When i started off in #derivatives #trading, some 15 years back, the "default trade" taught to us was to trade in Futures or to BUY calls or BUY puts as the need arose.
These days the "default trade" is to SELL calls and SELL puts.
These days the "default trade" is to SELL calls and SELL puts.
Thanks to a spurt in online education, you learn quickly to sell options at 09.25 am and at 12.30 pm and every time of the year.
No education is provided for things like VIX, directional volatility, IV smiles or even basic gamma math
No education is provided for things like VIX, directional volatility, IV smiles or even basic gamma math
And the numbers speak.
The option market today is 10 times the volume of the Futures market.
and this is just the weekly contract & on normal days of fri to wed.
On Thursday the Option volume market goes up 3X or 30 times the Futures Volumes , mostly writers closing positions
The option market today is 10 times the volume of the Futures market.
and this is just the weekly contract & on normal days of fri to wed.
On Thursday the Option volume market goes up 3X or 30 times the Futures Volumes , mostly writers closing positions
A couple of points here
If you are analysing using things like Open Interest and looking at Futures only, your analysis is redundant already and will be obsolete soon.
I have tweeted it here - ( look up this thread)
If you are analysing using things like Open Interest and looking at Futures only, your analysis is redundant already and will be obsolete soon.
I have tweeted it here - ( look up this thread)
Point 2 and more important to this thread..
This spurt in volumes, we have seen this only in the past 2 years.
So you can deduce with me that, most of these traders in options have been around for less than 2 years.
what's the point you ask?
This spurt in volumes, we have seen this only in the past 2 years.
So you can deduce with me that, most of these traders in options have been around for less than 2 years.
what's the point you ask?
Well, previously, Option writing was called "smart money" ( no longer sadly) and if a particular strike built an Open Interest of say 70 L , it was considered huge support or resistance as the case would have been.
We had monthly contracts then, and this held through the series
We had monthly contracts then, and this held through the series
These days you look at these strikes with high Open Interest and on a Thursday afternoon , they break :)
I call this my "dukaan" trade setup
And with a certain condition in place, it leads to a very fast move for a Buyer of these options on a Thursday
I call this my "dukaan" trade setup
And with a certain condition in place, it leads to a very fast move for a Buyer of these options on a Thursday
And we have broken Open Interest of 1 CR and more previously in an hour or 2 and most of us on a Thursday afternoon just look for the "dukaan" setup to work.
Most traders only use Open Interest as a tool to analyse and are programmed now to write on the highest of the strikes.
It's the "default" trade mindset explained above
& it's pyramiding on the efforts of the earliest of writers without paying attention to the risk or reward.
It's the "default" trade mindset explained above
& it's pyramiding on the efforts of the earliest of writers without paying attention to the risk or reward.
and of course the new novelty in options is "adjustments" taught to new traders who are told that a trade with 23% probability of win can convert to positive points if you learn "adjustments"
Direction of the market and volatility be damned
"Learn adjustments - key to riches"
Direction of the market and volatility be damned
"Learn adjustments - key to riches"
No one tells the new traders that those fancy sounding words -Butterfly and Condor and Iron fly etc are for non directional markets.
And for directional markets a simple call and put will do better.
But for clickbait to work well, masala is needed.
And for directional markets a simple call and put will do better.
But for clickbait to work well, masala is needed.
I digress.
There is lots of money to be made in options trading
But not with writing all the time
Sometimes you can make more as a BUYER of these options
With VIX above 18, if you are writing options naked you are fishing in troubled waters
Ask PE writers of last settlement
There is lots of money to be made in options trading
But not with writing all the time
Sometimes you can make more as a BUYER of these options
With VIX above 18, if you are writing options naked you are fishing in troubled waters
Ask PE writers of last settlement
A quick look at the Options table will tell you that there is 210 CR in OTM PUTS and a 115 CR in OTM calls this week
That is a lot of money in the game already
An additional 600 CR is already in ITM calls and puts
That is size of the opportunity which excites us
900 CR a week
That is a lot of money in the game already
An additional 600 CR is already in ITM calls and puts
That is size of the opportunity which excites us
900 CR a week
A quick explanation on how you can use the information in these charts well is at -
So you see there is more cash ITM this week than OTM.
And you want to be a writer of options?
Smart money trades both ways.
as buyers and writers when only needed.
And you want to be a writer of options?
Smart money trades both ways.
as buyers and writers when only needed.
And this is the VOL Curve for next week Nifty options
As you can see the skew is not a smile
Again, not a market for writers.
As you can see the skew is not a smile
Again, not a market for writers.
It's in markets like these, lots of traders who have not traded high VIX before lose money
So if you have lost, consolation would be that many many more lost money last week
But I hope you take lessons from the losses
Foremost being, it does not pay to be a writer all the time
So if you have lost, consolation would be that many many more lost money last week
But I hope you take lessons from the losses
Foremost being, it does not pay to be a writer all the time
Work with people who have been around and traded these situations before
But don't stop trading
Trade and learn, even if you lose money now, trade
The experience will help you become a better trader for the next round.
But don't stop trading
Trade and learn, even if you lose money now, trade
The experience will help you become a better trader for the next round.
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