Elliot's Impulse waves.(Part-5)
IMPULSE WAVES :- The Basics Waves that move the market in the direction of its main trend either up or down are called Impulse waves. 1....
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Trading strategy that works wonders besides the supports & Resistance is " Retracement strategy ": The strategy that has wor... -
If the steady FIIs inflow reflects in the prices, 5405 should be protected going ahead and market may encounter minor corrections and keep m...
55 comments:
GM to all,
Can anybody confirm Future Nifty Low?Is it 5206 at 9.00.38 a.m. instead 5180 which is showing?
Viren,
What is today VAH, POC, VAl Pls.
Thank you
sir & family
GM
@piyush
hw u r n a conservative sell whn d uptrend is still intact..
@mynac
it is 5180..
@ rv9 pa ji
amazing work ..
hi..Mynac,
@ 9.00.10 NF 5206.15, 66,750 traded.
Correction:
69,750 qty traded.
@mynac
NF low 5180.00, NS low 5189.45
sir at 5233 i had taken intra and conservative short at bounce to day high ema. levels close to premarket sell and conservative sell. was more focussed on sell side b cos conservative short levels arrived.
what was wrong with ythis approach sir?
pls suggest further sir.
@ Manu,
Take NF low as 5206.15. 5180 is a fake one.
Mynac,
My ODIN showing 5180.Esignal is also confirming a tick at 5180 ( It is the most reliable data feed IMO)
babu,
5257-5260-5270
@Dear manu,
Thanks.
Dear Viren,
ODIN means no problem.It is always reliable. Thanks.
Similarly BN future low is 9153.75 but it shows 9126. And the spot is a horrible 9066.70..
Gm All
manu sirjee though it has not closed below 5 ema but sir said that he takes ema close a trend confirmations rather that new trade initiations.
breach of 5240 wud probably breach uptrendline. negative div in daily . so shorts. this is my underatanding.
in premarket also it was given conservative short initiation level.
my brain stops here. market is rising.now sir has to tell further.
@manu
thanks dear
@ Piyush,
A gap down during uptrend is generally bought into and hence a trade from the "Day low ema" to a high point.
You need to be a bit flexible in actual trading place. Minor modification to the trade plan.
Trade long initially and trail it up and then sell @ higher level.
Now VAL is @ 5257.. Watch that level for weakness..Also Day Pivot is @ 5257.
thanks sir, will keep sl of 5275 of conservative will try to get out of intra with least damage
Piyush,
U are doing an excellent job of putting your thoughts into actionable ideas..
Pls keep it flowing.
GM,
@Mmynac
sir was correct, mynac, sharekhan terminal also shows 5206 NFF.
Only the 1st min, a false spike.
@RV9
hi RV9,
at your 5220 I went long.
Gm Ilango sir,
" Trade long initially and trail it up and then sell @ higher level"
am planning to enter shorts at "friday high" levels..i hope this is fine..
sir thnx
@mynac
5180 is a fake one..if u r using odin thn select NF-press ctrl f12..u will get hrly high /low/close vol..
nyways ur OI is awited..
@mok,
pl. keep the timeframe in mind.i didnt post an intraday trade but found that trading above 5220 can be beneficial.
for intraday go by Ilango sir's level
BTW thanks for the renewed excel file.will mail u later.hope u went through my thoughts on O.I.
Today the day low ema has given few excellent trades & booked out on all of them..
Tata Steel, bank Nifty, Nifty.
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SOLD NF @ 5257 ..SL 5275
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RV9,
yeah, am taking lessons on Options now. Cut & pasted both your thoughts here yesterday, and the email. Will read many times to absorb.
Thanks a lot.
Plz try the 2nd excel for realtime update.
On Sheet1 press Ctrl+H, then Ctrl+I
and then Sheet2 press Ctrl+J.
[that is, if you feel like ...]
Ever considered becoming a writer ,,, :)
Ilango sir g m , any change in tata motors view given in stock wealth?i m holding longs with sl 760. Conservatives nifty shorts @5225 with sl 5275.
Thanks
Sir,
I took a 4 lots, booked 1 at 5257,
Can I try holding the rest for Gap Closing till 5274 ? [bought between 5220 & 5224]
POC and VAL rejecting price at the first attempt.
Even though we are below value, indicating sellers at play, the early morning aggresive buying offsets their advantage.
