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This friend had trouble making money in options though he was directionally right. Let us see how a basic understanding of greeks would have helped him, This thread will be about two attributes of option pricing, extrinsic value and theta

 An option has two parts, intrinsic and extrinsic value. Think of a pack of Lay's potato chips. When you buy and open the pack, what you find is some chips and a lot of air. Intrinsic value is the chips, extrinsic value is air
https://t.co/8ZPv4ZnCiL
https://t.co/icWmqSLENW
https://t.co/vHA6azEmbQ
Let us stop for a second here. When our friend was buying the 31700CE, he was buying pure extrinsic value, i.e, AIR
He has a second problem, theta.

What is theta ?
Watch this example for theta. These are actual calculations of greeks
https://t.co/kxHNu8eGYY
https://t.co/IgXzrssx5f
https://t.co/w1KFFZVZkh
DTE = Days to expiration. Watch that the theta decay curve is not linear, it speeds up as we approach expiration
https://t.co/wWYA331uQi
Theta decay starts to accelerate at 13 DTE. From 6DTE, it justs accelerates like crazy . This is true for all options
So our friend in this example was hit by a double whammy ( triple actually, due to vega, but vega on a later day. Explaining vega will confuse if you are a novice).
1. He was playing pure extrinsic value
2. He has a high theta burn rate so close to expiry, the highest
Hence, his 31700 call was not moving up fast. It was continuously losing theta. Being an OTM option with pure extrinsic value, the theta burn was very high
So what is the solution ? An options buyer has to negate theta burn to a certain degree. Best way ? Should have used a bull call spread. What you lose due to theta in your bought option can be somewhat covered by theta gain in the sold option
I can or anyone knowing greeks can make a position almost theta neutral thru spreads

THIS IS HOW GREEKS HELP YOU !
I understand that when one opens an options book, the maths seems daunting. It's supposed to be, Black and Scholes won the Nobel prize for making that formula 😃 To be very frank, if you ask me the total maths, I will also have trouble explaining
So, focus on the graphs. Using graphs is the easiest way to understand options. Whatever strategy you use, plot it graphically and play around with vols, DTE and direction
1. https://t.co/LpbzrgqvaH ( web based)
2. https://t.co/5AHY0EmfH9 ( software)

BOTH FREE, use them

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Subhadip Nandy
Subhadip Nandy
@SubhadipNandy16
My experiences in trading through various international locha events, high VIX and various events.
A thread

I follow the news, but never think of myself smart enough to predict what is finally going to happen. I am not a geopolitical expert, smarter brains than me are analyzing and acting on the news

Their actions are reflected on price, volume, OI. Following the data keeps me at par with the latest news

Be ready to cut your existing positions ruthlessly when data changes, be ready to absorb the loss and get out of the position. Never hold onto with hope.
Never works

Reduce trading volumes. Higher the volatility, lower the trade size.
Use lower volumes and bigger stops to counter the volatility
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Subhadip Nandy
Subhadip Nandy
@SubhadipNandy16
My presentation on Money Management was based on a lot of sources as I mentioned. For traders interested on those sources , here they are

#OptimalF
Portfolio Management Formulas: Mathematical Trading Methods for the Futures, Options, and Stock Markets by Ralph Vince

The Mathematics of Money Management: Risk Analysis Techniques for Traders by Ralph Vince

#SecureF

#FixedRatio

The Trading Game: Playing by the Numbers to Make Millions by Ryan Jones

https://t.co/U0c65EbEog.
SUBHADIP DADA MONEY MANAGEMENT TO READ LIST
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Subhadip Nandy
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@SubhadipNandy16
A small thread on intraday support resistance logics over time

The most common is Pivot , support and resistances calculated from the previous day's data

https://t.co/ILMjMay1zc

They can be calculated for daily, weekly, monthly etc.

Camarilla levels are also quite popular. This seemed to be the next best thing after the original pivots at one point of

Over the years, many other technicians have tried to devise other methods to devise intraday support resistance points. In almost all cases, the previous days OHLC were used in some variation, in some cases today's OPEN was also used as an input

I have gone through almost all of the formulas. Some work on some days, some days it doesn't.
What struck me was that in each of the cases , we were using the OHLC and doing some maths with a multiplier/divider which WE/the trader thought fits the price action of the markets

This is the same as choosing a time period of an indicator and hope the market follows my choice of time frame to give me good trades. Like say a crossover of a 5/13 moving average, or a 14 period RSI or whatever.
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Subhadip Nandy
Subhadip Nandy
@SubhadipNandy16
Along with the levels, there is Trend Ratio.
Near 1 or below is bearish, near 2 or above is bullish
( this as per last day's closing).
If Trend Ratio is bullish, expect support at Balance or breakout above Upper level will mean rally will continue.


If Trend Ratio is bearish, look for break or Balance or lower levels .

