Trade Stats for 30-10-15

Trade Stats for 30-10-15

As on Oct 30, 2015 15:30:41 IST
Product	No. of contracts	Turnover (cr.)*	Premium Turnover (cr.)
Index Futures	2,79,804	16,080.39	-
Vol Futures	0	0.00	-
Stock Futures	6,24,231	32,010.11	-
Index Options	17,65,907	1,07,387.77	1,117.10
Stock Options	2,84,275	14,798.72	314.16
F&O Total	29,54,217	1,70,276.99	1,431.26

OUR LT BUTTERFLY STRATEGY ROCKS….!!!!!

CLOSING PRICE OF LT IN CASH WAS 1468.50

""REWRD IN LT STRATEGY IS 3250 @ RISK OF 750""

TRADE STATS FOR 28 OCT 2015

Trade Stats for 28-10-15

Product	No. of contracts	Turnover( cr.) *	Put Call Ratio	Premium Turnover ( cr.)
Index Futures	8,92,824	28,996.34	-	-
Vol Futures	0	0.00	-	-
Stock Futures	19,53,864	66,845.91	-	-
Index Options	1,28,10,561	3,14,505.50	0.92	1526.72
Stock Options	5,80,803	17,981.78	0.61	204.81
F&O Total	1,62,38,052	4,28,329.54	0.90	1731.54

Call Calendar Spread

 Using calls, the calendar spread strategy can be setup by buying long term calls and simultaneously writing an equal number of near-month at-the-money or slightly out-of-the-money calls of the same underlying security with the same strike price
Calendar spreads, also known as time spreads, are extremely versatile strategies and can be used to take advantage of a number of scenarios while minimizing risk. A calendar spread consists of buying or selling a call or put of one expiration and doing the opposite in a later expiration. More often than not, this involves buying or selling an option in the front month (the expiration closest to the current date) and selling or buying an option of the same strike either the next month or a few months out. They can also be done using weeklies instead, especially around events. Call or put calendar spreads look alike on a graph of profit and loss.

'Outright Option' call & put

An option that is bought or sold by itself; in other words, the option position is not hedged by another offsetting position. An outright option can be either a call or a put.
When option traders first get their feet wet trading options, they often just buy call options for a bullish outlook and put options for a bearish outlook. In their defense, they are new so they probably do not know many if not any advanced strategies which means they are limited in the option strategies they can trade. Buying call options and put options are the most basic but many times they may not be the best choice.
In addition, simply buying call options and put options without comparing and contrasting implied volatility (Vega), time decay (theta) and how changes in the stock price will affect the option premium (delta) can lead to common mistakes. Option traders will sometimes buy options when option premiums are inflated or choose expirations with too little time left. Understanding the pros and cons of an option spread can significantly improve your option trading.
BREAKING DOWN 'Outright Option'
Most option trades involve outright options. The opposite strategy to purchasing outright options is a spread trade strategy, which involves purchasing one option and selling another option of the same class but of a different series

Option Volatility

 variable in option pricing formulas showing the extent to which the return of the underlying asset will fluctuate between now and the options expiration. Volatility, as expressed as a percentage coefficient within option-pricing formulas, arises from daily trading activities
One of the most important steps in any option trade is to analyze 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 an often-overlooked step, thus making some trades losers from the start.
Volatility changes can have a potential impact - good or bad - on any options trade you are preparing to implement. In addition to this so-called Vega risk/reward, this part of the options volatility tutorial will teach you about the relationship between historical volatility (also known as statistical, or SV) and implied volatility (IV),
Implied Volatility and Historical Volatility
Historical volatility (HV) 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
In contrast to historical volatility, which looks at actual stock prices in the past, implied volatility (IV) looks forward. Implied volatility is often interpreted as the market’s expectation for the future volatility of a stock. Implied volatility can be derived from the price of an option. Specifically, implied volatility is the expected future volatility of the stock that is implied by the price of the stock’s options. Implied volatility is often interpreted as the market’s expectation for the future volatility of a stock. Implied volatility can be derived from the price of an option. Specifically, implied volatility is the expected future volatility of the stock that is implied by the price of the stock’s options.

