iCharts Discussions

[Alchemist]

great analysis again by skaz sir ... hats off !

Cheers
SH

[Alchemist]

[SwingTrader]

Alc,

Not sure how long you have traded this strategy live. Never say you have seen all when you trade short options. The volatility during the events you have mentioned was like cool breeze. I am taking about portfolio destroying volatility hurricanes that will almost certainly happen if you trade this strategy long enough.

Take the example of Jan 21st 2008. Market moved 12% that day. On such a day picture you holding from previous day a delta neutral position of ONE LOT LONG BNF FUTURE + 2 LOTS SHORT BNF ATM CALLS. The 10% move will put you in about Rs. 100,000 loss in futures and the options will contribute about Rs. 10,000 profit as they quickly become worthless. Now how may small traders following your trades will be psychologically capable of handling this trade from here? One can argue that we will quickly close out futures and save probably half of the loss etc etc. But most will freeze during such times. Market moved too fast that day. But still suppose the trader swallows this and somehow adjusts the trade, he will be greeted the next day (22nd Jan 2008) with a 11% move. Yes, this is extreme example. But this is what one must be prepared for otherwise that will be the last day you trade this strategy. One must fund the account back and be prepared to go through the brutal rest of 2008 and survive. And then half of 2009 too. From Jan 2008 to Jul 2009 there were 121 days where market moved +/- 5% and these would have been very difficult days.

It doesn't matter how the trade is setup - Long fut with short calls OR short fut with short puts OR short calls with short puts. All of these will go for a toss once a big move happens suddenly. One needs to be strong psychologically and financially to handle these situations and pray that there are traders who will take the other side of your trades (well you need to get out of the wrong short options). During such times one will see that options market will become illiquid.

NOTE: Since 24th Aug 2015 we have had only four days of 5% move on either side (true range), so it has been fun to trade short options. Between Jan 1st 2008 and 24th Aug 2015 there have been around 142 days when market moved +/- 5% (true range). So be prepared for such times if one wants to trade such strategies. A 5% current move on BNF fut will be around Rs. 50,000 and if against the trade, options will only cover about Rs. 10,000 of this move.

I am sure you would have thought about all this when designing this strategy, my only objection is to the "risk free" label when trading such dangerous strategies. One has to psychologically and financially be prepared to handle situations like above example and then trade such strategies. This should be made very clear.

[skaz]

ST nothing against thread or individuals. If it is primerly based on delta.
I can tell you so many dates in last 3 years were market is not moved much but just because of volatility trade will result in to loss and it will give higer losses compare to gain made.
Unless manage really well. Even when it is managed well it will give many losses.If managing delta would have been so easy smart money would automate most worlds exchange and sip wine in some exotic location.

[Redlionviji]

swing trader mentioned Risk period of this strategy"Take the example of Jan 21st 2008. Market moved 12% that day. On such a day picture you holding from previous day a delta neutral position of ONE LOT LONG BNF FUTURE + 2 LOTS SHORT BNF ATM CALLS. The 10% move will put you in about Rs. 100,000 loss in futures and the options will contribute about Rs. 10,000 profit as they quickly become worthless. Now how may small traders following your trades will be psychologically capable of handling this trade from here? One can argue that we will quickly close out futures and save probably half of the loss etc etc. But most will freeze during such times. Market moved too fast that day. But still suppose the trader swallows this and somehow adjusts the trade, he will be greeted the next day (22nd Jan 2008) with a 11% move. Yes, this is extreme example. But this is what one must be prepared for otherwise that will be the last day you trade this strategy. One must fund the account back and be prepared to go through the brutal rest of 2008 and survive. And then half of 2009 too. From Jan 2008 to Jul 2009 there were 121 days where market moved +/- 5% and these would have been very difficult days. "how to u manage this period for position...and how to hedge overnight risk completely? ple explain MR.Alchemist...

[Redlionviji]

Dear SH Sir... Since 24th Aug 2015 we have had only four days of 5% move on either side (true range), so it has been fun to trade short options. Between Jan 1st 2008 and 24th Aug 2015 there have been around 142 days when market moved +/- 5% (true range). So be prepared for such times if one wants to trade such strategies. A 5% current move on BNF fut will be around Rs. 50,000 and if against the trade, options will only cover about Rs. 10,000 of this move. how to mange our position in this period?.. ple Reply.....,,,,,,,,,,,,,,,,

[shyampandit]

If instead of long futures one were to hold long calls instead, would be safer i guess. Although then have to deal with the evaporating theta on the long call.

[Alchemist]

[rrsekhar]

[anika1010]

thanks Skaz/ST for your valuable comments, i would rather stay away from such strategy , Alch sir have developed good strategy but its not my cup of tea.thanks all

[Alchemist]

[harsh_85]

Alci sir, i have been following your strategies since many years and i use ur 3-15 ema strategy for options trading(writing) in stocks since many years...But i must say sir this "delta neutral theta biased" is a game-changer for me...Thanks a lot sirji!!!
Its definitely a "risk-mitigated" strategy for me which gives me enough leg room for margin of error. I use your strategy with a view in mind but gives me a peaceful sleep at night knowing that i am hedged.. please sir dont feel bad for the naysayers as we small traders definitely and religiously follow your trades on regular basis. So kindly please keep on updating the trades and if possible during market hours....

[SwingTrader]

NOTE : It has come to our notice that few users who are posting regular calls in the forums are asking users for phone numbers and email addresses and then enticing them to signup for their tips/calls service for hefty fees. Many users have forwarded us these messages recently. DO NOT FALL TO SUCH TRICKS AND LOSE YOUR HARD EARNED MONEY. None of these would be SEBI registered advisors and are probably running the service illegally.

BE CAREFUL. DO NOT GIVE CONTACT DETAILS VIA FORUM PM OR JOIN WHATSAPP / TELEGRAM GROUPS. THESE ARE JUST WAYS TO SEPARATE YOU FROM YOUR MONEY.

We are in the process of reviewing such threads and will take appropriate action in the near future.

[skaz]

Team Ichart it is good move. This will help to sanitised forum. This pest control activity will also save lot of new trader. Who believes such tricksters and conman. who keep changing colours and style every few month.

ST also Pl refers such conman to SEBI and serve legal notice from time to time.

[sanjayojha]