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Diagonal Spreads - Discussion, Q&A, etc |
amitagg
Black Belt
Joined: 01 Oct 2013
Posts: 4559
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Post: #196  Posted: Fri May 30, 2014 11:12 am Post subject: |
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| Hydrogen wrote: | | Gemini wrote: | Hello,
Normal days are back as VIX has cooled down.
Found a good diagonal put pair today : 7100P June sold at 64.3 and 7300P July bought at 193. Let us see how this trade turns out to be.
(System that I follow has given sell signal today and hence this trade).
Happy Trading  |
Hi Gemini
Can you disclose your system here ? |
yes pls give some insights...in other thread |
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Gemini
White Belt
Joined: 28 Apr 2009
Posts: 166
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| Post: #197 Posted: Fri May 30, 2014 9:26 pm Post subject: |
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Friends,
Diagonal Spread ( as explained in detail with quite a few examples by ST) allows one to take a trade for multiple days and also to have limited loss in case the trade goes against us.
Considering these parameters, I use absolutely simple set-up as below:
1. Calculate SMA(3) of high - (SMA (High,3))
2. Calculate SMA(3) of low -(SMA (Low,3))
Check the CMP near the close of the day. If the price has changed direction during the day and 1. has broken the SMA(H,3), identify a Diagonal pair with Calls and if 2. has broken the SMA(L.3), identify a Diagonal pair with Puts and execute....
Maintain this trade till the price turns back and breaks other extreme ( i.e. if gone long and after a few days, breaks SMA (Low,3) reverse the position.
For selecting the pairs, trade management etc. I follow guidelines from ST.
This set-up is useful for trader who are not able to spend lot of time in front of screen during the market hours.
Hope this helps. I am attaching recent chart, indicating two possible entry points. ( I do not have back-test results / very long experience on this set-up. Please make your own decision).
I use ADX for understanding if the underlying is trending or not. If ADX <20, the underlying is expected to have whip-saws ( changing directions often) and not allowing one to reap full benefit.
(I use this set-up only for Diagonal Spreads at this point of time.)
Happy Trading. |
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Hydrogen
White Belt
Joined: 18 Feb 2014
Posts: 87
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| Post: #198 Posted: Fri May 30, 2014 9:52 pm Post subject: |
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Thanks for your reply Gemini...
Actually I still did not traded option using Diagonal. Still analyzing Nifty by using 3 by 15 crossover method. I compiled data for the last two years in excel and found that on an average month on month we can get profit on an average of 10 to 15 % using Daily charts.
Still I did not started actual trade. May be I will be doing in near future.
Thanks again for your update. |
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Gemini
White Belt
Joined: 28 Apr 2009
Posts: 166
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| Post: #199 Posted: Mon Jun 02, 2014 10:20 pm Post subject: |
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Hydrogen,
I also observe 3/15 moves (for directional trade, either call or put). I find that set-up to be good for directional calls.
Returning to my trade, well, it has failed (by ~ 24% as of EoD). I am holding on for one more day (being policy day) and plan to take a quick decision tomorrow.
I believe reason for this is my failure to notice prominent pin-bar which got developed on Friday.
Let us see how events unfold tomorrow.
Happy Trading... |
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SwingTrader
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Joined: 11 Aug 2006
Posts: 2903
Location: Hyderabad, India
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| Post: #200 Posted: Tue Jun 03, 2014 10:29 pm Post subject: |
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Gemini,
My comment below is not to criticize your method but to point out something important from my experience when one is trading diagonals.
As I have mentioned before, diagonals work better when one is targeting a trend of larger magnitude as time decay needs to work. I felt your bearish signal was of a short-term nature (I did not see any key supports broken). From my experience a more lazy approach works better. My trades have worked better whenever I have initiated diagonals when trend change is clear to everybody.
Also, when you say the trade is down 24% it looks like you are computing the % based on trade cost. I compute return on total funds locked in the trade - trade cost + margin. Using this the loss on the trade would be around 7-8% yesterday and around 10% today.