Longs are in business till 5242 holds.
Shorts are on only below 5235, as momentum favors buyers to this point.
thanks viren sir.
RV9,
I hav longs from Budget days.
So, the average is fine.
Can hold with SL 5050.
Am keeping sir's level for Intra, with a small stretch on extra lots.
@ Mok,
For the rest, "Viren" has given the path to follow.
@mok,
good work mok,
your patience will pay u rewards as greater profits in your balance sheet.
keep s/l of 5170 on closing basis for your positional trade this series.
Mr.Ilango Sir,
I shorted NF at 5255 with Stop Loss 5275 NS as a conservative trader. Now I am going out due to some personal work. where should I book profit if Nifty slips down?
Thanks
@ Sir,
Oh, ok. I wil look for Viren post, sir.
Thanks.
Hope you checked Sheet1 in your file...
@ RV9
sure, will do.
Thanks.
Naveneet,
There are buyers in the 5200 call...and they are responsible for the price reaching here.
Only people who do not understand options will write calls now for this expiry.
Prabhakar said...
Mr.Ilango Sir,
I shorted NF at 5255 with Stop Loss 5275 NS as a conservative trader. Now I am going out due to some personal work. where should I book profit if Nifty slips down?
Thanks
------------
what target you looking for?
cool it, guys, lets have some good cheery blogging, not flogging
:)
@ALL----THIS IS A REPOST OF YESTERDAY LATE NIGHT
@All
sharing with u all,the mail i have sent to dear mok just now regarding O.I. Interpretation.hope this analysis helps in some way to clarify and trade the o.i. data.
1.Open Interest and Option analysis to me are secondary indicators of market and they should be treated like one.
2.O.I. and change of it cannot be looked in isolation.It has to be used in conjunction of Nifty price movement, data from rollover date and change in it hence.as well as overall market picture.It can only help in strengthening our conviction rather than forming/basing ones conviction on it.
3.Just to give an example –
a.in current month of March on 12/03 (Friday),there was huge build up of 10.57 and 12.34 lac shares in respective O.I. of 5100 CE and 5200CE, Nifty was trading in a tight range of 5095-5150 throughout the week.If we read this data wrt Nifty price ,we will be sure that calls have been written and the range of nifty will breakdown as all other indicators are OB.but exact opposite happened and these calls got covered in next two trading sessions.why? because someone smart knew of range break coming and was hedging his position for breakdown and must have gone long in nifty futures ,when the range broke on upside he covered the calls and sold of futures.so the above data only indicated of coming range break but not the direction.
b.similarly on 8/3,(as I mentioned in my report also), 5300PE have added unusual open interest of 10lac shares nifty was in the same range as above,this definitely showed downside market capped at 5080 because hedging done should have been done in above manner and moreover it was way above strike,someone must have been interested in taking the premium and rangebound market would have given him time decay and breakout of the range ,a handsome profit.
so this doesn’t makes sense in isolation.
4.Higher O.I in puts have been considered as base building and strong support but in Oct..last year the puts were heavily written as markets was expected to go to 5300, they were massacered till no end as market tanked to 4500.All the bases formed by put writing were bombed
The very next month market expected to go to 4200 or remain range bound covered all grounds and ended above 5100 doing the same to call writers.
Though I consider the writers, the most smart and informed of the traders with deep pockets ,they also are drummed and clearly all direction and range based on their data gets busted that time.
5.The data of O.I. has no clear breakup of buying and selling ,we never know the net open positions bias ,it could be both ways.secondly we don’t have figures of hedging ,which may be done with futures or amongst the options itself.lastly some insiders /informed traders take heavy naked positions/partly hedged,we will never know which positions are hedged and how and which are naked and with what bias.
This makes the O.I. data and change of it very dicey to interpret.
March 21, 2010 11:17 PM
Be careful guys in your interpretation of Options Open interest.
Understand importance of Implied volatility, qty of buyers& sellers and time when you decipher info.
A writer writes an option to gain advantage of time and volatility besides direction. With 2 days to go, what is the extrinsic component of the option, he is writing.
Besides with the low IV, he is better off going straight if he has a directional view as can be seen in the 5200 call today.
Remember the last one week of an expiry is the best time to buy an option if your direction is clear.
