#Quora Question: Why do some people prefer not trading on expiry days?
Because there is no set by the books way to do expiry day trading. See my screenshot of Intraday Net Positions from yesterday. After brokerage, I made a loss of ₹35k. Thread coming. #BankNifty#Nifty 1/n
Retail participation through leverage has increased in Thursdays Expiry #OptionsTrading. Everybody cannot be a winner. One's gain is others loss. Hence market makers have made Thursdays #BankNifty move extremely volatile. It is normal for a ₹10 option to hit ₹200 & 0 again. 2/n
I have been trading options as bread and butter, despite the fact that OTM options goes to 0, I prefer not to indulge in Expiry trading. I have tried: 1. Selling Option with proper signal with SL almost always hitting 0. Probability because of Index Management and Volatility 3/n
Bursts remain around 30%. 2. Only strategy that can be applied is Credit Spread with slight ITM options for atleast RR of 1:1 or Debit Spread of 2.5:1 or more. Its the only way I still find viable. 3. Selling OTM Cheap Options on Leverage for Rs. 3 - Rs. 10/-. Sadly, due to 4/n
low #vix premiums have already reduced. So now cheap options are only 200 - 300 points away. When gamma explosion happens, then managing these options require extreme management skill alongside high capital. Not everyone can do it and not everyone has the temperament. 5/n
Beyond risk, its nerve tickling experience. I know options are going to 0, but you are on 10 times leverage and strangle is not going to provide you safety in such environment. Case being from personal example: 1. I have done expiry trading alot for a 1% gain and on many 6/n
occasions, ended up making 2 to 5% loss. Yes, stoploss is there. I have seen a situation, where in 10 minutes after selling a Rs. 6 option, it was trading at Rs. 750/- without even giving a chance to exit at 1% stoploss. On fund of 1.5 Crore, I looked at a loss of 14-28 lakh 7/n
but still with management I managed to bring it in profit of 3 lakh by end of day. But I can't say I did not felt panic or some heart attacks during trading. 2. I have done the stoploss approach and seen a day where there was falls trend 5 times in a day. Total random moves 8/n
hitting stoploss 5/5 times.
So only thing that is left which can make profit is Selling cheap options and hold it by the end of day hoping it will go to 0. Before that where it will go, you must sit with Iron Heart for that. And that can be dangerous. 9/n
You cannot survive with that kind of odds against you.
That is why I am one of those who try not to trade on expiry day apart from closing existing positions.
Now there are twitter traders with huge following who indulge their followers into #ExpiryTrading. Remember 10/n
I have found that main bread and butter of these traders is #Training. With huge following and first movers advantage this is what happens: 1. The show mark to mark profit. 2. Lure Traders to expiry trading. 3. Train them for Expiry Trading. 4. Offer Broking Services post 11/n
-post training for cheap brokerage and high leverage. (This is bread and butter - Brokerage trainees generate and 5-6 lakh per training session). This is the recurring income making them rich. 5. And circle repeats by tagging similar other traders on weekend follow list.
12/n
So, when someone says that #ExpiryTrading is possible, it may be for 1% but for rest it is extremely dangerous. And that's the reason to avoid it. You are here for planned gains and not dangerous gambles. End of Thread.
Going forward, I am extremely cautious on BANKNIFTY.
I really was rooting for BANKNFITY to be bullish in coming days. Break of 39700 will take BANKNIFTY towards 37500 levels.
This is 1 Month Chart of BANKNIFTY. Break of 39700 (Support) will push prices further down.
On Daily Charts, we are standing at a support and gave a dead cat bounce. COI did not recede from this point but as you can see there has been continuous selling. At support, either this gives a bounce or indicative of incoming sell off.
MACD and ADX on Hourly Chart at support are getting sideways. Not bullish but just sideways.
Below 0 Line, MACD bullish is still a sideways market. ADX receding from 40-50 level below its EMA again a sideways sign.
At support, I will create positions will slight caution!
And yes, I am rightly worried. Its a neighbouring state.
This has been happening for past few months now. My immediate question was, what is the central government doing? I have no expectations from AAP. Or uprising of people of Punjab against such elements, as people themselves chose AAP. Many I talked with are regretting it now.
Today AAP might be the biggest threat to National Security. With Jammu and Kashmir stabilized, AAP might open a new frontier for Indian Government.
But no news media is showing this. Or Algorithms are not even picking it up. Why? Vested interest? But again back to question 1...
William's Alligator is probably the most underrated indicator in moving average category.
Alligator follows the premise that market is sideways for 70% of the time and trending only 30% of the time.
This is where William's Alligator can be a great tool for traders.
Why William's Alligator can be a great tool for traders?
It can identify Bullish, Bearish and Sideways market pretty easily. Problem is, traders don't know how to use it effectively. Alligator has three lines:
1. Lips - Fastest Line 2. Teeth 3. Jaws - Slowest Line
Book Interpretation is when Lips Crosses above Jaws, it's a buying opportunity and when below its a shorting opportunity. And when three lines are crisscrossing, instrument is sideways.
BUT this does not make it a tradeable indicator in practice. Here is what should be done.
I have no sympathies for #Scammers who were duping people with lakhs and crores of screenshots.
At first, I along with friends of mine were in awe of how they were generating this much return. For almost, 2 years I worked a lot and tried to break the code.
Do read and retweet.
A lot of ideas were worked upon on Amibroker may it be ITM Selling of Option, Option Doublers in 2 - 3 days, Intraday Option Buying, Future Holygrail and what not. In the process we were able to make Option Chain on Amibroker, calculate option greeks on Amibroker and what not.
But no definite system was built.
If we cracked up Option Buying or burst moves, it was difficult to ascertain position-sizing. For eg. position sizing average size, doesn't make the profit so lucrative. And if the position-size is big, loss could be 70% in 3 trades.
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.
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.