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OPTION STRATEGY :DLF STRATEGY FOLLOW UP

BOOK PROFIT IN DLF 150 PUT NEAR 10.5-11

DLF OPTION STRAP STRATEGY

BUY 2 LOTS DLF 180 CALL @ 2.4

BUY  1 LOT 150 PUT @ 2.7

BUY  ONE  LOT DLF 150 PUT @2.7

BUY TWO LOTS  DLF 180 CALL @2.4

COST =5.1

TOTAL RISK  = 15600

RETURN = UNLIMITED

UPPER BREAK GIVEN POINT=185.1

LOWER BREAK GIVEN POINT=144.9

 For Pay off table click on read more:

LONG BUTTERFLY STRATEGY

Short two calls at the middle strike, and long one call each at the lower and upper strike.  The upper and lower strikes (wings) must both be equidistant from the middle strike (body), and all the options must be the same expiration.

Max Loss

The maximum loss would occur should the underlying stock be outside the wings at expiration.

Max Gain

The maximum profit would occur should the underlying stock be at the middle strike at expiration. 

HDIL STRANGLE STRATEGY

BUY HDIL 95 CALL @ 1.4

BUY HDIL 70 PUT    @ .90

COST=2.3

RISK PER LOT =9200

RETURN=UNLIMITED

UPPER BREAK GIVEN POINT=97.3

LOWER BREAK GIVEN POINT=67.7

PAY OFF TABLE:

Types of derivatives available in share markets

There are different types of derivatives available in share markets which are recognized as financial instruments. Share market experts accept derivatives as contracts between two or more parties (one type of security) that are practiced for trading or for share markets. The fluctuation of price and value of a derivative totally depends upon one or more financial assets.

In western developed economies there are various types of derivatives that are introduced much before. In National Stock Exchange of India, types of derivatives are used almost 10 years back. A few years after its released date in NSE and BSE, derivatives occupied an important financial platform to earn profit for shareholders or traders. Now these different types of derivatives are integral parts of Indian share markets.

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Is the Long Call Option the Same as the Short Put option?

Long calls are not the same as short puts. Buyers of option contracts are long, while sellers or writers of option contracts are short. Call and put options give you the right to buy or sell the underlying securities at specified prices, known as strike prices, before predetermined expiration dates. Long and short option strategies have different risk-return profiles, with downside risk usually limited for long positions.

Basics

The relationship between strike prices and market prices determines profits and losses. A long call is profitable when its strike price is below the market price of the underlying stock, while a long put is profitable when its strike price is above the market price. The reverse is usually true for short calls and puts. You pay a premium, which is the market price, when you open or buy an option contract, and you receive the premium when you sell or close an option contract.

ADJUSTMENT OF AN OPTION POSITION

Adjusting an option position really is an essential skill for any investor – I would even say it is a mandatory requirement. Properly managing risk by adjusting can help you repair strategies that have gone wrong, limit huge losses or even create additional potential gains As a disclaimer it’s important that you know both HOW to adjust an option trade and that you are aware of the additional broker commissions you will be charged to exit/enter additional contracts. Take your time when adjusting so that you don’t adjust and create an even bigger hole from which to dig out of.

1. What’s the goal?

 Make sure that you are either reducing risk somehow someway or  creating a new strategy that could make you more money.

2. Are you really reducing risk?

Forget for a minute that you are not going to make money if you get into a bad trade.

3. Should you just close out the trade?

This is always one of my 1st considerations. If you’ve made a small profit and things are starting to go south it might be a wise decision to just close out the trade and re-evaluate the market. Don’t let your ego get in the way of making money.

4. How have the market trend  changed?

I’m sure when you entered the trade you had a firm opinion on the market if the trend is changing then is your options strategy structured to profit from the new market Wait to see a medium term change to adjust and remember that 1 day doesn’t make a trend.

Trading Strategy: Buying Call Options to Hedge a Short Sale

One of the riskiest investment strategies in the financial world involves selling stock short. This involves borrowing stock from your broker and selling it. If the stock's market price drops, you can buy it back at the lower price, pay back your broker and pocket the difference. Problems arise if the stock price doesn't co-operate and instead skyrockets. You can hedge your position by buying protective call options.

