[WanderinNomad]

Originally Posted by SmartCat

Not a good idea, because payoff is linear in futures. If you want to hedge options positions, a few ideas -

- Buy OTM option (and convert position into spread)
- If trading multiple options, use a ratio. For 3 short options, you can buy 2 OTM long options. Or for 3 short options, you can buy 4 lots OTM options.
- Hedge using next week options (same strike or OTM strike), and convert position into a calendar spread. You can again use a ratio here (like above example)
- Hedge using current month/next month options.
- Hedge using BANKNIFTY, when you are trading NIFTY (and vice versa)
- If trading STOCK options, hedge using NIFTY options (since they are correlated)

I mean I hedge a PUT/CALL sold which is going against me with a FUTURE SELL/BUY.
For example, recently I had made a NIFTY strangle for may expiry with a upper breakeven point of 15100. The trade went against me as Nifty is close to 15200 . I got out it by BUYing a FUTURE at 15100 and even maid a small profit of Rs2500

[ScarySkulls]

Thanks for creating this separate thread. Now I can see options specific discussion more clearly.

I got started with cash secured puts with the goal of a modest 1% return per month. 2020 was a crazy good year where even 3% a month was no big deal. Looking forward to seeing how 2021 turns out.

Long term goal is to replace the entire salary income with options income and quit the rat race well before retirement age.

Originally Posted by WanderinNomad

4 I have joined membership of one/two Youtubers who are experts in this field. This is really important since it gave me the confidence to start out. I am learning a lot from them as well as earning profits by imitating their trades

Sounds interesting. Anyone you would recommend?

[SuperFlyBoy]

Any recommendations for reliable/good trading platforms?

[techcoze]

Originally Posted by SuperFlyBoy

Any recommendations for reliable/good trading platforms?

Zerodha, found it reliable amongst all discont brokers

[SLK]

Is there any strategy that actually works for NIFTY F&O?

The HTFs seem to adjust the price so much/ front-run the derivative prices that its very hard to get money out of the market even if things look extremely good on paper!

[SLK]

This thread hasn't seen a post in one full month. So I thought, I'll give my own inputs.

Originally Posted by SLK

The HFTs seem to adjust the price so much/ front-run the derivative prices that its very hard to get money out of the market even if things look extremely good on paper!

I've been trying a lot of derivative strategies, unfortunately for me, nothing seems to be working too well, primarily because of derivative frontrunning. The good part is that even after 8 months of testing strategies, I have not lost money. In fact I've earned enough to pay the transaction charges (of Rs. 92k!!) and am 2k negative on a 1-8 lot NIFTY play.

Another question to add to my previous post: I get a very strong feeling that when I trade (option writing or futures) 6 lots or more - the market seems to chase my stop loss and then reverses in my desired direction. But when I trade 1-2 lots, things seem easier and the market does not bother to chase my stop losses. Or is this a known trader psychological issue! (I'm only a 10 month old trader)

Of course this sounds stupid - but is there any possibility that someone/ or something is able to track multi-lot orders from single retailers and making them bleed.

[SmartCat]

Originally Posted by SLK

6 lots or more - the market seems to chase my stop loss and then reverses in my desired direction. Or is this a known trader psychological issue! Of course this sounds stupid - but is there any possibility that someone/ or something is able to track multi-lot orders from single retailers and making them bleed.

Yeah, that sounds stupid and it probably is.

Instead of entering 5 lots at one go, you should probably scale into the position if it is working your way. That is, instead of entering a 5 lot trade on Friday, enter 1 lot each on Fri/Mon/Tue/Wed/Thu.

If the trade is not working out (stops being hit), do not scale up position during that week.

[SLK]

Originally Posted by SmartCat

Yeah, that sounds stupid and it probably is.

Instead of entering 5 lots at one go, you should probably scale into the position if it is working your way. That is, instead of entering a 5 lot trade on Friday, enter 1 lot each on Fri/Mon/Tue/Wed/Thu.

If the trade is not working out (stops being hit), do not scale up position during that week.

I'm only day trading. Absolutely no overnight positions, also helps me sleep better .

On the strategy front, I read a couple of books:

• 101 Option Trading Secrets
• Al brooks series of books on price action - but didn't get very far. This one is very difficult to read and I do have a hard day job too!

I'm starting to make some sense of price action, but it still seems largely unreliable to get consistent money from a 5 min timeframe.

I've always had this question - and it would be really helpful if you could share your views on this one. When NIFTY is made up of 50 stocks, which are trading all over the place, how are support and resistance at NIFTY level supposed to make sense. Interestingly they do work! but why and how?

[SmartCat]

Originally Posted by SLK

I'm only day trading.

Then see if it makes sense to scale into desired position size by entering 1 lot every hour.

I'm starting to make some sense of price action, but it still seems largely unreliable to get consistent money from a 5 min timeframe.

I think you need more data. Go back and analyze your winning days and losing days. Is high VIX environment the culprit on losing days? Is there a large gap up/down on losing days and the index reverses? Are you primarily losing when NIFTY trends up or when NIFTY trends down? Look for any other anomalies on losing days.

Once you see a pattern, make tweaks to your trading strategy to avoid/reduce loss days. Since you are breaking even, I think you are pretty close to cracking it.