Good luck!!!
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Srikanth Kurdukar
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sharmasanjeet
White Belt
Joined: 25 Jul 2009
Posts: 28
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| Post: #201 Posted: Tue Jun 03, 2014 10:58 pm Post subject: |
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Good Learning for me too.
And because of Swing Trader only I came to know something about options.
Planning to take trade whenever 3 by 15 gives crossovers on Nifty.
Thanks ST once again. |
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Gemini
White Belt
Joined: 28 Apr 2009
Posts: 166
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| Post: #202 Posted: Wed Jun 04, 2014 10:54 am Post subject: |
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Dear ST,
Sincere thanks for caring to point towards better way of trading. Indeed, I jumped little too early.
You are right, my calculation needs to be on capital employed.
Look forward to turning to winning ways !
Happy Trading ! |
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UMESH0909
White Belt
Joined: 02 Jul 2013
Posts: 139
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| Post: #203 Posted: Fri Jul 11, 2014 5:13 pm Post subject: |
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Dear ST sir,
In this month on 2nd july call digonal triggered based on EMA 13 & 233.
How to handle this in current situation. Should I wait for crossover of EMA 13 and 233 for reversal Or I could have taken 4th July low as reversal pivot.
Thanks in advance. |
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UMESH0909
White Belt
Joined: 02 Jul 2013
Posts: 139
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| Post: #204 Posted: Fri Jul 11, 2014 5:46 pm Post subject: |
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Dear ST sir,
Referring to my previous post, Since the loss was exceeded the target loss of 10%. So I closed my position, but did not took reverse put diagonal. Please advice about reversal of position.
Thanks. |
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SwingTrader
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Joined: 11 Aug 2006
Posts: 2903
Location: Hyderabad, India
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| Post: #205 Posted: Fri Jul 11, 2014 7:06 pm Post subject: |
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| UMESH0909 wrote: | Dear ST sir,
In this month on 2nd july call digonal triggered based on EMA 13 & 233.
How to handle this in current situation. Should I wait for crossover of EMA 13 and 233 for reversal Or I could have taken 4th July low as reversal pivot.
Thanks in advance. |
Umesh,
No new signal was triggered on 2nd July. Did you mean you took a new call diagonal position based on breakout above 11th Jun high? It was a continuation signal (and yes a secondary call diagonal buy signal). If you entered a fresh position on this day then yes, it would be in loss and you should have stopped out today. I just hope this was not the first position you took and that you did take advantage of the long uptrend. There were many secondary entry signals for call diagonals throughout the uptrend.
Do not initiate any bearish position before a signal. I would wait for a clear 13-233 bearish signal to initiate a put diagonal.
NOTE: 30th Jun & 1st Jul too were secondary signals for buying call diagonals. You would have been in a slightly better position if you had taken those instead.
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Srikanth Kurdukar
@SwingTrader
Last edited by SwingTrader on Fri Jul 11, 2014 7:13 pm; edited 1 time in total |
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SwingTrader
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Joined: 11 Aug 2006
Posts: 2903
Location: Hyderabad, India
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| Post: #206 Posted: Fri Jul 11, 2014 7:08 pm Post subject: |
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| UMESH0909 wrote: | Dear ST sir,
Referring to my previous post, Since the loss was exceeded the target loss of 10%. So I closed my position, but did not took reverse put diagonal. Please advice about reversal of position.
Thanks. |
Please wait for a clear 13-233 bearish signal.
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Srikanth Kurdukar
@SwingTrader |
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UMESH0909
White Belt
Joined: 02 Jul 2013
Posts: 139
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| Post: #207 Posted: Fri Jul 11, 2014 8:07 pm Post subject: |
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| SwingTrader wrote: | | UMESH0909 wrote: | Dear ST sir,
In this month on 2nd july call digonal triggered based on EMA 13 & 233.