 

 

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

How Option Delta and Gamma Influence Each Other

How Option Delta and Gamma Influence Each Other
As the market has been very volatile lately. Stocks have been moving in sometimes dramatic on a daily basis so it might be wise to review how option prices change when the underlying changes. The option “greeks” help explain how and why option prices move. Option delta and option gamma are especially important because they can determine how movements in the stock can affect an option’s price.
Option Gamma
The gamma of an option indicates how the delta of an option will change relative to a 1 point move in the underlying asset. In other words, the Gamma shows the option delta's sensitivity to market price changes.
Gamma is important because it shows us how fast our position delta will change as the market price of the underlying asset changes. When you are "long gamma", your position will become "longer" as the price of the underlying asset increases and "shorter" as the underlying price decreases. If you sell options, and are therefore "short gamma", your position will become shorter as the underlying price increases and longer as the underlying decreases.
Option Delta
The delta of an option is the sensitivity of an option price relative to changes in the price of the underlying asset. It tells option traders how fast the price of the option will change as the underlying stock/future moves.
Call Options
Whenever you are long a call option, your delta will always be a positive number between 0 and 1. When the underlying stock or futures contract increases in price, the value of your call option will also increase by the call options delta value. Conversely, when the underlying market price decreases the value of your call option will also decrease by the amount of the delta.
Put Options
Put options have negative deltas, which will range between -1 and 0. When the underlying market price increases the value of your put option will decreases by the amount of the delta value. Conversely, when the price of the underlying asset decreases, the value of the put option will increase by the amount of the delta value.
Option delta and option gamma are critical for option traders to understand particularly how they can affect each other and the position. A couple of the key components to analyze are if the strike prices are ATM, ITM or OTM and how much time there is left until expiration. An option trader can think of option delta as the rate of speed for the position and option gamma as how quickly it gets there.

 

 

 

 

LT BUTTERFLY STRATEGY FOR OCTOBER'2015

BUY 1 LOT LT 1400 CALL @ 101

 BUY 1 LOT LT 1500 CALL @ 43

SELL 2 LOTS LT 1450 CALL @69

Total risk=750

Upper break given point=1550

Lower break given point=1350

PAY OFF TABLE:

DLF STRANGLE STRATEGY

BUY DLF 140 CALL @3.3

BUY DLF 110 PUT @   2.7

COST=6

TOTAL RISK  = 12000

RETURN = UNLIMITED

UPPER BREAK GIVEN POINT=146

LOWER BREAK GIVEN POINT=104

Pay off table:

What Is Options Settlement In The First Place?

Settlement in options trading is the process where the terms of an options contract are resolved between the holder and the writer. In options trading, the holder is the one who owns an options contract and a writer is the person who sold the holder that options contract. Settlement  in call options contracts involve the holders of the options contracts paying the writers for the underlying asset at the strike price. Settlement in put options contracts involves the holder of the options contract selling the underlying asset to the writer at the strike price. After settlement, the options contract will cease to exist and all obligations between the holder and the writer would be resolved.

Settlement can happen under 2 circumstances; Voluntary exercise by the holder or automatic exercise upon expiration.
The holder of an American Style Option could choose to voluntarily exercise their options any time prior to expiration. Once that happens, settlement takes place between the holder and the writer and the options contract is resolved.

What the Option Market Can Tell You about that Stock You Love

For an investor who understands how to read the option market’s tea leaves, investing becomes like playing poker with an opponent who always holds his hand face up. This might seem too good to be true, but in fact, option prices contain within them the market’s consensus estimates for the future price of a stock. If you know where to look, you can easily decide if the market’s consensus price for a stock is near or far from your own idea of its value. Value investors who revel in finding differences between stock prices and intrinsic values will love what the option market can tell them about future expectations for stocks.

What Option Can Tell an Intelligent Investor?
Option pricing models are, first and foremost, statistical models of how stocks are likely to move in the future. The option pricing bit is almost an afterthought once the hard work of stock price forecasting is done. all option pricing models under the general term “Black-Scholes Model” or “BSM.” All subsequent models are basically tweaks of the BSM, in fact.) For all the mathematical complexity people associate with option pricing, it’s actually a pretty blunt tool. It’s based on a few, almost laughably simple assumptions:
1.       The market is “efficient”, so a stock’s market price represents its true value.
2.      Stock prices drift upward at the same rate as the rate of return for risk-free bonds.
3.      New positive and negative information relevant to the stock’s price comes in randomly, so the stock is as likely to go up as it is to go down.
4.      Stock returns follow a bell curve distribution.

