pe on the put side have highest Oi
And 16500ce and the highest TOTAL OI on the call side. Hence we can expect market to trade between this range.
- Change in Oi

Change in oi represents the total change in Oi "TODAY" or present day/right now.

For example 16300pe has the highest addition on change in oi.

Hence we can expect 16300pe to be a good support since option sellers are building their postions.
- Intraday unwinding:

Taking the above example, lets say if market starts to trade below 16300, then the change in Oi figure of 69k at 16300pe will start to drop.

This indicates that 16300pe writers are giving up and this is a bearish sign.
- Positional unwinding:

If the change in Oi figure, starts to turn negative , then it means that the positional option writers are giving up which is a stronger sign.
For example: The change in oi at 16200ce is negative(-4.9k) which clearly indicates that 16200 call writers have given up indicating bullishness in the market.
6: What should you consider?

Out of these 4 tools what should you consider?

So there is no black and white answer you have to take reference from these tools and form your own view. You have to look at everything.
7: DO I BELIEVE OI STILL WORKS?

NO!

In 2018, Total Oi used to work very well.
In2019, Change in Oi was working very well.

But in 2020, Oi completely stopped working.
8: From 2020, the strikes with the highest oi started to breach.

Earlier it was very rare to see the strikes with highest oi get breached. Market used to perfectly respect it. But that's not the case now.
9: For eg: In Banknifty the oi gets built on every 500pts interval.

If Banknifty is at 35800, then 36000ce will have highest oi and 35000pe will have highest oi.

If Banknifty goes above 36000 , then 36000ce oi will start to drop
and 36000pe will start to build up. Hence the edge is lost.

Oi will keep on building and unwinding at every 500 pts strike price Which does make it useful in 2022.
10: I have also made a Youtube video on OI. check it out. https://t.co/L2eWujgUx0
11: Hope you enjoyed reading this and I hope I've changed your view about Oi.

For more learnings join our telegram channel : https://t.co/uNIrqq5aDP

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HOW TO DO SHORT STRANGLES TO MAKE 1% WEEKLY INCOME CONSISTENTLY?

I've made majority of my money by short strangles and I'll explain one very easy short strangle strategy which you guys can follow.

I'll also explain the adjustments and risk management.

1: What days it should be done?

It has to be done on Monday to thursday.

You can skip Fridays as there's negligible decay and big delta moves.

2: Preferred Instrument:

Banknifty will be the preferred instrument, since it's high risk and high reward.

Moreover it has good premiums.

3: Criteria:

It has to be done when Banknifty is inside a range on the 15 min chart.

As we can see here, it was June 6th Monday and Banknifty was in a perfect range, which makes it ideal for short strangles.


4: Positon sizing:

Although we'll hedge our positions but you strictly don't have to use the margin benefit which you will receive.

Ideal qty which be 6 lots on each side on a 10L rs capital and 3 lots on 5L capital
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As I mostly take neutral positions overnight, I've been asked this a lot. So here you go.

1 : Take the right position sizing:

If you have the correct position size then there's nothing to fear from big gaps.

I like to take positions in such a way that I don't lose more than 2-3: incase of a big gap. This provides mental piece.

2: Have a calm mind:

This is of prime importance and somethin where most of the guys have trouble. Constantly panicking is going to do no good. What's going to happen will happen.

Having a calm mind allows you to think and act more clearly.

3: The 3 way rule:
If the markets open a a big gap there are not just going to stay there. Three things can happen.

a) It can go up : In this case you can use the move to recover our money.

b)It can go down : Just like the previous point you can take good advantage of it.

c) It stays there: After a big gap, obviously the IVs will explode. If the market stays then, premiums will be high and it will provide excellent opportunity to play neutral and recover your losses or atleast some part of it.
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Gone are those days where a short strangle used to expire worthless without any adjustments.

Adjustments are a must when your initial view goes wrong which it will.

Listing down all the ways to adjust a short strangle WITH EXAMPLES below.


1: Rolling up/down:

If you've sold a short strangle and one side premium spikes, you can book the profitable side and roll it up to match the premium of the other side.

eg: If you've sold a 60rs call and a 60rs put. If the 60rs call goes to 100. Then book profits in put and sell a 100 pt put.

This is the most basic way of adjustment.

2: Rolling the losing side:

It's very similar to the above adjustment however, we will consider shifting the losing side instead of profitable side.

eg: If you've sold 50pt call and 50pt put. If the 50pt put spikes up and goes to 120. Sometimes, I wouldn't want to sell a 120 pt call.

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This is the most important concept which made me great money in 2022.

This is the skill which is GUARANTEED to make you a better trader


Banknifty moves in 2 phases.

1: Consolidation
2: Trends

An understanding of both of these phases will take your trading to the next level.

Let's start with consolidation phase

It looks like this when Banknifty is stuck inside a range.


This is phase when you shouldn't be taking directional trades.

As market is mostly choppy and is good for mean reversion scalpers.

An option seller can initiate neutral strategies under such an environment.

