Im slowly getting free from mandatory business work, so thought to start this as a comeback.
There are surely many procedure adopted by many option writers, but this one got shape in mind particularly after upper circuit. Some( 2 or 3 ) of my trades were based on this without my notice but i could visualize it as a procedure in very near past. I will write more in holidays, till then... a chart of India VIX from NSE site from 1st April.....

__________________
Mind Like Water....

Originally Posted by devdas

Im slowly getting free from mandatory business work, so thought to start this as a comeback. There are surely many procedure adopted by many option writers, but this one got shape in mind particularly after upper circuit. Some( 2 or 3 ) of my trades were based on this without my notice but i could visualize it as a procedure in very near past. I will write more in holidays, till then... a chart of India VIX from NSE site from 1st April.....

Excellent , keep it coming.

Please continue dear, its very interesting

Originally Posted by devdas

Im slowly getting free from mandatory business work, so thought to start this as a comeback. There are surely many procedure adopted by many option writers, but this one got shape in mind particularly after upper circuit. Some( 2 or 3 ) of my trades were based on this without my notice but i could visualize it as a procedure in very near past. I will write more in holidays, till then... a chart of India VIX from NSE site from 1st April.....

As changed named suggest, scope for this thread is unlimited. What i was trying to post as continuation from 1st post, is now on hold for some time, cause of an interesting setup i read in F&O Magizine Oct Issue. Its a Double Butterfly System applied on S&P 500. I compiled some aspect for reference to apply on NF.





Good thing is its backtested well for 5 years



Now, with NF some limitations arises due to
a) strikes available at 50
b) Liquidity might not facilitade good exacution in Middile month options.( point no 7 in first diagram--- second month options ???)
c) Resources limited to Options Oracle.

Here are two setups with same strikes but one in Oct and other in Nov.





However point 7 advocate for options used as second expiration month, but i could not find benefits of Nov setup except more time. Rather Oct has lower cost and both setups have almost near zero position delta at start.
Another flip side for Nov seems ,
1) Higher negative vega ( compared to Oct ) and this causes net position to erode if volatility increases at present.
2) Lower Positive Theta ( compared to Oct ) and this makes written option legs to loose premium at low effective rate.

__________________
Mind Like Water....

Just a thought stirke ...

Oct DBS costs = 30.65
Nov DBS costs = 38.85

Why not have a composite position..

Short Oct DBS and Long Nov DBS....
May be a good bet for remaining 10 days of Oct series....

__________________
Mind Like Water....

you mean writing Oct series and and gng long in nov. ? But shouldnt it be vice versa ?
As oct long options are gng to provide same hedge at lower price ... plus being high priced next month long options are tend to loose higher percentage of the value as compared to near month ..at the time of expiry , we can shift to nov. series ., just my view.

A Short ITM Strangle has good RR ratio in current market range

Sell 5000 CE = 76
Sell 5100 PE = 95

NetCredit = 171 - 100 = 71

and Break Even lvl
On down side = 5000 - 71 = 4929 => already known refernce lvl
On Upside = 5100 + 71 = 5171 => already failed lvl.

Pair can be hold for weekend for approx 15-20 points time value decay.

__________________
Mind Like Water....

Coming back to original track, its same chart as in post 1, but with ATR 20 days combined with 20 Day SMA. Post Jan 08 this ATR has mostly ranged between 150 to 70 except for two crashes of Jan-08 and Oct-08, when it overshoots to 240 range.
Chart shows two different faces of volatility ( proxied by 20 Day ATR ). First was associated with rising volatility and rising index after volatility bottom in Feb-09. And second , i think has started now after point 3 in chart, again with rising volatility but with falling index. There is interesting shift in volatility at point 2, perhaps it would have been against nature of it cant support two different consecutive cycles of index movements on same cycle of volatility. So it itself changed the direction to further validate rise in index.
Stretegies for Option writters would have been accordingly changed as

1) Selling Naked Puts from point 1 to point 2.
2) selling Naked Puts and/or Selling strangles/straddles from point 2 to 3

and what for now after point 3.... obviously i think

3) selling Naked calls....till volatilty cycle changes.

__________________
Mind Like Water....

Originally Posted by devdas

Coming back to original track, its same chart as in post 1, but with ATR 20 days combined with 20 Day SMA. Post Jan 08 this ATR has mostly ranged between 150 to 70 except for two crashes of Jan-08 and Oct-08, when it overshoots to 240 range. Chart shows two different faces of volatility ( proxied by 20 Day ATR ). First was associated with rising volatility and rising index after volatility bottom in Feb-09. And second , i think has started now after point 3 in chart, again with rising volatility but with falling index. There is interesting shift in volatility at point 2, perhaps it would have been against nature of it cant support two different consecutive cycles of index movements on same cycle of volatility. So it itself changed the direction to further validate rise in index. Stretegies for Option writters would have been accordingly changed as 1) Selling Naked Puts from point 1 to point 2. 2) selling Naked Puts and/or Selling strangles/straddles from point 2 to 3 and what for now after point 3.... obviously i think 3) selling Naked calls....till volatilty cycle changes.

That's an interesting chart you have for points 1-2.

What's happened between 2 and 3 and what may happen after fits in with the volatility cycle we know of---rising index and falling vix and vice versa.

But what happened between 1 and 2?

The above is also referred to as Volatility Regime Trading.

__________________
Adapt,Overcome,Improvise

Any Site Issues/Problems? PM Me