SUNK COST AND RISK MANAGEMENT

LOSING MONEY? WHAT NOW?
If you find yourself thinking along these lines [placing a wager that recovers lost money and gets you back to break-even status is so important, that taking extra risk is acceptable], then don’t worry, you are like the majority of people in the world today.
Just remember that though it can be very tempting to take a big risk in order to break even, that risk might put you much further in the hole. Before you take that gamble, think very seriously about the consequences of losing.
If you can consider it rationally, you will realize that it’s much better to stop before you do further damage. Sometimes it’s better to accept a loss and walk away—much like sunk money.
It is very difficult for most people to walk away from a situation in which money has been lost. The temptation to continue playing the game is so strong -- not only for financial reasons -- but because it is psychologically unsatisfying to end the game as a loser. Getting back to break even is almost addictive.
In different language: Consider this scenario: You play poker, bet at the racetrack or invest in the stock market, and find yourself losing $100. You can walk away or continue to play. For most people, the possibility of recovering that $100 is so tempting that they may wind up losing far more money than they can afford to lose -- just in an attempt to recover losses.
This is the important part that is difficult for rational people to recognize: When people make an investment, earning $100 has a certain amount of pleasure associated with it. However, if they first lose $100, then earning $100 is far more satisfying -- despite the fact that it has the same financial value. "Not losing" is more satisfying than "winning" -- and that may lead to taking more risk than is prudent.
SUNK COST
When money has been lost and cannot be recovered, there is nothing that can be done. That is the sunk cost.

OPTIONS TO RIDE OUT CHOPPY ; EXPIRY DAY

Nifty tad below 7900 ahead of F&O expiry, Sensex falls 119 ptsWeakness in global markets also caused selling pressure in Indian equities. European equities slipped into negative territory as investors fretted over renewed weakness in global commodity markets. Asian markets closed mixed. The Nifty shut shop below psychological 7900-mark ahead of expiry of December derivative contracts. Shares of Infosys, TCS, Reliance Industries, State Bank of India, Maruti Suzuki, Wipro and Hero Motocorp were down 1-1.6 percent while ITC, Tata Motors, Tata Steel, NTPC and BHEL gained 0.5-1 percent.

DEFINITION of 'Iron Condor'

An advanced options strategy that involves buying and holding four different options with different strike prices. The iron condor is constructed by holding a long and short position in two different strangles strategies. A strangle is created by buying or selling a call option and a put option with different strike prices, but the same expiration date. The potential for profit or loss is limited in this strategy because an offsetting strangle is positioned around the two options that make up the strangle at the middle strike prices.
BREAKING DOWN 'Iron Condor'
This strategy is mainly used when a trader has a neutral outlook on the movement of the underlying security from which the options are derived. An iron condor is very similar in structure to an iron butterfly, but the two options located in the center of the pattern do not have the same strike prices. Having a strangle at the two middle strike prices widens the area for profit, but also lowers the profit potential.
Short iron condor
A short iron condor consists of four legs as described above and results in a net credit received. As for profit potential, the maximum potential profit is the initial credit received upon entering the trade. This profit will occur if the underlying stock price, on expiration date, is between the two middle (short) strikes. One of the benefits of a short iron condor (and potentially options in general) is limited risk. For short condors, the maximum loss comes when the underlying stock price drops below the lowest strike (long put) or above the highest strike (long call). If you want an equation for max loss, think of it as the difference in strike prices of the two lower-strike options (or the two higher-strike options) less the initial credit for entering the trade

TATAMOTORS STRATEGY UPDATE:HOPE YOU BOOKED PROFIT

TATAMOTORS 350 PUT BOOK PROFIT NEAR 6
Tatamotors strategy was given on 6-AUG-2015 Rocks!!!
Total risk=4800
Total returns=8000(4800 COST+3200 RETURNS)

Implied Volatility May Continue to Swing

FOR BEST OPTION TIPS FILL UP THE FORM GIVEN TO YOUR RIGHT SIDE>>>>
The last several months, the market has shown some good movement with some wild swings. The S&P 500 and Dow set their all-time highs once again, and then promptly moved lower. Now we are about to start the next earnings season and the roller-coaster ride may continue. It is important for option traders to understand one of the most important steps when learning to trade options; analyzing implied volatility and historical volatility. This is the way option traders can gain edge in their trades. But analyzing implied volatility and historical volatility is often an overlooked process making some trades losers from the start. An option trader needs to look back at the last couple of months of option trading to see how volatility played a crucial part in option pricing and how it will help them going forward.
Implied Volatility and Historical Volatility
Historical volatility is the volatility experienced by the underlying stock, stated in terms of annualized standard deviation as a percentage of the stock price. Historical volatility is helpful in comparing the volatility of a stock with another stock or to the stock itself over a period of time. For example, a stock that has a 30 historical volatility is less volatile than a stock with a 35 historical volatility. Additionally, a stock with a historical volatility of 45 now is more volatile than it was when its historical volatility was, say 30.

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.

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:-

Always Chose Liquid Counters to Trade Options

Simply put, liquidity is all about how quickly a trader can buy or sell something without causing a significant price movement. A liquid market is one with ready, active buyers and sellers at all times.Here’s another, more mathematically elegant way to think about it: Liquidity refers to the probability that the next trade will be executed at a price equal to the last one.Stock markets are generally more liquid than their related options markets for a simple reason: Stock traders are all trading just one stock, but the option traders may have dozens of option contracts to choose from. Stock traders will flock to just one form of DLF stock, for example, but options traders for DLF have perhaps six different expirations and a plethora of strike prices to choose from. More choices by definition means the options market will probably not be as liquid as the stock market.Of course,

BOOK PART PROFIT IN SBIN STRANGLE

SBIN STRANGLE UPDATE:BOOK PROFIT IN SBIN 2150 PUT NEAR 75-77 HOLD 2400 CALL-

Book Profit in Petronet Plain Vanila Option Strategy

Petronet 170 call given @ 1.9 in last post has made high of 4.6 today.Book some profit Near 5.5 and keep SL cost.Pls up the form ------> to Get Option Tips On mobile.........

IDFC BULL CALL SPREAD STRATEGY

Here we present you Bull call spread option trading strategy which is explained in detail in our earlier post http://optioncallputtradingtips.blogspot.in/

IDFC BULL CALL SPREAD STRATEGY

LEG1: BUY IDFC  160 NOV CALL OPTION @ 5.10

LEG2: SELL IDFC 170  NOV CALL OPTION @ 2.2

COST =5800          

 RISK PER LOT = (5.10-2.2)*2000=5800

MAX RETURN 14200

Pay off table

THINGS TO KEEP IN MIND WHILE TRADING OPTIONS

Below given are the DO’S while trading in options

1.Always deal with the market intermediaries registered with Sebi/Exchanges

2.Provide complete and correct email address and mobile number while opening                   trading / demat account.

3.Trade wisely ,create your own trading strategy depending upon the conclusions drawn from the various sources.

4.Insist on a Contract Note for every trade....

BEST OPTION CALL PUT TIPS

1. Clear Vision Of Target

We must always remember that reward and risk go hand-in-hand in trading and that we cannot expect to achieve high returns without planning for high risk (i.e. draw-downs). Your objectives and goals will be very specific to you, but they must have the following characteristics to be useful:

Be measurable
Be achievable
Be worthwhile
Be positive 

2. Discipline

This is most important part of option trading. In order to realize the full potential of your trading systems it is critical that you take every trading entry, adjust every stop, and close out every trade as and when your system says you should do

3. Never add to a losing trade

Averaging is Options could prove to be very dangerous as there is always time factor.