Technical analysis,learning technicals,articles,candlesticks,trading technically-TSR

OPTION SUBSCRIBER QUERY ==========CAN BE HELPFUL TO EVERYONE

2009-11-11T19:25:00.000-08:00

Hello tj,
Thank you so much for your mail expressing your worries and problems. We at Team stock researchers are always open to genuine ideas and always strive to make our relationship with our clients more healthy and long lasting. I have noted your problems with minute details and will also be answering it in minute detail. Kindly try to understand the concept of options trading first of all.

I have traded on a large scale in delivery, nifty, bank nifty, stock futures and options and believe me, it has been on a large scale earlier. Out of all forms of trading the stock markets I found options trading the most intricate and quick witted form of trading. It involves the least amount of capital with a higher degree of returns in terms of percentage wise. Hence, I personally too,now do only options trading. As you will know options premiums do not have supports and resistances like nifty or stocks, hence, involve a higher degree of calculation and foresight. It also involves taking into stock, the days left for expiry and finding the most liquid strike price compared to the current market price. A liquid strike price can turn illiquid any time and also an illiquid strike price can suddenly turn liquid in anticipation of a future movement of a stock towards a given target. Hence, finding the right strike price is one dicey part in options trading. Now that is where people like you and so many others who have had a bad experience in options trading in the past seek professional help with companies like us and become our clients. Trading in the right strike prices given the days left for expiry involves choosing strike prices varying between OUT OF THE MONEY TO AT THE MONEY AND ALSO IN THE MONEY. This headache you can leave on us. I hope you have now understood the basics of options trading of which I am sure you too are quite aware of.

Now coming to the way I trade options which has resulted in a high degree of success will also help you in understanding this concept better. Stock options premiums do not project the correct undercurrent during the first 15 minutes of trade and hence we watch the premiums move in a haywire fashion although we helplessly watch the stock prices rise at a fast pace. Patience is utmost important in options trading. There are times when I can wait whole day to give a call until a particular stock comes to my target range and there are times when I can give an instant call like suzlon 70CA given a few days back at 9.56 AM. I being a chartist prepare my charts of the eight stocks mentioned earlier (RIL, SBI, ICICIBANK, TISCO, DLF, UNITECH, HINDALCO, SUZLON) and NIFTY every evening in preparation for the next day on a piece of paper. Hence, all resistance and support levels are there on paper for for me to see. When I see a certain stock breaking a resistance,I give its CA and vice versa for a PA when it breaks supports. Now my job is to watch the exact movement of that particular stock and relate it with the options premium of a particular strike price at the same time which you will agree requires far greater concentration than any other form of trading. I have to decide whether the cmp of the premium is constituent with the current price of the stock and whether it is feasible to enter it with proper stop loss. I always give calls on CA at or near supports of that stock as my levels are on paper showing the same. Once, I decide that ok, its ok to enter, I give its CA call and the stop loss is generally such that it is lower than the next immediate support. Hence, when two supports break, it is better that the stop loss is taken which is quite possible as it results in stoppage of further loss. That is what the whole concept of stop loss is after all. One should be open to trade both ways on any given day and not sit in to trade with preconcieved notions. You will also agree that the premiums in stock options move at jet speed if one is playing AT THE MONEY OR DEEP IN THE MONEY. Only when one is playing deep OUT OF THE MONEY,does the premiums do not move at such a rapid pace.Now there are days when a stock or nifty does not move much,you will notice the options premiums also do not move much when playing the OUT OF MONEY calls. Hence, to overcome this, I usually play with strike prices very close to the cmp and in index options,I am always playing DEEP IN THE MONEY. Why ? The reason being the closer to strike price you are, the bigger the chances of premiums moving in a bigger range and also chances of making bigger money. Yes it also involves a much greater degree of danger and risk. And that is where my knowledge of stock levels come into play. I repeat playing ATM OR DEEP ITM involves greater risk and should not be attempted by novices or those who dont have levels knowledge.

