iCharts Discussions

[TLS2010]

In these series of post, attempt will be made to come up with safe hedging strategies for generating safe monthly income in NSE-Equities and NSE-Derivatives market.[/b]

[shaheerzaman]

Thanks for such a nice post. Elegant analysis. I have a question. What do you do if axis starts trading below 442?

Thanks
Shaheer

[TLS2010]

Hi Shaheer,
Thanks for your comments.
Now to answer you question....If Axisbank trades beyond the range then you look at squaring off the positions and write (sell) options which show up highest open interest. By the time this pattern comes up the trade already grows 2 weeks old and you will get to know new support and resistance zones. Look to sell those zones, both call and put, and you will turn out to be a winner most of the times, well atleast 80% of the time it does work, rest of the times you may be at a marginal loss.

[shaheerzaman]

Thanks for the explanation. I have two more questions. Hope you dont mind answering them.

1. To find out support and resistance zone we need to look at OI or the daily chart? 2. Any reason for doing axis or can we do select any stock?

Regards
Shaheer

[sonshu101]

Hi TLS,

What about 460 PUT and 490 call in his case. That is also giving 19+ if expiry is between 460 and 490.


Thanks
Sonshu

[TLS2010]

Hi Sonshu,
Very good obervation on the 460 PUT and 490 CALL, Yes they are OTM (Out of the money) strikes and certainly giving better time value decay than the ones suggested in the trade. If liquity persists you can very well think about trading (Selling) 460 PUT and 490 CALL instead of 460 CALL and 490 PUT.

Appreciate your call (pun intended

Hi Shaheer,
LIX-15 index comprises of the 15 most liquid stocks on NSE. On Oct 30th Axis happened to give better support/resistance zone trading opportunity as compared to others. Hence Axis came up.

For analysis purpose you need to look at both... Daily Chart as well as OI, both should talk the same language. Stay aside if signals are confusing.

Happy Trading.

[shaheerzaman]

Hi TLS,

Thanks for the answers. Please post the new trade here as and when you decide to take it.

Thanks
Shaheer

[TLS2010]

Hi Friends,

Looks like Axisbank trade suggested for the current month is almost going to be expiring within 460-490 on Thursday as predicted.

We had sold 460 CE and 490 PE for total of 48 points and now the same is trading at 5.5 and 24 respectively, total of 29.5. Shown as circled in the figure below.

If we close the trade at current rates we get 48-29.5 = 18.5 points X 1000 mktlot = 18500/- which is 9% returns on our margin amt of 2 lacs.

Keep selling options keep making safe money every month.

Happy Trading.

[shekharinvest]

TLS

Have a look on SBIN chart seems to be in a range of approx 30 points, 230-260. OI shows Supp at 230 and Res. at 250 range of 20 points. See the enclosed charts.

At current price 230 CE and 250 PE gives 28.90 ( marked in red circle) Net gain 8.9 points.

OR one should go for 220 CE and 260 PE which gives 43.35 (marked in blue) Net gain 3.35 ( after accounting for spread ask/bid not much is left though)

OR one should go for 230 CE and 260 PE which gives 35.80 Net gain 5.8 points

Is my selection of SBI and its analysis correct ?
How to decide which pair to take ?

[TLS2010]

Hi Shekhar,

Thanks for your question.

At the outset SBI option traders seem to be more interested in selling calls rather than put as the stock is likely to correct upto 231 and make give a bounce from there. If the spread is not very encouraging, it is better to sell OTM CALL PUT as it will give better ROI till the stock consolidates.

Having said that, my strategy would always be to step aside and wait for clear signals and then take the trade, just by looking at highest OI you cannot jump into trades.

At best the trade we can look at is selling the ATM strikes of 240-245 which will give you 20 points. Our trade goes in a loss only of SBI starts moving beyond 225-260. Max profit will be if SBI expires within 240-245 in December series.

Margin Amt reqd is 2 lacs approx
Mkt lot of SBI is 2000

Lets assume SBI expires at 230 or 250 then profit would be 10 points = 20000/- giving ROI of 10%

if it expires at 240-245 then you get max profit of 15 points = 30000/- giving ROI of 15%

Hope I have addressed your queries.

Happy Trading !!!

[AMBY]

Thanks for clear view.

[shekharinvest]

[chitrgupt]

Hi TSL,

Your logic is confusing...in the 1st post axis bank post where OI position are similiar to SBIN (Heavy Call OI compared to Put OI)....you have confidently feel range would be 440 -500.....But in SBIN case where Shekhar mentioned the Range of 230 to 250 you are not convinced and your analysis shows bias of your bearishness that SBIN will fall to 230....
This is totally confusing and shows selective biasness..

Also for selling option works when stock/indicez is predicted to be in range else all analysis will be of no use and its difficult for beginners to control the position and they have bear huge margin loss.

Thanks,
Chitrgupt

[TLS2010]

Hi Chadrgupt,
Thanks for visiting this post and I appreciate your comment on option trades that was suggested looked confusing and bias.

Let me clarify, option analysis is no childs play. Many are attracted to option trading because of "Limited Risk and Unlimited Profit" potential. These fall in one directional trading strategies. If you are lucky you may double/triple your money within a matter of few days too.

This thread is an attempt to Trade NEUTRAL, be HEDGED, not one directional, and emerge a winner with little or no hurt at all. I expect 80% chances of winning and the rest of the times even if we lose it should be only marginal and not a huge loss.

Sufficient Margin amt buffer atleast 25% more is needed if you want to trade NEUTRAL. So if the margin amount on the trade is 2 lacs then keep 50K aside for mark to market which will be needed during the time the trade is open, which is usually a month.

Attempt will be made to target realistic returns of 24% to 40% p.a atleast. Many of you will be aiming for more, including me

AXISBANK trade was taken becoz the chart was showing support at that price and the ITM option data premium was also working in our favour.

SBI trade, if you look at the chart it shows confusion and a bit bearish bias so the best option trade that we can take here is the ATM trade. Offcourse there is slight difference in the rational but the ROI needs to be taken into consideration and then trade can be taken more or less confidently.

Feel free to voice your doubts. I may sound biased in my trades....but I wont be biased in my replies to queries

Happy Trading !!!

[shekharinvest]

Here is another highly liquid ICICIBANK chart. 250 is a long term support if we go back. 290 is again a resistance zone cum previous support area.

ICICI is likely to remain rangebound for some time before it takes any direction as per my chart reading.

Now also look at Option chain, apparently 250- 290 does seems like a possible range.

SELL CE 250 and PE 290 fetches app Rs. 45.5 and any closing between 250 -290 gives about 4.5 and we are covered for the full range of 245 -295

Lot size 1700 Margin required for trade 1,90,000 Net gain 7650 about 4%.


If some one has a view that it is likely to close between 260-280 then other pairs do give better return viz ATM PUT/CALL and 260 -280 likely to give 8 to 10 Rs. With virtually no risk within the given range of 250-290