Day: July 18, 2021

Jun21-W4: Nifty Index 50 to decide direction this week (Jul19 to Jul23)?

Nifty Index 50 has consolidated for far too long and now seems to be itching to create all time high. The lack of momentum though is a dampener and 15900 – 16000 range has acted has strong resistance

Now, here’s what I am looking at:

RSI is good representation of what has been happening. The sandwich between trendlines is simply not getting digested. Like I said earlier, it is clear that if Nifty reclaims parallel channel, buyers will win but drop below green trendline will give opportunity to sellers. As of now, I do not have any bias.

Thus, scenarios for the week ahead (highlighted as yellow box with black lines dissecting scenarios)…

ScenarioProbabilityAnticipated Price Action
ConsolidationHighBetween 16000 and 15775
DowntrendLowIf breach below 15775; to drop somewhere till 15600
UptrendLowIf breach above 16000; to rise somewhere till 16150

At a global level, there seems to be quiet and peace everywhere. At a local level though, the impact of earnings can influence the swing either way. So, let’s see

DISCLAIMER: I am not a SEBI registered adviser. All the information provided on this website is for educational / informational purposes only and should not be taken as investment advice.

boring nifty index 50

Jul21-W3: Boring Nifty Index 50 makes money

If Nifty Index 50 does not move much (which happens more often than not as expected), it can leave trend following traders frustrated and option buyers miserable. But there is nothing better than a boring market for option strangle seller.

A boring market means that the options’ LTPs do not rise. It simply decays consistently with time. All you have to do is sit and witness the accrual of unrealized profits. But after booking profit, I think that my brain does not assess risk management properly.

Suppose that the premium of a position which I sold on Friday was 7. Now, if I close that position on Monday, I would think that I should not take a new position whose premium is more than 7. It is because Monday’s premium should relatively be lower than last Friday’s premium.  

But this is not true. Option pricing is very dynamic and while we cannot measure the biasness of institutional option sellers, we can always measure VIX. A rising VIX can allow Monday premium to be more than Friday premium even if all other factors are same.

There is no rule of thumb and whenever I should take trade, I should remain mindful of the ‘now’ than the ‘past’ or ‘future’. And this is what books on meditation also preach. But practice is always more different than theory.

Intra-day option selling is another area which I wish to master. Though the opportunities might be few, each opportunity holds potential of good profit. I need to take the risk of taking closer to money strikes. I missed one such opportunity on July 10. I hope for more chances in future. The market will not remain boring forever.  

nifty index 50 trades

Jul21-W3: Nifty Index 50 Option Trades Beat Target CAGR

Based on my previous analysis, I was expecting a drop till green trendline but had no clue what would happen afterward. Though I expected Nifty Index 50 to break green trendline and move to green rectangle, it kept moving up silently. I traded strangles conservatively but maybe I could have been a bit more aggressive. I also traded an intraday sell put opportunity on July 10 but again, my strike selection could have been nearer to money.

So I sold OTM strangles from Jul 9 to Jul 15 whose daily candles were like this:

Here are the results:

Net Profit (after deducting brokerage)Capital deployed (approx)Week’s ROIAnnualized ROI for this weekTotal no. of weeks traded till todayAverage CAGR till today
Rs. 3,953.65Rs. 6,43,1970.615%37.53%545.76%

Where annualized ROI for week = ((1+week’s return in decimal)^52)-1)*100

The following is breakdown of week’s positions:

DISCLAIMER: I am not a SEBI registered adviser. All the information provided on this website is for educational / informational purposes only and should not be taken as investment advice.