Call Options

A call option gives the option holder the right, but not the obligation, to purchase the underlying security at a fixed price, called the strike price, for a set period. If the option isn't exercised before it reaches its expiration date, it becomes worthless and ceases to exist. Call options are traded on major investment exchanges in much the same way that stocks are traded. While owning a call option doesn't give you ownership of the underlying stock, it does give you control over that stock for as long as the option is in force.

COMPARISON BETWEEN DERIVATIVE & EQUITY

In derivatives trading, traders can hold long or short positions for more than 1 day whereas in equity trading, short sell trading are supposed to square off before the market closing on the same day. Traders must not carry forward their short positions in any way, denying which results in penalty around 20% in auction market Apart, these tips are divided into indexes and stocks. As said in our previous article, virtual scrips like nifty, bank nifty, cnx IT ect., are called as index stocks where as companies which exist in real are said to be stock scripts.

RCOM STRAP STRATEGY UPDATE

RCOM OPTION STRAP STRATEGY ROCKS!!!!!!!!!!

 HOPE YOU HAVE BOOKED PROFIT IN  RCOM 130 AUG PUT @ 8 (GIVEN @2.8) contd..to hold  the call.

PROFIT FROM RCOM 130 PUT=(8-2.8)*2000=10400

RCOM STRAP STRATEGY UPDATE

RCOM STRAP STRATEGY :
BOOK PROFIT IN RCOM 130 AUG PUT @ 7.8- 8 (GIVEN @2.8)

OPTIONS COMBINATIONS

A combination is an option trading strategy that involves the purchase and/or sale of both call and put options on the same underlying asset.

Call & Put Buying Combinations

Straddle

The straddle is an unlimited profit, limited risk option trading strategy that is employed when the options trader believes that the price of the underlying asset will make a strong move in either direction in the near future. It can be constructed by buying an equal number of money call and put options with the same expiration date.

Strangle

Like the straddle, the strangle is also a strategy that has limited risk and unlimited profit potential. The difference between the two strategies is that out-of-the-money options are purchased to construct the strangle, lowering the cost to establish the position but at the same time, a much larger move in the price of the underlying is required for the strategy to be profitable.

RCOM OPTION STRAP STRATEGY

BUY  ONE  LOT RCOM 130 AUG PUT @2.8

BUY TWO LOTS RCOM 150 AUG CALL @2.3

COST =5.1

TOTAL RISK  = 15800

RETURN = UNLIMITED

UPPER BREAK GIVEN POINT=155.1

LOWER BREAK GIVEN POINT=124.9
 For Pay off table click on read more:

TWO WAYS TO SELL AN OPTION

In contrast to buying options, selling stock options does come with an obligation - the obligation to sell the underlying equity to a buyer if that buyer decides to exercise the option and you are "assigned" the exercise obligation. "Selling" options is often referred to as "writing" options.

When you sell (or "write") a Call - you are selling a buyer the right to purchase stock from you at a specified strike price for a specified period of time, regardless of how high the market price of the stock may climb.

Covered Calls

One of the most popular call writing strategies is known as a covered call. In a covered call, you are selling the right to buy an equity that you own. If a buyer decides to exercise his or her option to buy the underlying equity, you are obligated to sell to them at the strike price - whether the strike price is higher or lower than your original cost of the equity. Sometimes an investor may buy an equity and simultaneously sell (or write) a call on the equity. This is referred to as a "buy-write."

THREE WAYS TO BUY AN OPTION

When you buy equity options you really have made no commitment to buy the underlying equity. Your options are open. Here are three ways to buy options with examples that demonstrate when each method might be appropriate:

Hold until maturity....., then trade:-

This means that you hold onto your options contracts until the end of the contract period, prior to expiration, and then exercise the option at the strike price.

When would you want to do this? Suppose you were to buy a Call option at a strike price of $25, and the market price of the stock advances continuously, moving to $35 at the end of the option contract period. Since the underlying stock price has gone up to $35, you can now exercise your Call option at the strike price of $25 and benefit from a profit of $10 per share ($1,000) before subtracting the cost of the premium and commissions.

Trade before the expiration date :-

You exercise your option at some point before the expiration date.

