Tweet

More from @KatariyaPran

Pran Katariya

@KatariyaPran

2 Aug

Many use Cash Covered PE to try and buy stocks at prices below spot or generate income if those prices are not hit. So, if you like Tata Consumer at around 740- it currently at 760- you could sell the ATM 760PE for 22. If target price is not made you can get to keep the entire 22

Personally I prefer doing this with an OTM Straddle. So I will sell a 780 or 790 Straddle for 50. That way, I have the possibility of making much more if Price remains above 760. It opens out some upside Risk but a Straddle is easy to defend when Risk is on only one direction

Results are particularly good when this is done with a slightly bullish stock. I sold a 2000 Straddle in Deepak Nitrite for around 205 when spot was 1900 with a willingness to take delivery around 1800. Although the Stock is up 6%, the Straddle is in an MTM profit of 45per lot

Read 6 tweets

Pran Katariya

@KatariyaPran

21 Jul

The Straddle is my favorite trade these days. But more often than not, one needs to adjust to make a good return from it. There are many ways to do this depending on your view, psychology and imagination. Will discuss a few that I use

The Straddle is a delta neutral strategy and it is important to keep deltas in check during the course of the Trade and not let them run away from you. Of course Volatility is the elephant in the room- but not going there as that will require a separate discussion

The first and most common method is to go 'inverted.' That is to say to shift the untested side to generate additional Premium and increase the runway to Breakeven. So if you start with a Straddle at 700 and price goes to 740, you can move the PE up to say 720.

Read 16 tweets

Pran Katariya

@KatariyaPran

9 Jul

Part of msg I got as a DM
Everyday I collect data fr nse eod files and try to extract meaning information. Like oi built up, delivery change on dly, wkly and monthly basis
From this I can conclude stock is going to be range bound or trend move.

Basically he was asking how I decide whether a Stock will be range bound before selling a Straddle and telling me about the analysis he does before he reaches that conclusion. There was more that he does but let's stick to this.

My answer is that I do it on instinct. I basically watch about 20 or so underlying on a constant basis and when I feel that a Stock is not or has stopped trending and the IV's are ok, I sell a Straddle. No complicated analysis for me and I'll tell you why.

Read 10 tweets

Pran Katariya

@KatariyaPran

30 Jun

There are basically 3 ways to Trade Options. Option Buying, Directional Option Selling and Non Directional Option Selling. Each requires a different set of skills and mindset.

Option Buying is perhaps the most difficult. It requires some way of finding quick Directional moves. It also requires an extremely good knowledge of Option Theory to structure a Trade when the opportunity has been identified and a great understanding of the Greeks.

If you have a good sense of direction and momentum but a poor knowledge of Option Theory, you are better of Trading Futures as you will in all probability do far less well with Options and even lose money. It's like being a sharpshooter aiming at a distant Target.

Read 10 tweets

Pran Katariya

@KatariyaPran

26 Jun

There is a definite relationship between Risk and Reward in Markets. There are several factors that go into determining Risk but one of the biggest ones is leverage. This becomes quite clear when we look at Company valuations on the NSE.

So HDFC Bank has PE Ratio in the high 20's while Stocks like HUL, Nestlé, Pidilite etc are well past 80. So even though the quality of the Business may be equally good, the Market rate low or zero debt- read unleveraged- Companies as less risky and superior to highly leveled ones

The quality of Earnings without using leverage is always perceived to be superior to those which are magnified by leverage. Leverage equals Risk and this is discounted in Price

Read 7 tweets

Pran Katariya

@KatariyaPran

24 Jun

Had the privilege of listening to Javed Akhtar several times at the Jashn-e-Rehta festival. He was asked to comment on why the standards of Hindi Film Music and Lyrics had been on the decline over so many years. His answer was both thought provoking and worrying.

He said that it was not that the quality of music composers or writers had deteriorated. It was the standards and quality of the audiences that had declined and their inability to appreciate good music or good writing that was responsible for the poor fare that's being dished out

When I see the kind of posts or response to my tweets I can't help but think that the same has happened to Traders in recent times. A Trade is basically the expression of an idea executed thru a plan or strategy.

Read 10 tweets

Share this page!

Pran Katariya

Try unrolling a thread yourself!

More from @KatariyaPran

Pran Katariya

Pran Katariya

Pran Katariya

Pran Katariya

Pran Katariya

Pran Katariya

Did Thread Reader help you today?

Like this author's thread?