A few examples for you as per todays trade. The first call I gave on Hindalco 130CA - When I know it will not break 125 very easily,I will be prepared to gives its CA nearer to that level. When it was at 126 after mkt open, its 130 CA was trading at 4.40, then it fell to 4.30. Simultanously, hindalco fell to 125.15 and started to go up, while its 130CA came up to 4.35. My call was typed ready by that time and as soon as I saw it sustaining 125, I sent the call. Now what happens is that since I have such a high number of clients, everybody endeavours to enter it at the same time.The number of options clients coming into the chat room do not even represent a fraction of the actual clients I have who are sitting at thier mobiles. They know since its call has come, it has been given at important supports. Some even hit blank market orders thus triggering the next offer price at a rapid pace which only results in the price of premiums moving fast. Now for a person who is slow at trading, there are only three choices left, either he waits for that cmp to come back or he does not trade or he picks it up at the higher price. I am not saying that everytime, the cmp will be the lowest price. It can go lower too, so the choice is upon each individual to take up the call as per his risk appetite. I simply cannot help on this. Only thing I will say is even if one gets it a bit higher, there is no problem as one might miss out on a bigger gain that might result ahead. As it is,a range used to be given earlier,so that can explain it all. But stop loss is to be maintained strictly at any cost.

Second example of SBI 2370CA today. SBI was not breaking 2325 since two days. And today too it came down to 2330. Thats when I saw the 2370CA at 63.70 and since my call was already typed, I just had to send it at 2330 and apparently 63.70 ended up being the days low too. Some people caught it at that price as shown in the shoutbox down below today, but most again compain, they never took it up.

Now to come to your individual questions .

1. Like I explained above, first fifteen minutes will show erratic movement in stock options premiums, hence, it is pretty impossible to guess which strike price will be active before market open. Now how can I keep sending sms of each individual stock whose strike prices have become active. If I do this who will watch my live intra day nifty chart and other live charts that run parallel to my trading software. And who will track any call if given. The only solution to this is that of the eight stocks I mentioned earlier, an options client needs to put two or three strike prices above and lower than the current market price of all eight stocks (CA & PA) to be prepared to recieve a call on them at any given time. This will help a lot in executing the trades a lot quicker as options traders who are quick witted and quick fingered have a better advantage. However, I do give the index options calls to be kept under scanner on a regular basis, that too after market opens if anyone will notice in the shoutbox.

2. You are suggesting to send an early sms stating for example to buy hindalco 130 CA at for example 5 if it goes above a certain level. Well, my friend , what will happen if hindalco does not sustain above that level, it will only result in you getting stuck up with the highest traded price then and surely the stop loss being taken. Options trading is not that easy as it looks. And above all, I never give any call which states to buy anything above a certain level. Only in chat, I may give levels, but never in my calls. A stock can easily break a resistance and fall back and likewise, it can break a support and bounce back too. Hence, a call involves a lot of gut feeling too along with knowlege of levels and anticipated future intra day market movements. Also, I am tracking so many stocks together and only when one reaches my level do I give its call. Now how to predict which stock will first reach my level out of the eight I track. Giving a call also involves a particular event based on news and the mood of global markets, the mood of FII and DII, open interest buildup etc etc. I myself do not decide which call I will be giving today,hence, its not possible to send an early sms.

3. Coming to the problem of range given earlier. When it was given earlier, there was more confusion as people always complained we got at higher range and some saying we missed it. Then there was calculation problem which always resulted in more arguments as to what price to be taken into account as index options calls always had a range of 10 rupees. Old options clients know that there used to be a range of 10 rupees in index options calls and hence, even if they do not get the trade at cmp, they know, its safe to buy it 5 rupees higher. For example, today the 4700ce call was given at 260 cmp. Next it jumped to 265 and then ursbuddy writes,he left it as it was 5 rupees higher. Now, 5 rupees is just 2 % on a call that costs 260 rupees. Yes I agree its a huge percentage if one is playing deep OTM, but when we are playing deep IN THE MONEY, one must be prepared for rapid movement in these calls as explained earlier. So to save that 5 rs, he lost out on profits of at least 30 rupees as we exited at 295 which later went up to 342. Yes this call could have hit stop loss too, but if one always fears of stop loss hitting, then one is sitting at the wrong place. I can have a few days of bad calls as am only human, but I can bounce back too. Some people say to give targets in advance. In index options calls, my usual first target is 20 points, then I raise my sl to cost. If a given target is given in advance, what if the market gets stronger like today,then we miss out on much bigger profits. So leave the targets to me as I will give exit as and when I see a certain resistance being reached or any weakness setting in. Also typing a range involved a greater loss of time for me while sending the call. For example, in index options calls, since I play deep in the money, there is rapid movement thus resulting in myself having to continuously rectifying and modifying the range and stop loss. This loss of time is harmful for us as split second decisions have to be taken by me while sending calls. I am finding calls based on cmp quicker for me to send, thus resulting in better chances of the clients catching it at cmp too.