For example: You buy the same Call option with a strike price of $25, and the price of the underlying stock is fluctuating above and below your strike price. After a few weeks the stock rises to $31 and you don’t think it will go much higher - in fact it just might drop again. You exercise your Call option immediately at the strike price of $25 and benefit from a profit of $6 a share ($600) before subtracting the cost of the premium and commissions.

Let the option expire :-

You don’t trade the option and the contract expires.

Another example: You buy the same Call option with a strike price of $25, and the underlying stock price just sits there or it keeps sinking. You do nothing. At expiration, you will have no profit and the option will expire worthless. Your loss is limited to the premium you paid for the option and commissions.

Again, in each of the above examples, you will have paid a premium for the option itself. The cost of the premium and any brokerage fees you paid will reduce your profit. The good news is that, as a buyer of options, the premium and commissions are your only risk. So in the third example, although you did not earn a profit, your loss was limited no matter how far the stock price fell.

SPOT OPTION ADVANTAGES AND DISADVANTAGES

Initially used in Europe as another way to trade currency options, single-payment options trading (SPOT) options have gained acceptance in other markets as well. Investors who are learning to invest might consider using them, as they offer another way to possibly generate profit and lower risk.
What are SPOT Options?
SPOT options allow an investor to set the conditions that must be met to receive a desired payout. Setting up this type of option involves three steps:

1. The investor defines a trading scenario that, according to his/her analysis, has the best prospects, including the risk-reward tradeoff.
2. The broker determines the probability the conditions will be met and proposes an appropriate premium. The price of the option or the premium quoted by the broker will depend on the likelihood of the scenario occurring.
3. The investor can agree to either pay the premium and then buy the option or turn it down. Normally, the price of the option or premium represents a percentage of thatpayout.

SPOT options are vanilla put and call options whose value is set by the conditional scenario, not just the price and the expiration date.

The Advantages and Disadvantages
Like most investing techniques, there are advantages when using SPOT options:

• While a bit different from normal options, SPOT options are easy to trade. With a normal option you might not be able to close out the position, since no one is willing to take the opposite side. With SPOT options, this is never a problem, since there is never a need to close out the position - it is a one-sided trade.
• SPOT options give you the opportunity to create different scenarios that allow choosing exactly what you believe will happen in the market. In fact, investors who use SPOT options define the specifics of the trade.
• With SPOT options, the downside risk is limited to the premium paid.
• The option scenario defines the reward, so it is known before entering the trade. Before committing to the trade, you know the risk-reward tradeoff....

BINARY OPTION STRATEGIES & MANAGEMENT

As an entertaining and interesting trading method, binary option trading is becoming popular among the investors day by day.

A lot of binary option strategies are available which the traders use in order to succeed in trade. The basic concepts of all binary option strategies are the same although different investors follow different strategies. As opposed to other trades, binary option trading offers only two probable outcomes, loss or gain.

In binary option trading the turnover is fast which is yielded by calls and puts. Because of this if a good binary option strategy is used, traders would see most of their investments bringing high returns.

There are some basic strategies followed by all traders concerning the binary option strategy guide. The first one is the pairing up of an “in the money” call and money put. That’s why you can still earn money if the spot price is between the two prices at the expiration.

Another useful strategy in binary option trading is the pairing the put with a call into a hedge and double position. This binary option strategy helps to make very high profits.

Binary option betting strategy is another very popular strategy. In this strategy an investor uses a pull or call option if an unexpected move occurs on the market. This strategy is based on the fact that people put positions on indicators which have large scale impacts on the market prices.

Strategies to Help You Get Started with Binary Options Trading

It should come as no surprise that binary options trading is fast emerging as a great alternative  investment channel and a genuine one at that. With real estate prices taking in 2008 and witnessing huge fluctuations ever since, people all around have been looking to find new ways to invest their personal finances.

Binary options trading has been gaining steam in the recent times as more & more people are reading about the simplicity of the binary options trading and the potential return on investment. The fact that it can be done completely online has also seen a lot of work from home moms and even working professionals experiment with binary options trading in spare time. While binary options trading is definitely becoming a viable investment vehicle, there are some risks to binary options trading just like any other investment. Therefore, it always helps to learn the right strategies for binary options trading before you jump into it.

