Playing Blind in Options and Futures ??

Top stock exchange NSE has increased the market lot sizes of derivatives contracts in 151 stocks including several blue-chip companies. The revised market lots would be applicable  from November expiry contracts.

The move comes after market regulator SEBI's decision in July to hike the minimum investment size for any equity derivative product to Rs 5 Lakh from Rs 2 Lakh. The lot size of all existing Nifty long-term options contracts (having expiry greater than three months and including December 2015 contracts) has  been revised from 50 to 75.

The National Stock Exchange (NSE) has  increased the market lots of derivatives contracts on eight of its indices -- Nifty, Bank Nifty, IT, Infrastructure,  Nifty Midcap 50, Dow Jones Industrial Avg, FTSE 100. The lot size for Nifty Futures and Options contracts has been increased from 25 to 75. Traders will now exposed to greater risk on higher leveraged contracts. The risk associated with trading the most liquid, Nifty derivative contract  has gone up by 200%. In such a scenario, trading with stop losses alone would not be a wise strategy, as every stop loss  trigger itself would increase the cost of trade.

High leveraged trades in Futures & Options can be tricky. Stop losses can be used for risk management but a few stop loss triggers can take away a substantial part of your capital. What is important is the entries are timed precisely and once an entry is made, ride on the position till exit.

Equally important is the stock selection which can give the best trending position. Using Triple Trend Oscillator (TTO) one can analyze the long term trend and take position in a shorter time frame with a precision entry using a minor trend, all this information available on the same  indicator.

An  advanced option trader has highly sophisticated tools to trade in options where each of the factors affecting option pricing  is analyzed.  However, for a trader it boils down to managing the intrinsic and time value of an option.  Hence it is important for an option trader to know the trend force and direction before trading in options. A strong trending move can negate the effect of theta (time value erosion), keeping the option trader in profit, even when close to expiry.

Trading naked options, if timed correctly, can become a relatively risk free, simple  and  high profit strategy . An option trader using TTO will be in a position to judge the tend quality. The position of trend oscillators close to zero indicates sideways moves which can kill an option trader.  The best  trend structures  would be when the trends are placed away from the zero line indicating strong trending move in either direction. Again the position of the intermediate and minor trend would indicate the trend strength and the trigger line could be used to take position in the direction of  the major  trend.

To know more on how to trade Futures and Options using TTO, click here :

http://eqtrend.blogspot.com/2014/04/trading-naked-options.html

http://eqtrend.blogspot.com/2014/04/using-bullish-alignment-for-intraday.html

http://eqtrend.blogspot.com/2015/01/how-nifty-option-traders-made-killing.html

http://eqtrend.blogspot.com/2015/07/stock-selection-and-trade-strategy.html

 

Make or Break Case for Nifty

Nifty has been range bound  due to lack of any triggers on the economic and political front even as the increased certainty of FED rate hike in December  seems to be have been digested by the market.

Two crucial levels 7725 and 7925 hold the fate of Nifty an the near future. Nifty has corrected 78.6 % to 7709  from its move from 7540 to 8328  and is presently holding the recent lows.

7925, which is the extended  neckline of the previously failed  inverse H&S pattern, forms stiff resistance  to any up move. Any sustained breakout above this level could take Nifty to its logical target of  9200.

A break below 7725, a neckline for the impending H&S pattern could result in levels of 7100 if Nifty is unable to hold 7500.

Even though, TTO is indicating mild bullish bias in the short term, the strength needs to translate into daily and weekly oscillators which at present are placed below zero.

It would be a difficult time to take a position in this market as it may surprise on either side.