games operators play - II

table tennis

= when the operators know that the market can neither go up nor down for some time, they play table tennis from left to right to left between a boundary.

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sumo wrestling

= while still in a range, when the operators foresee the market shifting in a particular direction, they turn sumo wrestlers and drag the trade out of the range using mental tricks and sheer money power.

-----

rugby

= when the operators see a gap in the positions taken by mass traders, they pick "the trade" and run!

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equestrian

= when the operators see an opportunity in a particular direction, but notice a hurdle, they turn jockeys and play equestrian.

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chess

= when nothing is happening, they play chess and offer their rooks or even the queen as bait to checkmate.

the right strike price for hedging with options

ganeshji,

strike price points to be used for hedging should be such

that u strike a balance between

- the premium u pay (keep it minimum)

- the movement (delta) of option viz. a viz. movement in spot. otherwise hedge won't be effective.

- ur confidence in correctly reading the sitaution and hence the amount of risk u don't consider as serious risk.

- the more speculative u r the more u hedge out-of-money. and more sure u r be at or in-the-money.

understanding options - IV

ganeshji, the following criterea helps in understanding the operator market from options data

1. open interest

2. rate of change of open interest

3. change in price w.r.t. change in open interest

4. option activity in in-the-money and out-of-money zones.

5. identifying speculative calls or put points

6. ignoring those put strike points which are being used as hedging instead of actually taking positions.

7. put-call ratio at different strike-prices

8. interpretation for bull and bear and range-bound movement will be different.

9. nifty's effect on bank nifty and vice-versa

10. the premium, the volatility, implied volatility

11. the quantity being offered at a given price for a particular strike price (equivalent to volume in cash-and-carry)

.....besides i amalgamate this with rsi and william to be tripple sure.

pilgrimage of a stock trader

"where are you going?"
asked the curious father of a stock trader.

"dad, i am going for '3 dham yatra' "
the trader said.

"where?"
asked the surprised father.

"prabhadevi, bandra, fort."
the trader replied.

"where are these?"

"mumbai, dad."

"what kind of 'dhams' are these?!!
dad snorted.

"ncdex, nse and bse"

never travel without knowing

29/9 3.15pm

alkaji,
as per the options data for nifty for oct series AS OF NOW,
neither upside nor downside is lucrative for operators.
they have to pause and wait for red signal to turn yellow and then green.
till that time, they can afford to stroll here and there.
you may not profit mcuh, and you may not lose much either.
but the uncertainty and fear will take the better of you.
best of luck.
never trade without being sure where u want to go and where the bus of market is heading to!

predicting long distance with options

dear ganesh,

technicals are spectacles which are good for short as well as long distance vision.

but options are only microscopes
(those too with night vision and x-ray)
which help you see only what is at hand
and hidden in the dark
inside the pandora's box
by the operators.

so, can't predict about contours of october series with options.
neither do i want to.
we will take one day at a time.
also, to predict future trust technicals.

how much to safeguard?

dear ganeshji,

i am of the opinion that all ur money should be protected, not half.

2 nifty put options to hedge 2 bank nifty is what i recommend.

of course, this way you may not make money for small movement of BN,

but why play for small movement?

BN gives a move of 1000 points 8 out of 12 months.

and these moves can be gauged using indicators

(not option data of operators - one reason why technicals are indispensable).

out of 1000 move

assuming u manage to gain 800,

150 odd points will be the cost of hedging.

even that can be recovered if you can walk step by step in tandem with on-the-way fluctuations/volatility.

e.g. i booked BN profit at 9652 on 27th and bought again at 9496 yday.

this has resulted in my hedged nifty puts becoming "free of cost" till the end of october series.

i can take whatever "panga" with my godfather "mr.hedge" behind my back.

if u don't hedge all ur "wealth on the trading table" fear will get the better of you.

"never trade with scared money"

and

"never trade out of fear, never fear to trade."