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)

My previous b'day which fell on expiry day was in 2010. On that day Nifty straddle opened at 45. Day range of nifty was around 30pts :)

(High 5415, Low 5380)

At that time:

•Didn't know the word Straddle though i used to trade them regularly
•Greeks existence wasn't known

•Adjustments felt like a superpower
•Everyday theta decay was a birth right
•Any strategy thought off felt like a personal invention
•Listening to people warning about unlimited loss in option selling was normal
•Making unlimited gain in long straddle seemed a possibility

•Volumes & Oi were closely tracked
•Overnight positions without hedge was a normal routine

All the above points have been changed over the years. But the underlying market psychology & following the price action still remains the same.

Thank you all for the warm wishes 🙏

@javia_savan You answered it yourself 🙂
Adjustment cost is way too high for bnf. Sometimes bnf does exceed nifty in vol crush, but nifty overall is more consistent.

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.

A THREAD

Topic: Why triple straddle has no real benefit.

A triple straddle is essentially an ATM Straddle & one or two step away straddle on either side. The position is almost neutral strategy just like any other neutral straddle or strangle.

1/

We can also view the position as an ATM straddle, a strangle & inverted strangle.

For example

Nifty: 14700

Triple straddle: 14600,14700,14800

Another view:

14700 straddle
14800-14600: strangle
14600-14800: Inverted strangle

2/

So the real question is what is the advantage of an inverted strangle over it's otm counterpart?

The answer is none.

They both have same premiums/theta. Only that slippages will be high in inverted strangle when we do the required adjustments plus liquidity issue.

3/

So isn't it better that instead of a triple straddle, we can just do ATM Straddle & 2* OTM strangle.

So in the above eg. the position will be

14700 ATM straddle
2* 14800-14600 otm strangle.

Same premium received, similar range just that there's no nuisance of ITM options.

4/

The question arises:

Why trade in an ATM straddle & 2* OTM Strangles? Why over-complicate?

Options are in itself a complicated instrument. Wouldn't it be better to stick to one straddle or a strangle & adjust accordingly?

Lesser the strikes, more there will be clarity.

5/

𝐑𝐮𝐥𝐞𝐬 𝐨𝐟 𝐈𝐧𝐯𝐞𝐬𝐭𝐢𝐧𝐠 𝐓𝐡𝐫𝐞𝐚𝐝
The entire thread summarizes some important rules with respect to investing. Inspired by legendary traders,these will not only help you to grow wealth,but also make a smart investor. Hope you would like the thread & shower some love

Rule 1: Bulls, Bears Make Money, Pigs Get Slaughtered so chose your category wisely
Rule 2: It's OK to Pay the Taxes,Dont just wait for a 10% LTCG always. Sometimes you know it won't pay you
Rule 3: Don't Buy All at Once,Have patience market will give enough opportunities

Rule 4: Buy Damaged Stocks, Not Damaged Companies. Understand the diff b/w undervalued stocks and no value stocks. Everything cheap is not bargain,it could be trap.
Rule 5: Diversify to Control Risk,make sure you don't put everything into one stock,one sector or one asset class.

Rule 6: Do Your Stock Homework. You spend 5 hours to buy a cream on Amazon but research for 1 hr based on buying a stock on twitter! Well,do your homework.

Rule 7: No One Made a Dime by Panicking .Invest 2-10% and leave rest. If it falls,pain will be low,if moves,no FOMO haunt

Rule 8: Buy Best-of-Breed Companies,This doesnt mean you have to invest in the most expensive companies,all it means is you need to buy co.s with good earnings,promoters and sustainability
Rule 9: Defend Some Stocks, Not All
Rule 10: Bad Buys Won't Become Takeovers,STOP hoping

Thread: Parabolic SAR Indicator

Parabolic SAR (PSAR) indicator was developed by J. Welles Wilder.

#PSAR #Indicators #Definedge

The calculation of this indicator is a bit complex, but the concept is extremely useful. I will try to simplify it and explain the logic. I will briefly explain the concept, calculation and reading.

Let us think about creating an indicator that shows the trend.

Using the indicator, we can identify & ride the trend using the trailing stop-loss method.

For trailing the stop in uptrend, indicator needs to be placed below the candle. Similarly, it should be placed above the candle for trailing in a downtrend. We will plot it using ‘dots’.

So, the indicator & stop-loss will be rising in uptrend & falling in downtrend.

Let us define the trend as:

If Low of the candle > Stop-loss level in bull market = Trend remains bullish.

If High of the candle < Stop-loss level in bear market = Trend is bearish

Imagine you are driving a car on highway; you would like to accelerate if the road is clear. You will slow down if the road is bumpy.

Crypto Day-Trading Secret Strategy.

SIMPLE. HIGH PROFIT. NO NONSENSE.

One of the best strategies for Scalping crypto.

Share it to help all beginners.

(A THREAD)🚀🚀

We will use three basic indicators.

1. Pivot Points
2. Stoch RSI
3. VWAP

Note- This strategy will have a MUCH higher probability of success if basic Price action, volume and Candlestick pattern is kept in mind.

USE THE STRATEGY:

I will introduce the tools and then explain the strategy.

I Will talk about the calculations to arrive at the indicators separately.

IMPORTANT- Don't use the indicators alone.
Eg. Stoch RSI has less than 26% hit rate so you can't use it alone to trade.

Tool 1- Pivot Points:

They are reversal points based the historical prices.
Go to the indicators tab and type 'Pivot point standard'

The settings to be used have been disclosed in the pic below.

Note- You can choose your own settings but I have disclosed the ones I use.

This is what they will Look like.

Ignore All notations and just remember.
ALL the lines are Support or Resistance lines
(Lines of Interest)

It doesn't matter if it's been denoted as P,R or S.

We will learn how to use them below, practically.

Knowledge sharing initiative Book 3: "Zurich Axioms" by Max Gunther

The book crystallizes how to think about taking investment bets (position sizing), and how to reduce risks in investing & speculation. It focuses on teaching a balance between rewards & risks.

(1/n)

Here are the key takeaways from the book:

1. Take sizeable bets in life: Taking small bets will give you a good night's sleep as you have very little to lose, but the important point is "it won't ever make you rich".

(2/n)

2. Taking size-able risk is necessary to get rich but make sure you don't go bankrupt taking that risk.

3. Don't diversify too much as gains & losses will nullify each other.

(3/n)

4. Be less greedy to make money - Book some profits when you see a sudden huge increase in wealth - fear of regret will stop you from booking profits but don't be greedy as consistent streaks of lucks are rare in life.

(4/n)

5. Cut losses when you go wrong don't start praying that your losses will recover rather act quickly take some loss and sell out.

(5/n)