Thursday, August 23, 2012

option screw drivers to suite the need

when market was @ 5445spot today, 5400pe was @ 19
when the market slipped t0 5395 (50points), 5400pe rose from 19 to 33 (14points)

when the market was @ 5405spot, 5300ce was @ 121
when the market was @ 5415spot, 5300ce was @ 135

14points in both
but total movement in the first was 50points
and in the later 15points.

same result, different effort.

in the first case, i was less sure of the move,
so i bought cheaper slow moving option.

in the second case, i was more sure of the move,
so i bought costlier fast moving "overdrive gear" option.

that's the beauty of options!

different screw drivers as per the need!!!

how many lots?

Dear all,

This is to emphasize that when I buy cheaper at-the-money or out-of-money options I don't buy more lots than I would have bought had I bought costlier in-the-money options.

I buy cheaper options when I expect comparative uncertainty or volatility, or when the situation is less clear.

By buying cheaper options I put lesser money at risk.

I buy a lot of cheap option lots only when I want to gamble big time with controlled risk, like I did when I bought 5100 pe lots for less than 9rs on expiry day on 26 July which rose to 61rs.

just because i was ready to deploy larger amount in costlier options doesn't mean that i buy more lots of cheaper options just to deploy all that amount.

Best wishes

Wednesday, August 22, 2012

booking profit and trailing stoploss

i have this standard profit booking rule for intraday or overnight nifty trades with in-the-money options:

one third lots booking@25 points,

one third lots @40 points

and balance flexible.

once a target is crossed, previous target becomes trailing stop loss for the balance lots.

trailing stop loss for balance lots after crossing first target is the entry point.

Wednesday, August 1, 2012

why i prefer to trade in options instead of futures

* safety (especially large unforeseen sudden moves)...and hence peace of mind. you thereafter never trade with "scared money".

* more leverage of capital

* adverse movement is lesser than the pro-movement for the same movement of spot.

*  more effective stop loss.

* lot of flexibility viz. a viz. which option to buy 

* deeper in-the-money options have much less premium and move as much as futures.

* options have inbuilt stoploss.


all i have to guard against is the time decay.