Here are some binary options trading strategies that should come in handy if you want to start with binary options trading:-

JPASSOSIAT STRANGLE STRATEGY UPDATE

Book profit in JpAssosiat 90 put @ 2 and  contd..to hold call

CALCULATION OF P & L IN OPTION

While it comes to calculation, there is thing we have to learn  how to calculate profits/losses are calculate. 

Let’s go with an example, nifty to understand better how profits and losses are calculated in options trading. The lot size of nifty is 50 shares in number irrespective of call or put. The profit/loss does not depend on the type of call (nifty call option or nifty put option), expiry or strike. It directly depends only on premium which trader selects while purchasing the option.

HEDGE A CALL OPTION WITH A PUT OPTION ?

Sometimes an investment has made substantial gains, but you're not ready to sell the assets just yet. At the same time, you don’t want to risk losing the profit you’ll get by cashing in immediately. When you face this dilemma with call options, you can hedge your position with offsetting put options.

Calls and Puts

When you purchase call options on stock or another underlying security, you receive the right to buy shares at a designated price called the strike price. You can exercise your right to buy until the option expires, but you are not required to do so. Put options work exactly the same, except you get the right to sell a security instead of buy it. Suppose you buy a call and put option contract for the same stock at the same strike price. If the stock price increases, you would exercise the call to buy shares at the lower strike price, and then sell at market value, netting a profit. The call option is said to be “in the money.” The put option has no value, because you pay more to buy the shares needed to exercise the option than the strike price you are paid. However, if the price of the stock falls instead, the call option would have no value and the put option would be in the money.

OPTION TRADING STRATEGIES : HOW TO USE THEM FOR MAKING PROFIT IN ANY MARKET SITUATION

 How to Use Option Trading Strategies in any Market Situation

Option strategies are implemented by combining one or more option positions and possibly an underlying stock position.

In other words, a trading strategy is a calculated way of using options singly or in a combination, in order to make a profit from market movements.

Option strategies can give you a greater profit with less risk compared with the traditional buying and selling of stock.

One vitally important thing to consider when investing is when to get out and how. An effective exit strategy needs to be decided upon in advance, and stuck to without allowing emotions to sway you.

There are many types of option trading strategies that can be applied, depending on your opinion, or ‘prediction,’ of which direction the underlying stock is going to move.

A guideline for picking the right stocks to go with the right options strategies is available by reading “Options Strategies for Different Stock Styles”. The various stock movements are taken into account – bullish and bearish – as well as major moves, or slower, moderate moves, in either direction - and a strategy that can be applied to each of these movements.

JPASSOCIAT STRANGLE STRATEGY

Buy Jp assosiat 90 CALL @1.4       

Buy Jp assosiat 65 PUT   @ 1.4

COST =2.8

RISK PER LOT = 22400

RETURN = UNLIMITED

UPPER BREAK GIVEN POINT=92.8

LOWER BREAK GIVEN POINT=63.2

Pay off table:..

Low Capital Needed In Option Trading as Compared To Stock Future

Option trading is a trader friendly kind of trading which allows the trader to find new ways of doing business. It has many strategies and the trader is allowed to choose any one of them or plan a strategy of his own master it and earn profit. Other trading such as stock trading and future trading does not support this feature and have their strict rules which must be followed to do business. Moreover, if recession occurs there is no way by which the trader may safe his money. He may lose all of it or his money may stick in the market.
One of the major benefits of option trading is that you can start trading with even low capital invested. Then use that profit to re-invest and earn even more money. So this trading style supports a small business to flourish and is giving the new traders to trade without getting loans and selling their personal property to do business. While in future or stock trading sometimes the traders bears so much loss so as to leave the business or sell their personal properties to compensate the effect....

Index Vs Stock Option

Index and stock options are known as unique investment opportunities for all men and women who want to make it big in the investment market. However, there are certain peculiarities between index and stock options. 
Index Option 
Index as a type of investment trading is simply a list of number of various stocks that are quite similar to one another. Index option signifies the composite value of all the stocks in question.  in the Indian Stock market, index option is used to evaluate the progress of the Indian economy.  It is also used in determining the general overview of the stock market in a given economy.
Stock Option
Stock option is usually referred to as a legal contract which grants the contract owner the right to purchase or sell stock of a specific quantity at a particular set price before a specific date. Stock option is usually has a standardized term. It has the ability to pull sellers and buyers together in a fantastic manner.  Stock option usually has two main varieties namely; the call option and the put option.  Call option grants the owner the right to buy the stock at a fixed price over a fixed period of time, while put option grants the owner the right to sell the stock at a fixed price over a specific period of time. 
Well, having seen both index and stock option, one can easily find out that both of them also belong to the same category in the capital investment market.  Really, the index option is usually well known by almost every ordinary human person.... 