 

HOW TO BUY OPTIONS

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Puts, calls, strike price, in-the-money, out-of-the-money — buying and selling stock options isn't just new territory for many investors, it's a whole new language.
Options are often seen as fast-moving, fast-money trades. Certainly options can be aggressive plays; they're volatile, levered and speculative. Options and other derivative securities have made fortunes and ruined them. Options are sharp tools, and you need to know how to use them without abusing them.
Stock options give you the right, but not the obligation, to buy or sell shares at a set dollar amount the "strike price" before a specific expiration date. When a "call" option hits its strike price, the stock can be called away. Conversely, with a "put" option the shares can be sold, or "put," to someone else. The value of puts and calls depends on the direction you think a stock or the market is heading. Stated simply, calls are bullish; puts are bearish.

What is the difference between options and futures?

The main fundamental difference between options and futures lies in the obligations they put on their buyers and sellers. An option gives the buyer the right, but not the obligation to buy (or sell) a certain asset at a specific price at any time during the life of the contract. A futures contract gives the buyer the obligation to purchase a specific asset, and the seller to sell and deliver that asset at a specific future date, unless the holder's position is closed prior to expiration.
Another key difference between options and futures is the size of the underlying position. Generally, the underlying position is much larger for futures contracts, and the obligation to buy or sell this certain amount at a given price makes futures more risky for the inexperienced investor.

The difference between futures and options as financial instruments depict different profit pictures for parties. The gain in the option trading can be obtained in certain different manners. On the contrary, the gain in the future trading is automatically linked to the daily fluctuations in the market. This is to say that the value of profit positions for investors is dependent upon the market position at the close of the trading every day. Therefore, every investor should have a prior knowledge of both futures and options before they enter the financial market operations.

1. A future is a contract which is governed by a pre-determined price for selling and buying at a future period. In options, there is the right to sell or purchase of underlying assets without any obligation.
2. A future trading has open risk. The risk in option is limited.
3. The size of the underlying stock is usually huge in future trading. Option trading is of normal size.
4. Futures need no advance payment. Options have the advance payment system of premiums

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Hedging

Hedging is the practice of purchasing and holding securities specifically to reduce portfolio risk. These securities are intended to move in a different direction than the remainder of the portfolio - for example, appreciating when other investments decline. A put option on a stock or index is the classic hedging instrument Options are a great way to hedge against your existing positions to decrease risk
When properly done, hedging significantly reduces the uncertainty and the amount of capital at risk in an investment, without significantly reducing the potential rate of return.
Hedging is what separates a professional from an amateur trader. Hedging is the reason why so many professionals are able to survive and profit from stock and option trading for decades
Downside Risk
The pricing of hedging instruments is related to the potential downside risk in the underlying security. As a rule, the more downside risk the purchaser of the hedge seeks to transfer to the seller, the more expensive the hedge will be.
Spread Hedging
Index investors are often more concerned with hedging against moderate price declines than severe declines, as these type of price drops are both very unpredictable and relatively common.
The Bottom Line
Hedging can be viewed as the transfer of unacceptable risk from a portfolio manager to an insurer. This makes the process a two-step approach

  

Option Delta

Delta is probably the first Greek an option trader learns and is focused on. The ratio comparing the change in the price of the underlying asset to the corresponding change in the price of a derivative
In fact it can be a critical starting point when learning to trade options. A positive delta means the position will rise in value if the stock rises and drop in value of the stock declines. A negative delta means the opposite. The value of the position will rise if the stock declines and drop in value if the stock rises in price. Delta is one of four major risk measures used by option traders. Delta measures the degree to which an option is exposed to shifts in the price of the underlying asset. Delta tends to increase as you get closer to expiration for near or at-the-money options. Delta is not a constant

Call Options

Whenever you are long a call option, your delta will always be a positive number between 0 and When the underlying stock or futures contract increases in price, the value of your call option will also increase by the call options delta value.

Put Options

Put options have negative deltas, which will range between -1 and 0. When the underlying market price increases the value of your put option will decreases by the amount of the delta value. Conversely, when the price of the underlying asset decreases, the value of the put option will increase by the amount of the delta value.

 

 

How to Trade Nifty Options in Bearish Markets

Trading Nifty options in bearish market, in bearish people traders say they lose money but fact is bearish markets offer best money making opportunity as panic is higher in these markets so markets react fast. In case of bearish market you always look for selling opportunities or selling signals in technical indicator. We are talking about nifty option so we will be buying out of money put options if time of expiry is greater than 15 days, or else we will go with at the money or in the money put option. After selecting the type of put option now we will completely focus on the price action of the underlying i.e. nifty future and wait for pullback to buy that nifty put option. Target will be 50% of the total premium paid while purchasing put option and stop loss will be 25% of the total premium. In trading nifty options always remember a golden rule that you will never risk more than 10% of your total trading capital at any point of time.
Also it’s very dangerous to trade Nifty Options without proper guidance & knowhow. So, why don’t you leave the dangers to us and take yourself the most lucrative profit margin in the stock market.

