Sunday, September 14, 2014

When and What Option Strategies to Implement?

There are may ways to trade options, out right buying a call or put, naked selling call or put, using spreads. Then there are 100 different ways one can setup spreads, to get a credit or debit spread.

The question is do i need to know all spreads?
No, Knowing about all different kind of spreads is theoretical knowledge. But knowing what to use in certain market condition is trading knowledge / practical knowledge.

Anyway ...... Based on my experience, This is how I take trades.

If My Projection is extremely bullish (from certain setups) I buy calls and / or sell Bull put spread or Put credit spread. If extremely Bearish then vice versa.

If Neutral - Iron Condor.

If I know this will be a grinder (mostly I ignore, But will play this if I cant find any other).
           If Bull grind - call debit spread and / or put credit spread
           If Bear grind - put debit spread and / or call credit spread

Keep it simple and stupid.

You can also use low risk trade like Butterfly. Also can use a Broken wing butterfly, and manage the position to create a zero loss trade @ expiry. You can create a butterfly in many different ways. Traditional, Inverse, Iron Butterflies etc....

There are many different combinations, creating a net net Zero loss trades @ expiry. Provided your projection is correct. 

Sunday, September 7, 2014

Curios if the Standard Deviation Indicator Worked?

Here You GO,

This is one of the High Probability Setup. The Key factor is Option Liquidity.

This indicator is designed with Historical Volatility (HV). The better way to perform this would be with Implied Volatility (IV).

If the IV is relatively lower (IV percentile < 30). Then there would not be much of a difference between choosing HV or IV. If the IV Percentile is > 40. Its better to use IV Std Dev.

Note: Its just my way to trade for premium erosion. If you choose to disagree, by all means go ahead.

As usual - GOOD LUCK

Thursday, September 4, 2014

Why not to crowd charts with indicators.

Using RSI or Stochastic, Measures the same (momentum / buying or selling). Like same story different version. Here is a proof.

Its like 1+1 = 2 or 2+3 - 4 = 1. End result is the same.

Still not convinced?

Its the same chart, same indicator. With different lookback periods.

First chart with RSI(3) and Fast Stochastic(8)
Second chart with RSI (3 & 14) and Full Stochastic (14,3)

both stochastic has the % D lines hidden. In my opinion its just a freaking distraction to traders.

Its up to you to use whatever you want.

But knowing how to use them is the key. Not how many you use.

Hope, this helps. 

How does probability help you keep in track......

Notice I had Setup SCTY for both bullish and bearish!!!!

Did I know it? No way.

All I knew was the probability of the setup triggering a long position vs short position was equal. When you have such a trade setup - be prepared.

After all being prepared to tackle the outcome of the market is all you can do. Not predict bottom and top.

as usual Good Luck, and take a good look at the probable scenario.