COMPARISON BETWEEN CASH AND FUTURE TRADING

1.In the cash segment, one can pick up as many shares one wants starting from just one share but Futures, a trader cannot buy less than the lot size prescribed
2. From an investors point of he should invest in Cash Segment. Since Futures are a trading tool, the risk is also high to a large extent.
3. In Futures, a trader needs to pay 33% tax on the profit. In equity, it is a flat proportion of 10% (short term capital gains) if trading done is within a year and no tax if sold later a year (long term capital gains).............

HOW TO PICK GOOD STOCK

In India the volume of investments has somehow depleted in the past 3 years. This market situation leaves extremely fragile scope for any bloopers as far as the common private investor is concerned. The intermittent slowdowns have brought the stock market to a situation where there is always a danger of a double dip; something which small traders and investors can hardly afford at this juncture. Hence, it is absolutely necessary for them to strategies and plan their tactics before making any investment decisions. And this is possible only when they know how to pick good stocks, based on serious and factual knowledge of the market, its history and its current trends.

How to Pick Good Stocks: Strategies and Contours

• The most important thing to remember before making any kind of investment is the current financial scenario of the investment destination- whether it is bank accounts, fixed deposits or in our case; the stock market. These do not operate in a financial vacuum and are notorious for their illusive speculativeness and other malpractices. Reading, understanding, observing and internalizing market trends is an art- an art which can be perfected only after years of practice, patience and fortitude. It is no child’s play and small investors with no experience of stock trading can be easy target for frauds. Hence, it is extremely necessary that the investor keeps an eye on the share market, learns its operational norms, peculiar institutional behavior and uninsured risks. Only after the investor, with or without the help of professional advisors, executes this plan of action can he/she hope to make any headway in terms of profits.

HOW TO MAKE OR LOOSE MONEY IN FUTURE TRADING

In Future trading one can buy any number of shares. In Futures, the trader buys a lot. The lot magnitude is set for every futures contract and it varies from stock to stock & also from company to company.

Margin payment:-

Buying a Futures contract one need not pay the entire value of the contract but just the margin. This margin sum is defined by the exchange. Let’s assume one buys a 1000 Futures contract of a particular company each share costing 50 Rs. This will sum to Rs. 50000 (1000 X 50 Rs). The trader need to pay only about 15% to 20% of that sum and this sum is called the margin amount. Assuming 15% the trader need to pay Rs. 7500 & not Rs. 50000

How to make or lose money:-...

BENEFITS AND RISKS OF OPTION TRADING

You may be wondering  why would an investor want to get involved with complicated options, when they could just go out and buy or sell the underlying equity? There are a number of reasons such as:

• An investor can profit on changes in an equities market price without ever having to actually put up the money to buy the equity. The premium to buy an option is a fraction of the cost of buying the equity outright.
• When an investor buys options instead of equity, the investor stands to earn more per dollar invested - options have "leverage."
• Except in the case of selling uncovered calls or puts, risk is limited. In buying options, risk is limited to the premium paid for the option - no matter how much the actual stock price moves adversely in relation to the strike price.

Now thing comes in our mind that if option given these benefits, why wouldn't everyone just want to invest with options? Options have characteristics that may make them less attractive for certain investors.

UNITECH STRANGLE STRATEGY ROCKS....!!!!BOOK PROFIT

Book profit in Unitech 40 Call near 2 contd... to hold the put
Total profit =10200 from the strategy. 
Hope you have booked profit. 

UNITECH STRANGLE STRATEGY

Buy Unitech 40   Call @.65

Buy Unitech 22.5 Put @.50

COST =1.15

RISK PER LOT =13800

RETURN = UNLIMITED

UPPER BREAK GIVEN POINT=41.5

LOWER BREAK GIVEN POINT=21

Pay off table:...