On a bullish Trend Ratio if Balance breaks, expect all longs to be trapped . Can short with stop above upper breakout figure. And vice versa

Normally the Trend Ratios of both indices are in sync, a little bit of difference. But here BNF is bullish while Nifty is bearish. So, if playing bullish tomorrow concentrate on BNF, If playing bearish, concentrate on Nifty

Major Rule :
1. DO NOT play bearish is market above Balance
2. DO NOT play bullish is market below Balance

The Balance basically tells you which side is a bit trapped

As long as the market stays within the upper and lower levels, option sellers ( whether they have sold on friday or will sell tomorrow) are at an advantageous position and make money. Whichever side this level is broken, that side sellers will be trapped
SUBHADIP DADA BALANCE AMP TREND RATION STRATEGY
Subhadip Nandy
Subhadip Nandy
@SubhadipNandy16
This question might have rose in your mind too, that why VIX was lower than yesterday despite the huge selloff today.
This is what I think happens . A thread.


What is VIX ?
https://t.co/VOkAwGRsHL


What is IV ( implied volatility ) ?

Now my explanations. IV is simply demand and supply. IV is back calculated from option prices and not given by the BSM model. When demand for options ( by buyers) are high, IVs will be high. When supply of options ( by sellers) are high, IV will be low.

Now look at this chart. Nifty fut and VIX are plotted together ( red line is the VIX). Yesterday's massive breakdown forced traders to hedge their positions by buying puts ( could be cash holdings, could be future longs, could be sold puts). This excess demand spiked up IVs /VIX
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Cem Karsan \U0001f950
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1/x Vanna is back & ready to turn back on the charm! Overnight the market hit our weeklong target of **3705 and pulled back... We were able to take profits & play for a bit of morning digestion. It’s been a nice +3.5% in a week w/a few extra scalps along the way...But the best


2/x part has been the gift of Vol compression, which along w/ short Vol profits, has given us significant calendar expansion & dispersion opps, as predicted. I expect this to continue this week as well, as Ivol oversupply should continue to be the dominant force until 12/11.This,

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5/x the potential macro-cyclical consequences of the next 2 years of fiscal stimulus seems absurd...& In terms of a more short term trade,Tesla Vol is either too high or 12/18 on back calendar spreads in the SPX are too low, as there’s no premium being priced in for the inclusion
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Trader knight
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@Traderknight007
A thread on Pyramiding-


What is pyramiding?

In pyramiding we add on to a position when it is going in our direction. Its basically opposite of averaging down.

MOMENTUM - Success of a pyramiding trade depend on this ingredient, the more the momentum the better pyramiding.


There are many way to enter and exit in a stock-

1. ALL IN - ALL OUT
2. ALL IN - SCALE OUT
3. SCALE IN - SCALE OUT
4. SCALE IN - ALL OUT ( I use this one)

Why traders use Pyramiding ?

More than anything what pyramiding do is keep your losers small and your winners - Big.

Pyramiding in my view keeps your dd smaller as your losers are very small because you enters with only a fraction of what you would have entered Normally.

BUT, not necessarily it should be more profitable than ALL IN- ALL OUT, Where one enters all at once and sell all at once.

HOW TO DO PYRAMIDING-

There are various methods which are used by traders for pyramiding ,while keeping the basic concept of adding onto the strength.

1. PYRAMIDING AND TRAILING BASED UPON STRUCTURE-

In this method we scale in or pyramid the qty when the stock breaks above
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I analyzed 25+ years of #Nifty data to better understand bear markets 🐻

Why?

Given the recent market sell-off and bearish stance of market participants, history and data is your best guide to prepare if we're headed for a bear market.

Thread with findings below 🧵👇
1/n


But first, do you know the definition of a bear market?

When any index falls 20% or more from it's all time high, it is termed to be in a #bearmarket 🐻

How do you calculate length of a bear market? The time duration in days from previous all-time high to market bottom.

2/n


🇮🇳 Nifty last 25 years (1997-2022*)

Number of Bear Markets = 8

Average drawdown % = -38.5%

Average bear market duration = 246 days (8 m)

Key takeaway - Bear markets occur every ~3 years and take on average 8 months to bottom

3/n


1997 and 2006 saw the fastest bear markets with Nifty correcting 20-30% in just ~1 month.

Unbelievably, 1997 had 2 bear markets! Just imagine suffering 20% drawdowns twice in a few months!

Mar 2020 Covid crash was the 3rd fastest and 3rd worst bear market.

4/n


Okay, how should we define Bear Market Recovery?

The no of days from market bottom to a new all-time high.

Sadly, bear markets take time to recover.

Almost double the time to recover to a new ATH compared to the time to form a bottom.

Avg recovery duration – 495 days

5/n
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@Anshi_________
Full Technical Analysis in Single Thread🧵

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1- Candle sticks and how to use

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3- The dow theory

4- Moving
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