Trending phase will look something like this

The price action is quick and furious at this time.

As you can see after a consolidation there is a strong breakdown.
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1: Save taxes:

The prime objective was only and only to reduce taxes. There's no other reason to trade from a corporate account.

2: Form a Pvt Ltd company : I've formed up a Pvt Ltd company since that's what I was advised by majority of the people including my CA as opposed to LLP/HUF.

3: Claiming Expenses: This is the most beneficial aspect of a pvt ltd company.

You can literally claim any expenses in the name of the company. Some of them are:

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THREAD: 14 of the best resources/topics for anyone who wants to start option selling as a career. 🧵

Collaborated with @niki_poojary

1. Best Sources of knowledge for a beginner in option selling?

Zerodha Varsity from @Nithin0dha's team & the @tastytrade financial network.

Links:

2. Top YouTube Channel for Options Learning?

Power of Stocks - Subhasish Pani

What you'll learn:
1. How to form a trading plan.
2. How to scale an account with risk-reward in option selling.
3. Technical analysis logics you can use daily.

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3. What are the preconditions to start option Selling:

You should know technical Analysis basics like:
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- Chart Patterns
- Candle Patterns
- Dow Theory (HH, LL)

This will help you start taking high probability trades.

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If you don't learn to manage your risk, making money in trading is going to be an extremely difficult endeavor

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The best spreads trader on Twitter: @Ronak_Unadkat

He trades in Nifty & Bank Nifty via spreads majorly.

In the Jainam Broking Speech, he shared how he trades debit and credit spreads:

Here's a breakdown of his 10 step method: 🧵

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1. Why trade via spreads?

Overnight risk will be always capped
Limited Risk will keep you cool
Hedge our position

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Traders Sell option for 100 and buy 10 rs option.

That is for margin reduction, not a spread.


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If the market opens at the lower circuit or upper circuit, then our loss should be limited.

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In a 4% index move, people lost 10%, so in the case of a circuit, they will lose 50%.

To recover a 50% loss on capital, you need to make 100% returns with the leftover capital to break even.

In these cases, spreads cover your risk.

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#15100 strikes OIs Bullish crossover.... https://t.co/IgXLn1P5F3
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A small 🧵

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• BNF reversed from 32155 (low made on Mar'8)

• One side rally to butcher the CE writers

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• From Mar'8 low till today open ~2800 point rally

• 2800 point rally in just 1.5days

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• Due to election results we decided no to carry any overnight positions

• Selling PE on the back of 2800 point rally would have been disastrous due to unfavorable R/R

• So we were very clear to short only CE's

• But then need to follow the trend

• We decided to short CE at the break of first 5min candle

• By 9.45 it started to reverse


• Spotted M pattern at the resistance and started shorting CE's thereafter i.e. post 12.12 hours
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🧵*Weekly Bank Nifty Analysis for 7th Oct Expiry* 🧵

To form a view, let's have a look at both:
1. Technicals
2. Data

Also, 3 strategies to deploy for:
1. Aggressive Traders
2. Moderate Risk Traders
3. Low-Risk Traders


1. Technicals

Let's start with technicals. We'll look at -
1. Daily charts.
2. Hourly / 60 min charts.
3. 15 min charts.

Formed an indecisive candle on the daily timeframe right at support. Unless we sustain below 36900 for 15 mins, the probability of a bounce is high.


2. 15 min charts.

Above Friday's High on 15 min charts, if we sustain that level for 15 mins can sell strangles.

If we gap down on Monday, only selling calls would be a good idea as the probability of the market going below 36900 would increase.


3. Hourly / 60 min charts.

On hourly charts, wait for a 1 hour close above 37900 levels to again look for Future buy opportunities.

The structure of Lower high and lower low will change to a higher high here.


Option chain data.

Shows a stiff resistance at 38000 levels. There was an addition in put writing at 37000 levels, expecting them to run for cover if 36900 breaks.

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Here is the detailed information of about strategy,

Entry time : 9.30 - 10
Exit : Upto you

Strategy :
Sell weekly ATM CE & PE at almost equal price
For ex : Sell Nifty 17250 CE at 50 and Nifty 17250 PE at 48 so it will become short straddle

Buy monthly ATM or near ATM CE & PE at matching price (5-10 points diff should be fine) as hedge
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Weekly Short straddle + Monthly Long straddle

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• If Nifty moves one side or about to breach BEP then add equal amount of lot. This can balance tested side. For ex: If I bought 17300 CE 4 lot as hedge then add 4 lot so you will have only one side risk . Note: Remember to keep SL at cost price (only for additional lot bought)

Capital requirement:
2.2 L for 4 lot
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Everyone in the country is about to get a harsh lesson on what this really means...

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3. A ten mile square parcel of land (see,
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One of the most important place for snake worship.
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There is an anthill which is opposite the shrine. Bhaktas pour milk on it as part of rituals.


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The Pushya Suddha Shasti is one of the biggest festivals here believed to be appearance day of Subramanya


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Kilogram, kg (mass)
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