@All----contd.from above----
6.This month the data looked clear because of strong bias at the start in 5000puts(over one crore),secondly heavy build up in 5100calls simultaneously.the range at the start of month is never so small,once it breaked and then again traded sideways without major correction,also the volatility in options was dead this month,gave some clear indications. Normally it is not always so,and we get caught up on wrong foot analyzing this data in isolation.
7 My way of going about O.I. data
- I look upon this data as secondary indicator
- I look for some unusual build up and try to see its followup and interpret it in conjunction with market conditions prevailing that time.
-for me options are tools for hedging more than direction indicators,(which they may sometime when other datas are confusing)
-I find that upto 15th of a month O.I data may determine a range in a trending market as writing is rampant due to higher premiums.I check this data after 15th and see if any trade can be formulized based on it.
-I take some trade based on my convictions(hedging them too) in a week before expiry as options can give fabulous returns compared to other instruments with similar investment capital.
-last week of expiry is dangerous as premiums disappear in a day and don’t give a second chance to cover as in previous weeks,so losses in terms of percentage can be huge or total.
8.There are no rules formalized for interpretation of O.I. data (which itself is not transparent) as with other indicators because maybe it is not a indicator at all which gives uniform signals under same conditions all the timeTthis is because of its non transparent and dynamic nature which changes real fast in real time.
9.So because of the above considerations I feel this may be difficult to quantify and then interpret the data,secondly it may do more harm to traders not well acquainted with option data because.the data cannot speak for itself as it does in case of other indicators.
10.Here is a list of resources which I follow for the derivaties data
http://www.nseindia.com/ (for Realtime and EOD data)
http://www.stocksfortune.com/FOReport (for EOD data)
http://www.ventura1.com/Derivativesnew/iFrindex.aspx (For EOD data)
http://www.marketcalls.in (for realtime charts of O.I.)
and few brokerage reports on derivaties for some interesting data missed by me.
March 21, 2010 11:17 PM
aarvee9 said...
@All
correction-------
pl.read 3.b. first line,as 5200PE inplace of 5300PE.
Thanks.
March 21, 2010 11:27 PM
@ navennet,
You can chech NSE for buyers and sellers qty of 5200 CE.
It is not being written, it is bought.
@ RV9
gets proven time & again. You have written well.
There was an article in BusinessLine on PCR & OI prediction failures & possible misjudgements.
"To understand more detailed analysis of how one should understand option trading and analysis, pls have a go on some option book or u can always learn from us online.. :)"
Navneet,
If this was a joke...I'll let it pass..
@mok
mail me the same ,thanks.
Buy Qty Buy Price Sell Price Sell Qty
800 64.15 64.40 400
1100 64.10 64.45 700
250 64.05 64.50 2200
1850 64.00 64.70 50
100 63.80 64.80 200
469600 Total Buy Qty Total Sell Qty 227650
For the benefit of everybody..
RV9 : Great explanation/interpretation. One more point you will have to write is about the "time decay" and its effect. When I read this part, all my interest in Options vanished. Is it to be scarred about?
Please explain at leisure.
Viren - sending a mail. Request your advise.
B. Venkatesh
We recently met an options trader. He primarily sells out-of-the-money options that are likely to expire. And expire they mostly do. So, he keeps the option premium. His return has been around 50 per cent per annum in the last two years. We explained to him as to how risky the strategy was. Having tasted success for three consecutive years, he was unwilling to listen to us. He suffers from what epistemologists call as the “Black Swan” problem. What is it?
As David Hume, a Scottish philosopher and economist, puts it, “No amount of observations of white swans can allow the inference that all swans are white, but the observation of a single black swan is sufficient to refute that conclusion.”
Selling options
How is this related to the options trader? At present, the trader believes that selling options is the best strategy. He has to suffer just one large loss to realise that it is risky.
All of us are aware that substantial proportion of options expires worthless. Let us suppose this number is 80 per cent. This frightfully high number gives a feeling that the strategy is, indeed, profitable.
Twist the logic a bit and you will realise the folly. You know that there are no free-lunches in the market. If option-buyers pay a premium, it is because they believe that those options will be worth more on expiry. They are right.
Though large number of options expire worthless, a good number still get exercised. What happens when options are exercised? You will have to cough up a huge loss. Why?
Options are structured in such a way that as a seller, the maximum you get to keep is the option premium; the buyer enjoys all the benefits.
