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Saved by @Shubham51ngh

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

More from Subhadip Nandy

Subhadip Nandy
Subhadip Nandy
@SubhadipNandy16
Regarding the MFI divergence indicator those who are asking :
1. Link not working on TV
2. Not showing on spot Nifty/BankNifty
3. Code showing errors
All your answers are there in the original thread. Kindly do not expect spoon feeding .
SOLVE YOUR PROBLEMS ON YOUR OWN
MFI
Subhadip Nandy
Subhadip Nandy
@SubhadipNandy16
Perhaps you have the idea that calling me " 1 lot Nandy" is somehow derogatory and a easy poke at me. Allow me to explain why I look at this moniker as a badge of honour


I have traded 1 lot continuously twice in my life. The first in 2003 after I blew up on my INFY trade. I traded 1 lot ACC fut consistently and made 50k in a month

The 2nd time in 2013. When I suffered continuous losses for 5-6 months due to a variety of psychological issues. Then I traded 1 lot Nifty options consistently for 3 months. After that 2 lots for next 1 month and slowly increased

I have shared these two incidents on my various interveiws and regularly share this in detail with my handholding students when I talk about trading psychology.

This logic of trading 1 lot to iron out trading issues I learnt from the interview of Anthony Saliba, who traded 1 lot in options for 6 months. BTW, Saliba was the only options trader to have been profiled on the original Market Wizards ( I read his interview and used his logic)
GENERICLEARNINGS
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Subhadip Nandy
Subhadip Nandy
@SubhadipNandy16
Will start this thread with a disclaimer. I have never invested a rupee in cryptos 😀

But I have studied bull and bear cycles and financial bubbles extensively. Saw 1992, 2000, 2008 with own eyes. The first one as a novice, the next two when I knew to analyze

The amount of chatter I am seeing in friends, family and social media about cryptos has gone through the roof. For everyone, it's a dream to make 100x or even 1000x easily. Basically, become stinking rich easily
( it never happens )

In any financial bubble, the top is made in extreme speed and violence. The distribution happens on the way down. Unless one saw the rates of 65k on bitcoin, one wouldn't buy at 30-35k or 20k. That 65k is an anchor point which leads to greed

During the tulipmania, a single piece of tulip reached a price of $750,000 in today's money. When we see that history, we think "what idiots". But consider this, as of now meme coins generated by someone in their garage are being traded at absurd prices


Then there is this joke called NFT. A piece of "digital art" basically made by someone on their computer ( who is not even a known artist) are being sold for millions of dollars
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Subhadip Nandy
Subhadip Nandy
@SubhadipNandy16
The most important question now on the mind of all analysts and traders. Is this a bear market rally or is this the start of a bull move. Retweeting this as I will need a few tweets to explain my view


Everyone knows the HH-HL or LH-LL as per Dow theory. This can be a bit confusing on how one marks the Highs and Lows. Long back, I picked up this trick from one of the neo-Dow theorists on what to do in scenarios like this

Simply plot a 5 period exponential moving average on a different panel. A 5-EMA simply shows you a running weekly perspective and kind of smoothens the price where a single spike high/low is not of that much importance

You will see this 5-ema also making HH.HL.LH.LL. So now, rather than focusing on the highs/lows on the charts, focusing on highs/lows on the 5-ema gives a cleaner perspective

As per this charts, unless the 5-ema now closes above 17540 ( the ema, not Nifty price) I will not play this as a bull market. I will deal with this market as a counter move against the major bear trend
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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

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Abhishek Kar
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FREE MINI STOCK MBA
If you wish to learn abt trading,psychology,options,business etc
You can go through this thread.
Other than this I do post videos on my YT channel : -Abhishek Kar & Tradiostation
-Intraday views on FREE telegram : Abhishek Kar Official
RT will be appreciated

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Sarang Sood
Sarang Sood
@SarangSood
@javia_savan You answered it yourself 🙂
Adjustment cost is way too high for bnf. Sometimes bnf does exceed nifty in vol crush, but nifty overall is more consistent.
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Trader knight
Trader knight
@Traderknight007
A thread on Risk and Returns


Trader X -

Net-worth - 5 Cr
Trading capital - 25 lakh

Trader Y -

Net-worth - 30 lakh
Trading capital - 25 lakh

Trader X take risk of 2% per trade and he makes about 30-40 % Return on trading capital per month,

Whereas Trader Y only risk 0.25% per trade and he makes about 3-4 % on Trading capital per month.

Trader Y saw how much trader X is making with the same amount of capital that he has.

He is frustrated with his mediocre results as compared to Trader X, though he don’t know the fact that Trader X Is only trading with 5 % of his total net worth.

Trader X has much more risk taking ability in Rupee terms as compared to the Trader Y because he has higher net-worth.

Trader X will not have much impact when he goes into deep Drawdowns , 40-50% where as if the Trader Y goes below 15% DD , it will have deep psychological impact on him.

Even if the Trader X makes 100% return on his trading capital , turns 25 lakh into 50 lakhs ,
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Gordon Gekko
Gordon Gekko
@GordunGekko
A small thread on momentum investing and how I practice it.

I use the Nifty 500 universe for selecting my momentum stocks. Nifty 500, as the name suggests, has 500 companies in it. WRONG !!!! It actually has 501 companies. Yes, I double-checked 🙂 So, these 501 companies is

my talent pool (if you will) from which I select the 50 best candidates that I want to bet my money on.

Ok. So, exactly, did I go about doing that.

Step 1: Start with Nifty 500 universe (501 companies)

Step 2: Eliminate all those companies which have a listing history of

less than 1 year. This eliminated 25 companies (see table).

Step 3: For the remaining 476 companies, I computed their last 12-month rolling price returns (meaning, comparison of their price as on March 31, 2022 as compared to that as on March 31, 2021, and then computing the %


gain that each of those stocks have earned. I found out the following:

a) Average return of all the 476 companies was 43.27% (meaning if their average price as on March 31, 2021 was 100, then their average price as on March 31, 2022 was 143.27)

b) Out of these 476 companies

140 companies, gave a negative return.

c) Out of the balance 336 companies, 46 companies gave single-digit returns

d) Out of the balance 290 companies, 101 companies gave a return between 10-30%

e) Out of the balance 189 companies, 55 gave returns between 30-50%
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Zerodha
Zerodha
@zerodhaonline
ChartIQ charts on Kite web just got an upgrade with custom timeframe charts, new indicators, backtesting from charts, and much more.

Here’s how you can switch to the new version of ChartIQ: https://t.co/rhXrQ330G7

A thread on all the new features 👇


Custom timeframe charts

Charts with timeframes of 75 and 125 minutes were amongst the most popular feature requests. With the custom timeframe feature, you can now not only access 75 and 125-minute charts, but you can also do so for any timeframe of your choice.


Download historical data in CSV

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Shortcut keys for various functions

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