Time I retweeted this 😃

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)
— Subhadip Nandy (@SubhadipNandy16) September 20, 2018

More from Subhadip Nandy

Subhadip Nandy
@SubhadipNandy

This friend had trouble making money in options though he was directionally right. Let us see how a basic understanding of greeks would have helped him, This thread will be about two attributes of option pricing, extrinsic value and theta

Sir, today #niftybank was continue making new high, but 31700 CE was struggling to go up. I bought at 140, some how managed to sell it at 200. I m ok, in identifying directional edge but options behave differently.
— Vikash Shrivastava\U0001f1ee\U0001f1f3 (@VikashS28) May 27, 2019

An option has two parts, intrinsic and extrinsic value. Think of a pack of Lay's potato chips. When you buy and open the pack, what you find is some chips and a lot of air. Intrinsic value is the chips, extrinsic value is air

https://t.co/8ZPv4ZnCiL

https://t.co/icWmqSLENW

https://t.co/vHA6azEmbQ

Subhadip Nandy
@SubhadipNandy16

Two year back thread on MFI, someone liked this so came up in notifications . Rather than running around 100s of indicators, I have made this my go to indicator under any circumstances and have been using this for years

What do you think/use as the most robust leading indicator if following technical analysis ? Please answer with reason , I will provide my answer after 2 hours
( At Delhi airport , bored as hell )
— Subhadip Nandy (@SubhadipNandy16) August 12, 2019

This thread actually had some great answers , one can learn a lot about the thought processes of different traders from the answers. Please go thru them

Subhadip Nandy
@SubhadipNandy16

The most common problem faced by day-traders and it's easy solution which is extremely difficult to implement.
A thread.
( uses concepts I have discussed many times before in separate threads)

Problem : I have a good system, I understand charts and/or price action, but I simply can't make money. I hold my losses too long or ( this is most common) I get out of profitable positions too fast and cannot sit for the whole move

At many firms at NASDAQ, day-traders are seen as elite sportspersons playing in a difficult taxing game. That's why, they have regular sessions with sports psychologists. They are advised to follow the basic routine of sportspersons.
Train ---- Play tournaments --- Rest

The cycle repeats

We retail day-traders here neither rest nor train.

Rest = taking time off markets
Train = trading in markets in training mode

Understanding REST is easy, simply take time off markets and spend time with family or do something you love

Subhadip Nandy
@SubhadipNandy16

The BNF OI puzzle, what I think happened. This is post mortem analysis 😀

COi was going up like crazy since early March, positions were being created in far month ( go thru my previous tweets)

OI = net shorts = net longs. So informed traders were taking a huge position expecting a parabolic move ( we did not know whether up or down). As of now, my guess is that the whole position was a long position. Someone had the info of the rate cut

You can see that the positions were cut hugely on 1st April. What happened on 1st April ?

This happened 👇👇

If the rollback did not happen ( due to whatever reason), BNF would have gapped up by 1000-1500 points and the shorts would have been killed, and longs would have been laughing all the way to the bank. See the cut on 1st April

But since the rollback did happen, what we now had were trapped longs. that's why we are seeing any upmove getting sold as longs get rid of their positions. COI now is down to normal levels as you can see

Subhadip Nandy
@SubhadipNandy16

This is actually an interesting question and a correct observation. Many people before you also have made this observation, so I am going to explain this the best I can

Ek baat to hai dada, u like mandi over teji.. Don't u... I mean u play both sides bt still... Im ryt \U0001f911\U0001f911
— VaibhavSharma (@vaibhav2631) September 23, 2022

I am trading since badla days. There being long meant you had to pay badla / interest and being short meant you received badla. Similar to an options buyer having theta burn and an options seller being theta positive. So the bias among pros were being short bit

Now, as of now I am an options buyer. All my strategies are geared towards options buying, so I have a theta burn continuosly. I do use strategies to cover that a bit, but still the burn is there

Now, let's consider how an options buyer makes money. His enemy is theta, vega can be friend or enemy ( coming to this in next tweet) , Delta is whether his view is right or wrong

Now say I am bullish on BNF and I buy calls and I am directionally correct . As BNF goes up, generally IV will decrease. This leads to a double whammy.
1. Vega hurts me
2. Theta decay increases.
So, the position does give money, but slowly

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