How to Trade Options in Bear Market

A bear market is defined as a drop of 20% or more in a market average over a one-year period, measured from the closing low to the closing high. Generally, these market types occur during economic recessions or depressions, when pessimism prevails .Bear markets reflect slowing economic growth and corporate financial problems. Fearful traders panic and dump their holdings at a loss, which pushes stock prices down further and ignites a fresh round of selling. Investors can use several bear-option strategies to profit from a market-wide selling frenzy

Step 1

Buying put options is a straightforward bear strategy with low risk/high reward potential. The goal is for the stock price to drop below the put option strike price so the option is in the money prior to expiration. The amount of risk is limited to the option price plus the commission.

Step 2

Reasons Why Sensex, Nifty are Sinking

1. Lower-than-expected GDP data
one of the main reasons behind today's sharp fall in Sensex was the lower-than-expected GDP growth figure.
Data released by the Central Statistics Office ( CSO) on Monday showed the Indian economy grew by 7% in the June quarter, slower than the previous quarter's 7.5% expansion. Growth in the June quarter of 2014-15 was 6.7%.
While the 7% growth rate matches the June quarter growth of China and still places India in the league of fastest growing economies in the world, economists said more measures are needed to step up the acceleration.
2. Foreign investors sell record amount of Indian shares in August
Foreign investors sold a record amount of Indian shares in August, offloading even more than in the midst of the global financial crisis, as turbulent markets in China led many funds to reduce their holdings in riskier emerging markets.
Foreign institutional investors sold a net 168.77 billion rupees ($2.55 billion) in Indian shares in August, more than the previous monthly record of 153.47 billion rupees in October 2008, according to data from National Securities Depository Limited.
The sales helped push the Nifty down 6.6 per cent in August, its worst monthly performance since November 2011.
Analysts said the sales were largely a result of the overweight positions in India by foreign investors, who have been heavy buyers since 2012.
Foreign investors had been net buyers as early as July when India was seen as benefiting from outflows from China. They remain net buyers of 275.2 billion rupees this year.
3. Rate cut by HDFC
Banking and financial stocks led the decline after reports of HDFC Bank's steep base rate cut on Monday sparked fears that other lenders will be able to match it only at the cost of margins.
HDFC Bank cut its base rate by 35 basis points to 9.35 per cent from September 1 in a move to capture wider market share, according to media reports on Monday.
The move stoked fears that pricing pressure would lead to other banks taking a hit on their net interest margins as most banks would have a base rate of 35-65 basis points higher than that of HDFC Bank.

HDIL OPTION STRATEGY

Buy HDIL 70 CALL @ 3

Buy HDIL 50 PUT @ 2.2

COST=5.2

TOTAL RISK  = 10400

RETURN = UNLIMITED

UPPER BREAK GIVEN POINT=75.2

LOWER BREAK GIVEN POINT=44.8

Pay off table:

OPTION STRATEGY ROCKS..!!!!!

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Long Call Butterfly

Long Call Butterfly is one of the sideway strategies employed in a low volatile stock. It usually involves buying one lower strike call, selling two middle strike calls and buying one higher strike call options of the same expiration date. Typically the distance between each strike prices are equal for this strategy.

Combining two short calls at a middle strike and one long call each at a lower and upper strike creates a long call butterfly. The upper and lower strikes (wings) must both be equidistant from the middle strike (body), and all the options must have the same expiration date.

You may also execute the Long Butterfly strategy using all puts options. When all puts options are used, it is referred to as the Long Put Butterfly strategy. As to whether a butterfly strategy should be executed using all calls or all put options depend on the relative price of the option. The premium of both puts and calls option should be taken into consideration to achieve the optimum trade

Market Outlook

 Neutral around Strike

Summary

This strategy generally profits if the underlying stock is at the body of the butterfly at expiration.

Breakeven:

· Upside Breakeven = Higher Strike less Net Premium Paid

· Downside Breakeven = Lower Strike add Net Premium Paid.

Advantages and Disadvantages

 

Advantages:

·         Ability to make profit from a range bound stock with relatively lower cost outlay.

·         Limited risk exposure compare to Short Straddle strategy when the underlying stock moved beyond the breakeven point on expiration date.

Disadvantages:

·         The profit potential only come from the narrow range between the 2 wing strikes.

·         Bid/Ask spread from the various option legs may adversely affect the profit potential of the strategy