iCharts Discussions

[sonila]

Hi all, on expiry day, and day before expiry, next month nf is generally having 30-50 pts premium. So can any body suggest a simple option trading strategy in nifty involving this premium factor. Thnx.

[rakpeds]

[nanjanbala]

The high premium in NF may be due to deeper discount of Nifty Index due to heavy selling in Nifty stocks and lack of arbitrage trades. Option pricing depends on NF value and premium makes no difference.

[saumya12]

[bolband_macd]

Hi Saumya12,
Wooooooo, that's a dangerous question dear... As vehicles need fuel for traveling, trader needs strategy for trading. Just because you have minted money in Options, with Trend favoring your trade, does not mean you shouldn't have any strategy. There has to have a system to which one must adhere.
I am telling you all this as I have paid heavy price. I have learned a hard way. iChart is a "Fantastic Fertile Trading Land" where you can saw "Profit Seeds". Google "Option Trading Strategies" and you will surely find one which suits you.
I am sorry to interfere here as you have shot this question to Sonila. I could not stop myself answering as I do not want anyone to pay heavy price for same mistake I have made.

Thanks for giving time to read this.

Trade safe,
BM

[saumya12]

Thanks BM for your reply.

Yes I do understand that I should follow some strategy, while trading in options. But most of the time following any strategy involves selling (writing) options and I just do not want to do that. One of the reason is to pay margin money for shorting options and it reduces my trading money quite a lot. I will also search the term as suggested by you for further reading.

Further, if you do not mind I will like to know the mistakes that one commits in trading options, particularly in buying options.

Regards

[bolband_macd]

Saumya,
Your post is indicating me that you take more than one ( Hopefuly not Overtrade ) trades. Get one thing in mind as a trader -- Its not what "You want" ... Its what "Market wants". Traders ego, overconfidence and tendency of retaliation kills it own thinking capacity and evaporation of capital. Fact remains : Strategy is a Strategy.
Most common mistakes with Buying Options is to be speculative. As the margin of trade is smaller as compared to Selling Options or Future, one keeps on "Hoping" that I will earn profit for sure. Another thing is "Averaging": Always keep in mind that one is Paying "Premium" and it keeps on reducing as expiry comes near. So, stay away from this monster.
Best thing to avoid mistakes is to keep Stop Loss. Keep 1:3 ratio on your trades.
For e.g. If you buy an option for 30 Rs, then keep 5 Rs as your Stop and 15 Rs to lock your profits. Meaning, come out of trade if Premium price goes below 25 and Book profits when values 45 Rs.
Hope this helps,

Trade safe,
BM

[sonila]

Bm, can u discuss the strategy u use for option trading, plz ?

[rk_a2003]

[vinay28]

BM, the 1:3 ratio will change depending upon which option one has bought e.g. ITM or OTM? My experience is that 20% of day's high (when long) is a good SL for first level OTM options and 30% for second level OTM options and hence the question. At the same time, 50% profit is not likely on a regular basis in such a case except in case of second level OTM option.

[saumya12]

Thanks BM for your reply and your sincere advice. I will take care of it.
As per your advice I searched for option strategies and got the following very good link on option strategies. Will go through it and choose one or two that suits me as per my capital value and ease of trade.

www.hsbcinvestdirect.co.in/pdf/Option_Trading_Strategies.pdf

I am posting it here, so that other fellow readers may also get benefit out of it.
Thanks

[bolband_macd]

Hello All

RK ji thanks for appreciating my suggestions and thoughts. Honestly, it came out from my heart as I have experienced Option trading strategy a hard way.
Vinay, you are absolutely right dear. OTM (Out of the Money) and ITM (In the Money) type. Liquidity and Volatility also play substantial part. All in all, one should trade Options according to the Depth of individuals Pockets. Money management has to be learned before trading.
Don't give your money to Stock Market, rather, thank Stock market by minting money from it.
Sonila, just see 21 EMA on daily charts with diversions and figure out your own suitable strategy. Hope this helps.

Trade Safe,
BM

[pkholla]

Saumya: advice from someone who has dealt with HSBC
1 Dont keep money, shares, MF, trading account with them FULL STOP
2 My father left shares, savings accounts and MF in 2006. You wont believe the trouble I took to remove even after showing legal succession
3 Some stage personality (Suchitra ?) has filed in Bombay a 420 case of mis handling, mis judgement and abuse of POA against HSBC (involving crores)
4 They employ good looking, 'honey' voiced but ignorant Bombay and Goa girls who HAVE to dress "smartly" and influence gullible young IT etc to entrust their money to HSBC. You, as a female, obviously wont be influenced but better to be careful anyway
5 More senior staff are transferred frequently often within 2 months. You may have a commitment from X but his replacement Y knows nothing about it!
6 Extremely high handling and maintenance charges to pay for marble, granite, AC, high salaries etc but the client doesnt benefit
Cheers, Prakash Holla

[saumya12]

No, No Prakash. I was not suggesting to trade with them. I have Zerodha for that. I was just suggesting to use that link to learn about various option strategies. Thats all

[pkholla]

Saumya: I know that you are not suggesting anything like that. But many times we get glossy attractive brochures/ emails and get tempted to at least look into the corporate running the scheme (like the share a holiday ones). From my experience, HSBC can prove very costly to someone who takes 1 step beyond look-n-see!!! Prakash Holla