I've always had this question - and it would be really helpful if you could share your views on this one. When NIFTY is made up of 50 stocks, which are trading all over the place, how are support and resistance at NIFTY level supposed to make sense. Interestingly they do work! but why and how?

Since the weightage of NIFTY constituents is already known, it is quite likely that large participants BUY/SELL each stock in that proportion (using automated trades)

[SmartCat]

Originally Posted by SLK

In fact I've earned enough to pay the transaction charges (of Rs. 92k!!) and am 2k negative on a 1-8 lot NIFTY play.

I thought about this a bit more, and I now think your strategy is already profitable. But you are messing up with position sizing. See, every strategy has something called drawdown phase.
https://www.investopedia.com/terms/d/drawdown.asp

A strategy can enter drawdown phase anytime - as soon as you enter the trade or after 3 months or 1 year or more. I suspect that you are

- Increasing allocation (from 1 lot to 5 lots) when the strategy is doing well
- Just before strategy enters drawdown phase, you are at peak allocation (5 lots)
- After a largish loss, you are going back to 1 or 2 lots.

If you are doing this, then that is not the right away. Scale up your position size based on rules like this -

- In December 2021, trade 1 lot only. At the end of this month, see if the strategy is in profit (after including brokerage + STT/exchange fees).
- If December was profitable (Eg: Rs. 6,000), increase lot size to 2 lots in Jan 2022.
- If Jan was a loss making month (Eg: minus Rs. 3,000), continue with 2 lots in Feb. Do NOT go back to 1 lot.
- If Feb made a profit of Rs. 4,000, then it means your equity curve is at new highs (6000 - 3000 + 4000) = Rs. 7,000. So in March 2022, start trading 3 lots.
https://www.investopedia.com/terms/e/equity-curve.asp

Basically, during drawdown phase, you have to stick with your old lot size. You should not increase/decrease size based on whim. You can tweak the above rules a bit (eg: increase lot size only after 2 or 3 consecutive months of equity curve highs) to reduce risk. To increase risk (and faster rewards), scale up lot size when equity curve stays at new highs for 2 weeks.

[SLK]

Originally Posted by SmartCat

I suspect that you are

- Increasing allocation (from 1 lot to 5 lots) when the strategy is doing well
- Just before strategy enters drawdown phase, you are at peak allocation (5 lots)
- After a largish loss, you are going back to 1 or 2 lots.

If you are doing this, then that is not the right away.

You are right. This is what I end up doing even if not intentionally.

My strategies are evolving and every time I make a change I want to test it live, so I go down to fewer lots.

I'm confident that eventually I'll crack it, but because I continuous evolve the strategies (add a parameter every third day based on what actually happened), I have a great record on paper (for historical days) but live is still far from remunerative.

PS: I'm using Zerodha API to collect and analyse data so that the system can give me some kind of recommendations/ indications to place trade/ exit.

[SmartCat]

Originally Posted by amol4184

Google has announced 1:20 split which will take place in July this year...in case people investing in US market missed it.
It probably does not matter much since you can buy partial shares too but writing covered calls will become much more affordable now.

Price of shares should not stop you from doing covered call strategy, despite the limitation of 100 shares for the trade size in US market.

- Let's say you own 20 shares (not 100) of GOOG is priced at $2700
- Your GOOG shares value is $54,000
- You can sell a call spread instead of naked call. For eg: you can sell $2900 call and buy $2950 call. Here, the risk (max loss) on the call side is just 100 x [(2950 - 2900)-premium credit].
- If there is a large upmove, profit from your 20 shares will make up for the losses in the sold call spread.

[deetee]

Originally Posted by RoadTiger

Unsolicited advice, based on my investing experience

Markets likely to go down further
Could be the start of a multi-month downturn
Dont be sucked into investing too early, assuming stocks look cheaper than last month
Dont guess the bottom - wait for definitive signs of an upturn

+1

This is a phase of cyclical correction. My analysis points to around 11000 level of NIFTY 50 in a few months . If that doesn't stop there, it can get very worse. Can crash beyond 7000 level if economy doesn't show signs of recovery by this year end.

[AZT]

Originally Posted by deetee

+1

This is a phase of cyclical correction. My analysis points to around 11000 level of NIFTY 50 in a few months . If that doesn't stop there, it can get very worse. Can crash beyond 7000 level if economy doesn't show signs of recovery by this year end.

Has your analysis changed since then. These numbers sound highly pessimistic. Govt would probably suspend trading if it even gets anywhere near here.

[deetee]

Originally Posted by AZT

Has your analysis changed since then. These numbers sound highly pessimistic. Govt would probably suspend trading if it even gets anywhere near here.

Nothing changed much. 'Around' 11000 mark of Nifty index is a sure shot, I can't estimate the time frame. That's why I mentioned 'a few months' . What happens then is something not clear at this point. It may bottom out or otherwise there will be deeper rout (not impossible).
No, Government will not get involved in this. Because, this is a structural bear market now and there wouldn't be any sudden deep crashes that can trigger circuit breakers. Prices will slip slowly and systematically.
Depending on how long it will take to bottom out, market will proportionately take longer to recover back to this high levels.