BC OPTIONS DYNAMIC ADJUSTMENTS

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Sourabh Sisodiya, CFA
@sourabhsiso19 5 years ago 894 views

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Options Thread

How options allows to change and adjust view dynamically.
Let’s understand with a live example.

Example : Nifty is at 11921 and you are bullish on Nifty.

1) Buy Naked 11900 CE(call) at 167

Breakeven : 12068
Max Loss : Rs 12555
Max Profit : Unlimited

2) Now your view changes from bullish to slightly bullish so you can convert naked call into a bull call spread by selling 12100 CE at 72

Breakeven : 11996
Max Loss : Rs 7100
Max Profit : Rs 7800

#OptionsTrading #trading

3) Now your changes from slightly bullish to slightly bearish. You can convert the bull call spread into a ratio spread by selling more 2 calls of 12100 CE

Breakeven : 12224
Max Loss : Unlimited above 12224
Max Profit : Rs 18550

#OptionsTrading

4) Now if your view changes to sideways then you can buy 2 lots of 12200 CE to convert the ratio spread in a butterfly spread.

Breakeven : 11936 to 12182
Max Loss : Rs 2600
Max Profit : Rs 12300

#OptionsTrading

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Sourabh Sisodiya, CFA
@sourabhsiso19

Thread
How to manage strangles dynamically incase of a violent move or IV spike ?

1) Yesterday and infact entire last week if you had created strangles you would have experienced that during upmove only call side were increasing but puts weren’t decaying.

#trading #Options

2)In morning I had created a short strangle
200 lots 25000 PE sell at 102
200 lots 27000 CE sell at 161

You can sell from below image that if I had waited in this strangle till day end I would have lost around -4.5 L

So lets see what all adjustments did I do logically.

3)After creating strangles the premiums strarted increasing as puts were not decaying and calls were increasing.
So I had kept 100 lots buy on 26500 CE at 400(day high)
My buy got executed at 400 around 12:15 pm & I exited 25000 PE at 75

4) I had kept more 100 lots buy at 435 (recent high made during upmove till now)

The buy got executed at 12:15 pm
So my current open postions now were

200 lots 26500 buy at average 420
200 lots 27000 CE sell at 161

5) Logic:
As short strangles are basically short vol so if there is a movement on one side with no decay then one can start buying atm calls.
What this does is it converts your strangles into ratio spread and if move continues eventually into a debit spread

Sourabh Sisodiya, CFA
@sourabhsiso19

Trading Mistakes & Lessons Learnt 🧵

1) I always keep my mistakes & lessons learnt in front of my screen while trading.
Bcz we as traders tend to commit the same mistakes everytime.

So seeing your learnt lessons everyday ensures that you avoid them.

#trading #mistakes

2) In 2017, I analysed all my trades and saw that I have majorly lost in stock futures and profits came only via index trading.

I accepted that I am not great at stock trading & been trading index only majorly since then & have never missed a day trading BankNifty

3) I decided to adjust all of my past losses to 1 % of capital to see the effect of capping the downside.

I would have had a gain of more than 230 % if I had capped losses at 1% of cap.

Lesson: Keep losses per trade less than 1% of capital no matter what !

4) While trading index options, I lost sometimes due to IV rise,flash crash, and option freezes.

Lesson: Never take markets lightly & Always keep protective stops in the system (and not in your mind) to keep loss in control in case of blackswan.

5) Being an option seller, I have a tendency to manage my position by rolling up/converting to calendar etc.

So many times I have wasted 1 or 2 weeks just to close a loss making trade at cost😢

Lesson: I do manage now but exit as soon sold options become ITM or 2 x in value.

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Sourabh Sisodiya, CFA
@sourabhsiso19

How to identify momentum stocks for intraday trading

Explained in detail with examples with a scanner to scan stocks(link in youtube description)

https://t.co/wf4EOV9Ktt

#trading #youtube #markets

Sourabh Sisodiya, CFA
@sourabhsiso19

Thread : Trading Applications that I use on a daily basis🧵

1) After putting a detailed post on hardware & multi-monitor setup. Few asked for softwares I use for trading.

So I am listing softwares/apps which I find the most useful for trading & investing

2) Trading View or Kite app

I use trading view for intraday charts.

As I trade intraday, I use the 5 min time frame.

My chart is simple with 20 sma plotted on it along with CPR(central pivot range)

Price > 20 sma & CPR indicates bullish trend for intraday & vice-versa

3) Icharts

As I majorly trade option premiums(short volatility or theta decay strategies)

I keep a track of combined premium of strangle using @iChartsIndia

Combined premium should be trending down & below VWAP to create a strangle

4) QuantsApp

As I need to provide analysis on TV channel.

I need to analyse overall market breadth, futures data & option chain activitiy.

@quantsapp provides

Futures Data : Long Builtup/Short Builtup
Options Data : Max Call OI/ Put OI
Market Breadth : For overall sentiment

5) Spider

I used @SpiderSoftIn to scan momentum stocks for intraday.

Spider helps in identfiying :

stocks hitting 52 week high/ low
Stocks making day high/low
Stocks with large buying single orders

Sourabh Sisodiya, CFA
@sourabhsiso19

Thread: Risk hai toh ishq hai ?

1) A lot of people talking about today’s freak trade in 37100 PE in BNF

We as traders are always exposed to various types of risk and it’s a part of our business.

Let me highlight certain risk faced in past years & also ways to manage it

2) Gap Risk

18th may 2009

Markets opened at 9:55 AM as this was the market opening time at that time
Nifty immediately hit an 20 % upper circuit at 10.01 am and the markets froze.
So markets were open only for 6 minutes.

There are many such instances of overnight gaps

3) Vega Risk

On 24th August 2015, the Indian markets declined close to 5.92%.

Nifty around 490 points but something unusual happened on that day.

Far otm Call options shot up inspite of such a huge fall😲

Vix shot up 64%

4)Gamma Risk

26th sept 2019

It was an expiry day and 30000 CE went from 50 to 1000+ in minutes and eventually closed at 0

This move caused lot of leveraged traders to lose a significant amount of their capital
Many such instances of gamma risk on expiry day

5) Flash Crash

31st may 2019

Flash crash in Banknifty of 1000+ points.

Friday’s high of the Bank Nifty was 31,783 and the low point of the index was 30,623

Such flash crash has been seen in many stocks as well on other instances

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