The options trader may generate Rs one crore profits from 1,000 trades. It may take less than 100 trades for him to blow up, because the losses are likely to be far bigger in size than the gains. Will it happen? May be not, but remember Murphy’s Law, “If anything can go wrong, it will.”
(The author is a Chennai-based financial analyst.)
@ RV9
i am looking for that article.
soon as i get it, you get it.
Navnnet,
My interpretation of the data you posted is recorded on the blog.
Upon your query, I backed up my info with data from the NSE site which showed more buyers than sellers.
The blog is waiting for a confirmation from you about the writers at 5200 CE.
Nothing personal.
@RG
As Viren has pointed out ,it pays to understand the intrinsic components of an instrument,here "time decay" and "implied volatility" are important to an option trader.
But i dont write options neither trade them naked ,only use them for hedging ,so not afraid of them.
remember:When the wind changes direction, there are those who build walls and i like to build windmills.
Dear Friends - The Open interest of 5200 calls have risen by 691450 (462450 buyers & 235450 sellers) & 5200 puts have risen by 668250 (226000 buyers & 787750 sellers) - frm above one can safely analyze that markets will close above 5200 this expiry - regards Deepak
Open interest as a barometer of derivatives market
Srividhya Sivakumar
If the markets are on an uptrend and open interest is also increasing, it is a bullish signal. It implies the entry of new players, who are creating fresh long positions and suggests the flow of extra money into the market.
Would you like to be an active player in the derivatives market? If so, "open interest" is an important market indicator that could lead you in the right direction. By definition, open interest means the total number of open contracts on a security, that is, the number of future contracts or options contracts that have not been exercised, expired or fulfilled by delivery. Hence, we can say that the open interest position at the end of each day represents the net increase or decrease in the number of contracts for that day.
However, it is to be noted that open interest is not the same as trading volume. Trading volume represents the total number of contracts that are traded during a day, inclusive of both squared-off (closed) positions and new positions. Thus, for any day, the trading volume will always be higher than the open interest.
What is Open Interest
Every trade in the exchange would have an impact on the open interest for that day. Say, for example, `A' buys one contract of Nifty on Monday while `B' buys two on the same day. Open interest at the end of the day will be three. On Tuesday, while `A' sells his one contract to `C', `B' buys another Nifty contract.
The open interest at the end of the day is now four. In other words, if both parties to the trade inititate a new position, it increases the open interest by one contract.
But if the traders square off their existing positions, open interest will decrease by the same number of contracts.
However, if one of the parties to the transaction squares off his position while the other creates one, open interest will remain unchanged.
Open interest, thus, mirrors the flow of money into the derivatives market, which makes it a vital indicator of market direction. Here is how you interpret open interest:
Rising market and increasing open interest
If the markets are on an uptrend and open interest is also increasing, it is a bullish signal. It implies the entry of new players into the market, who are creating fresh long positions and suggests the flow of extra money into the market.
Rising market and decreasing open interest
If despite a rise in market, the open interest decreases, it can be interpreted as a precursor to a trend reversal. The lack of additions to open interest shows that the markets are rising on the back of short-sellers covering their existing positions.
This also implies that money is flowing out of the market, given that open interest is decreasing.
Falling market and increasing open interest
When open interest records an increase in value amidst a falling market, it could be a bearish signal. Though a rise in open interest means that new trading positions are being created and fresh money is getting routed into the market, the new money is probably being used for creating fresh short positions, which will lead to a further downtrend.
Falling market and decreasing open interest
If open interest decreases in a falling market, it can be attributed to the forced squaring-off of long-positions by traders. It, thus, represents a trend reversal, since the downtrend in the market is likely to reverse after the long positions have been squared off.
Thus, in a falling market, a declining open interest can be considered a signal indicating the strengthening of the market.
Sideways market and increasing open interest
When the market is range-bound and there is marked rise in the open interest, we can expect a significant movement in the market. However, the direction of the move cannot be predicted.
Sideways market and a decreasing open interest
If the open interest decreases in a sideways market, we can say that flat market trends will continue for some more time.
A decrease in open interest only represents the squaring-off of old positions and lack of any new positions might result in a sideways or weak trends in the market.
Though open interest is a good barometer of where the markets are heading; it is only an indicator that helps us trade intelligently; it cannot be considered foolproof.
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NEW POST DONE
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Dear ILLANGO Sir ,
CAN WE GO LONG IN UNITECH NOW SIR
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