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Options Cheatsheet with Greeks

Options Cheatsheet with Greeks

Option basics explained

1. Open Interest

  • How many options exist in totality.

2. Implied Volatility

  1. Represents the expected volatility of the price of the stock.
  2. Used as a proxy of market risks.
  3. Increases when bearish, declines when bullish.
  4. Directly proportional to the demand of the asset, time left for option expiry.

Option Volatility Vs Stock/Index Valuation for picking strategies

  1. When valuation is under priced than there is scope of price coming up by buying.
  2. When valuation is Fair priced than there is scope of price coming to a range bound.
  3. When valuation is Over than there is scope of price coming down by selling.

Above compared to Volatility or IV we can plan strategies

For example

… Read the rest

Option Strategies – Bear Call Spread

Spreads versus naked positions

Most professional options traders prefer initiating a spread strategy versus taking on naked option positions. There is no doubt that spreads tend to shrink the overall profitability (max profits), but at the same time spreads give you a greater visibility on risk (max loss).

Always remember “Professional traders value ‘risk visibility’ more than the profits.”

It’s a much better deal to take on smaller profits as long as you know what would be your maximum loss under worst case scenarios.

Another interesting aspect of spreads is that invariably there is some sort of financing involved, wherein the purchase of an option is funded by the sale of another option. In fact, financing is one of the … Read the rest

Option Strategies – Bear Put Spread

Options Strategies – Bear Put Spread

Spreads versus naked positions

Most professional options traders prefer initiating a spread strategy versus taking on naked option positions. There is no doubt that spreads tend to shrink the overall profitability (max profits), but at the same time spreads give you a greater visibility on risk (max loss).

Always remember “Professional traders value ‘risk visibility’ more than the profits.”

It’s a much better deal to take on smaller profits as long as you know what would be your maximum loss under worst case scenarios.

Another interesting aspect of spreads is that invariably there is some sort of financing involved, wherein the purchase of an option is funded by the sale of another option. In … Read the rest

Option Strategies – Bull Call Spread

Spreads versus naked positions

Most professional options traders prefer initiating a spread strategy versus taking on naked option positions. There is no doubt that spreads tend to shrink the overall profitability (max profits), but at the same time spreads give you a greater visibility on risk (max loss).

Always remember “Professional traders value ‘risk visibility’ more than the profits.”

It’s a much better deal to take on smaller profits as long as you know what would be your maximum loss under worst case scenarios.

Another interesting aspect of spreads is that invariably there is some sort of financing involved, wherein the purchase of an option is funded by the sale of another option. In fact, financing is one of the … Read the rest

Option Strategies – Bull Put Spread

Options Strategies – Bull Put Spread

Spreads versus naked positions

Most professional options traders prefer initiating a spread strategy versus taking on naked option positions. There is no doubt that spreads tend to shrink the overall profitability (max profits), but at the same time spreads give you a greater visibility on risk (max loss).

Always remember “Professional traders value ‘risk visibility’ more than the profits.”

It’s a much better deal to take on smaller profits as long as you know what would be your maximum loss under worst case scenarios.

Another interesting aspect of spreads is that invariably there is some sort of financing involved, wherein the purchase of an option is funded by the sale of another option. In … Read the rest

What is short strangle? Why so famous?

What is short strangle? Why so famous?

Short strangle is very famous for nifty and secondly banknifty. It Involves selling options at two points at a distance from Spot Price.

How to select our selling strike price in our strangle?

1. Go for technical analysis and draw resistance/vah(value are high) and support/val(value are low)

Sell strikes at these support and resistance drawn.

 

2.  Go for monthly chart and draw high and low, now draw last few weeks high and low. Now select points of support and resistance using the high and low’s

 

3. Option chain analysis to figure out the sellers perspective of highest OI(active contracts) and change in OI(market participants) ande volume for liquidity.

Now select the … Read the rest

Trading Breakouts with Stop-Loss Entry Orders

Trading Breakouts with Stop-Loss Entry Orders

For a likely breakout point in any range breakout, you can use a resting stop-loss entry order placed just beyond the breakout level(buffer of 0.0025% that is 0.5 for 200 rs) to get into a position if a break occurs.

Two scenarios

1.To get long for a break to the upside breakout

  • We would leave a stop-loss entry order to buy at a price just above the upper level of the range or pattern (market stop loss) . There can be some slippage with market stop loss. But with limit stop loss the order may not get executed at all if in high momentum.

2. To get short for a breakout at lower end… Read the rest

BankNifty Composition and Weightage 29 October 2021

BankNifty Composition and Weightage 29 October 2021

The NIFTY Bank Index includes the most liquid and significant banking firms in India. It serves as a benchmark for investors and market intermediaries, capturing the capital market performance of Indian banks. The Index includes a maximum of 12 companies that are publicly traded on the National Stock Exchange of India (NSE).
The free float market capitalization approach is used to calculate the NIFTY Bank Index.
The NIFTY Bank Index can be used to benchmark fund portfolios, establish index funds, ETFs, and structured products, among other things.
NIFTY Bank Total Returns Index is a type of index.

Company’s Name     Weight(%)

HDFC Bank Ltd.                                        26.61
ICICI Bank Ltd.                                        22.91
State Bank of India                                 13.82… Read the rest

Regular profit strategies Iron Condor vs Iron Butterfly ?

Regular profit strategies – Iron Condor vs Iron Butterfly ?

The Iron Condor and Iron Butterfly are both very popular for Regular profit / income which is used by many traders. Also next thing to know is these 2 strategies is that they work on Hedging, so you pay less margin. They also have defined max loss and max profit, so you never lose more than what you know you are ready for.

Iron condors and iron butterfly options are both very similar Option Strategies and both are very popular options trading strategies. Both Iron Condor Option strategy and (Short) Iron Butterfly Option strategy (also called iron fly) can profit by selling short positions in the face of low implied … Read the rest

Option Strategies – Iron Butterfly Option Strategy ?

What is the Iron Butterfly Option Strategy ?

Options provide a variety of money-making tactics that cannot be matched with traditional equities, and not all of them are high-risk endeavors. The iron butterfly technique, for example, can provide consistent income while limiting risks and profits.
Because each strategy is named after a flying species like a butterfly or condor, the iron butterfly option strategy approach is part of a collection of option strategies known as “wingspreads.” A bear call spread and a bull put spread with the same expiration date that converge at a middle strike price make up the strategy.

The “body” of the butterfly is formed by a short call and put sold at the middle strike price, … Read the rest