While we are at the subject, allow me to also clarify the concept of two lots here. As I mentioned earlier, I have a varied class of traders as my clients which include brokerage houses too. I have clients who are trading one lot of index options to clients who even trade above 30 lots on one call. Now to cater to our clients in general, we always suggest to buy two lots as our calls carry two exit points. Now people have difference of opinion on this subject too. Allow me to explain it in an easier manner. An options trader who has big risk appetite may buy both lots at cmp given and exit first lot at first exit and second lot at last exit. An absolutely low risk taker may buy only one lot at cmp and exit fully from it at the first exit given. A relatively average risk taker should buy one lot at cmp, then wait for the price of that trade to come closer to the stop loss and buy the second lot. However, the same stop loss in all the above three cases shall stricly be mantained as my stop losses are given purely on a technical basis. Upon calculation, if second exit is higher than the first exit, it is calculated, however, if second exit is lower than the first exit, then the higher exit is always calculated since the final calculation is on one lot basis. People complain, when stop loss is hit on two lots, the loss is big. But they also forget , when both targets are met and second exit is higher, we do not calculate the profits on the first lot which they made. Hence, all this is done on a mutually beneficial basis. One must not forget, my stop loss hitting ratio is much less as compared to the number of calls given.

The whole idea for me to explain all this in such intricate detail is that I hope it will help all options clients to clear their doubts and at the same time would also request them not to upset the mood of the callers as we belong to the sensitive class of species who have immense pressure on our heads. Arguing over silly questions will only result in us callers taking the wrong decisions which will only eventually result in your own personal loss. Kindly refer your queries and problems to the various class of people we have designated on chat for your yahoo message problem or sms problem and help us to concentrate on our calls thus ensuring a much more beneficial relationship between us. Looking forward to a better and much more humongous relationship with one and all.

Thanks

I remain,
Yours Sincerely,

Sunil1
( OPTIONS MASTER )

IN REPLY TO

Hi Sunil,

I became premium member of TSR option on 21st October. A problem whcih has been consistently coming is getting in at right price. And since you have stopped giving ranges as well, the person dont know whether to get in if price has moved. I have already expressed this thing many time on the chat room. And I have also given you examples real time, when even entering 3 prices above given CMP couldnt be executed because price moved very very fast.

While i dont blame or say nething negative about way of giving calls. I have one small request:

1. As you mention in the active calls window keep 4700 CE and 5000 PE for watch etc. Please send sms for keeping a watch on other stocks you are looking at currently. You said u look at 8 stocks only but still the specific ones whcih are about to generate call according to you shud can be made known by sms, we cant watch all the strike prices and stocks all the time.

2. You can always send an sms before the actual call generation like: Buy Hindalco CA 130 at 5 if hindalco crosses 120.5. SL will be 3.9 etc.
This way we already know which one to take before market actually moves, we may have multiple calls in this manner out of which half may not actually get generated but we will be ready to get into right calls. I know there may be limitations to this but things can be worked out around this. I am sure today also, not many people were able to take advantage of your efforts and their money.

3. If nothing is possible range thing was better anyday to get the confidence. Simple thing is if point 2. can be implemented, i am sure execution of trades for many members will become easier.

Think of people who have made losses in your calls hitting SLs after entering above CMP given by you, you will realize it becomes increasingly difficult to remain confident of getting into trades if CMP is left behind after those losses.

Hope you will look into this a little more closely.

Cheers,
tj

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2009-07-30T00:20:00.001-07:00

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Naked Put-Another bullish strategy.

2009-07-04T22:34:00.000-07:00

Naked Put

Risk: high
Reward: limited

General Description
Entering a naked put position entails selling puts (most likely in-the-money).

The Thinking
This strategy is employed when you are very bullish. If the stock rallies above the strike price you keep the entire premium, but you have huge risk to the downside if the stock drops. You would then have to either buy the puts back at a much higher price or the stock would get “put” to you, and you would show an immediate loss.

Example
Let's say RNRL is trading @ 82.8 and you think a big rally is coming soon. You sell the 80 put options for 5.10.

Your max profit is the premium collected from selling the puts. As long as the stock closes above 80, you keep the entire premium. Simple as that. Your breakeven point is 74.9 – at that price the 80 puts will be worth 5.10 (80.0 – 74.9). Below 74.9 you will lose money at the same rate as if you owned the stock. You will then have to buy the puts at a much higher price or let the stock be “put” to you at 80/share and show an immediate loss. Between 74.9 and 80 you will have a profit but less than the max.

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Technical analysis,learning technicals,articles,candlesticks,trading technically-TSR

OPTION SUBSCRIBER QUERY ==========CAN BE HELPFUL TO EVERYONE

HAPPY ENDING OFFER :-TSR MASS DISCOUNT PLAN

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