How to handle this in current situation. Should I wait for crossover of EMA 13 and 233 for reversal Or I could have taken 4th July low as reversal pivot.
Thanks in advance. |
Umesh,
No new signal was triggered on 2nd July. Did you mean you took a new call diagonal position based on breakout above 11th Jun high? It was a continuation signal (and yes a secondary call diagonal buy signal). If you entered a fresh position on this day then yes, it would be in loss and you should have stopped out today. I just hope this was not the first position you took and that you did take advantage of the long uptrend. There were many secondary entry signals for call diagonals throughout the uptrend.
Do not initiate any bearish position before a signal. I would wait for a clear 13-233 bearish signal to initiate a put diagonal.
NOTE: 30th Jun & 1st Jul too were secondary signals for buying call diagonals. You would have been in a slightly better position if you had taken those instead. |
Dear ST Sir,
Thanks for prompt reply.
Earlier I had taken diagonal for june month and square of it before 3 days of expiry. And then again initiated another diagonal for july month.
I did not understand the "secondary call diagonal ".
As you mentioned in the rules that 3 days before the expiry better to square off the diagonal. That is what I did in this case and initiated a new position on 2nd july. Since on 2nd it crossed the 11 jun pivot( significant pivot).
Should I have done differently? kindly suggest. |
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SwingTrader
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Joined: 11 Aug 2006
Posts: 2903
Location: Hyderabad, India
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| Post: #208 Posted: Sat Jul 12, 2014 10:06 pm Post subject: |
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| UMESH0909 wrote: |
Dear ST Sir,
Thanks for prompt reply.
Earlier I had taken diagonal for june month and square of it before 3 days of expiry. And then again initiated another diagonal for july month.
I did not understand the "secondary call diagonal ".
As you mentioned in the rules that 3 days before the expiry better to square off the diagonal. That is what I did in this case and initiated a new position on 2nd july. Since on 2nd it crossed the 11 jun pivot( significant pivot).
Should I have done differently? kindly suggest. |
Got it, understood now. What you did was fine overall. The only thing I wanted to mention was that you probably closed your JUN position by 23rd Jun (you did the right thing as last three days before expiry are tricky due to high gamma of the short option). You got the next buy signal on 30th Jun close (price closing above previous pivot high). So you could have bought the call diagonal on 30th just before close (if you were watching the market) or on 1st Jul. But I guess it would not have made much difference (especially if price continues to go down now).
So I think what you did was fine. Now please wait for the next signal to initiate position.
Primary / secondary signal explanation:
Primary signal is triggered when EMAs crossover followed by close beyond pivot. Secondary signal is triggered when price closes beyond any prior pivot (in the direction of current trend based on current position of EMAs).
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Srikanth Kurdukar
@SwingTrader |
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hardik0007
White Belt
Joined: 16 Mar 2011
Posts: 53
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| Post: #209 Posted: Sun Jul 13, 2014 11:16 am Post subject: |
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ST Sir,
High gamma thing I understood during expiry. But if we carry till expiry and rollover both short and bought is it Ok(I will get at high price both)
instead of waiting for previous high/low pivot?
Pls check charts (bought n sl place)
Last edited by hardik0007 on Sun Jul 13, 2014 11:18 am; edited 1 time in total |
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hardik0007
White Belt
Joined: 16 Mar 2011
Posts: 53
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| Post: #210 Posted: Sun Jul 13, 2014 12:43 pm Post subject: |
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| hardik0007 wrote: | ST Sir,
High gamma thing I understood during expiry. But if we carry till expiry and rollover both short and bought is it Ok(I will get at high price both)
instead of waiting for previous high/low pivot?
Pls check charts (bought n sl place) |
Deep ITM's are more profitable earlier we get on trend....
is there way to hit Stop loss before it hit our pivot low??
if we booked on july4 at 12:00.. trade would be profitable instead of loss |
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