Discover and read the best of Twitter Threads about #OptionBasics
Most recents (5)
Thread on #OptionBasics for #Nifty #BankNifty or #Stocks for beginners
To understand options, three concepts are required:
1. Intrinsic / Extrinsic value
2. Time / Theta Decay
3. Implied Volatility
Option Value = Intrinsic + Extrinsic (Value)
To understand options, three concepts are required:
1. Intrinsic / Extrinsic value
2. Time / Theta Decay
3. Implied Volatility
Option Value = Intrinsic + Extrinsic (Value)
Intrinsic Value - Value of Option if it were exercised today at CMP.
Extrinsic Value - Total Value of time in the option.
ATM and OTM options are 100% extrinsic value. ITM options have more intrinsic and less extrinsic value.
Extrinsic Value - Total Value of time in the option.
ATM and OTM options are 100% extrinsic value. ITM options have more intrinsic and less extrinsic value.
ITM Options: Intrinsic Value = Price of Underlying Asset -
Strike Price
For eg.
Nifty is at 11,416. 11400 CE of 29 Oct 2020 is at 224.40/-.
Intrinsic Value is = 11416-11400 = 16
Extrinsic Value is = 224.40-16 = 208.40.
208.40 is time value.
Strike Price
For eg.
Nifty is at 11,416. 11400 CE of 29 Oct 2020 is at 224.40/-.
Intrinsic Value is = 11416-11400 = 16
Extrinsic Value is = 224.40-16 = 208.40.
208.40 is time value.
Part 3: Thread on #OptionBasics for #Nifty #BankNifty or #Stocks for beginners
In Part 2 we understood how to determine what IV is high and when to buy and sell options. Now we need to understand when to exit, roll or take a stop-loss.
...1/n
In Part 2 we understood how to determine what IV is high and when to buy and sell options. Now we need to understand when to exit, roll or take a stop-loss.
...1/n
@rohit_katwal Lets take a credit spread today:
Sell 11800 PE at 118
Buy 11700 PE at 75
Max risk is 57 point & max reward is 43 points. As visible from the Greeks, delta is almost neutralized and position is theta positive. Does one need to always look at greeks to strategize
2/n
Sell 11800 PE at 118
Buy 11700 PE at 75
Max risk is 57 point & max reward is 43 points. As visible from the Greeks, delta is almost neutralized and position is theta positive. Does one need to always look at greeks to strategize
2/n
@rohit_katwal There is a quick way to remain delta and theta neutral i.e.
When doing credit spreads: Sell one strike ITM and buy one strike OTM.
When doing debit spreads: Buy one strike ITM and sell one strike OTM.
This is a quick and dirty way to remain greek neutral.
...3/n
When doing credit spreads: Sell one strike ITM and buy one strike OTM.
When doing debit spreads: Buy one strike ITM and sell one strike OTM.
This is a quick and dirty way to remain greek neutral.
...3/n
Part 2: Thread on #OptionBasics for #Nifty #BankNifty or #Stocks for beginners
In Part 1 we understood Intrinsic/Extrinsic Value, Theta Decay and IV.
Now we need to understand another aspect of IV. Volatility is mean reverting. It means if Volatility is high, it tends..
...1/n
In Part 1 we understood Intrinsic/Extrinsic Value, Theta Decay and IV.
Now we need to understand another aspect of IV. Volatility is mean reverting. It means if Volatility is high, it tends..
...1/n
@rohit_katwal to decline and if Volatility is low, it tends to rise. So when deciding on Option Strategy we should consider IV. If it is low, we should buy debit spreads so that we benefit from rise in IV. If IV is high, we should sell credit spreads so that we benefit from...2/n
@rohit_katwal fall in volatility. Lets look at IV or Nifty and Bank Nifty in the given image it is: 18 and 29 respectively. Now how do we decide which IV is low or which is high? I prefer to use IV Rank method for it.
...3/n
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I welcome all the first time visitors to my profile. I am posting some tweets and information which you may found useful.
My name is Rohit Katwal and I am the founder of Katwal Asset Management.
Kindly Retweet so I can reach to more fellow traders and connect with them.
1/n
My name is Rohit Katwal and I am the founder of Katwal Asset Management.
Kindly Retweet so I can reach to more fellow traders and connect with them.
1/n
You can find more information about what we do on my blog cum website rohitkatwal.com
I keep my trading journal live for fellow traders to access. If some tweet about my trade is missing, it will surely be updated in my Live Journal here rohitkatwal.com/live-journal
2/n
I keep my trading journal live for fellow traders to access. If some tweet about my trade is missing, it will surely be updated in my Live Journal here rohitkatwal.com/live-journal
2/n
Whenever I close a week, trades are moved to past journal which can be accessed through the link docs.google.com/spreadsheets/d…
My Telegram Channel can be accessed through: t/me/rkatwaltradingupdates
...3/n
My Telegram Channel can be accessed through: t/me/rkatwaltradingupdates
...3/n
Thread on #OptionBasics for #Nifty #BankNifty or #Stocks for beginners
To understand options, three concepts are required:
1. Intrinsic / Extrinsic value
2. Time / Theta Decay
3. Implied Volatility
Option Value = Intrinsic + Extrinsic (Value)
...1/n
To understand options, three concepts are required:
1. Intrinsic / Extrinsic value
2. Time / Theta Decay
3. Implied Volatility
Option Value = Intrinsic + Extrinsic (Value)
...1/n
@rohit_katwal Intrinsic Value - Value of Option if it were exercised today at CMP.
Extrinsic Value - Total Value of time in the option.
ATM and OTM options are 100% extrinsic value. ITM options have more intrinsic and less extrinsic value.
...2/n
Extrinsic Value - Total Value of time in the option.
ATM and OTM options are 100% extrinsic value. ITM options have more intrinsic and less extrinsic value.
...2/n
@rohit_katwal ITM Options: Intrinsic Value = Price of Underlying Asset -
Strike Price
For eg.
Nifty is at 11,416. 11400 CE of 29 Oct 2020 is at 224.40/-.
Intrinsic Value is = 11416-11400 = 16
Extrinsic Value is = 224.40-16 = 208.40.
208.40 is time value.
...3/n
Strike Price
For eg.
Nifty is at 11,416. 11400 CE of 29 Oct 2020 is at 224.40/-.
Intrinsic Value is = 11416-11400 = 16
Extrinsic Value is = 224.40-16 = 208.40.
208.40 is time value.
...3/n
