Read this carefully if you are speculative trader. You must be seeing today that MindTree Ltd. stock has fallen to its 52 week or one year low. Mindtree shares hit fresh 52-week low of Rs 446.85 today.

In the last one year its highest was 804.50. So almost 50% down. Due to this I am sure if you are not my course subscriber who do not directional trading, you must be doing some directional trading in Mindtree shares.

Since you are doing speculative trading a lot of you who are contrary trades must have bought its shares, or gone long on it in whatever means link Intraday or whatever.

Some who love to follow the so called “Trend Following” would have shorted its shares.

What is Trend Following?

Trend Following is just going by the flow in the direction of the share. For example if the share is falling, just short it. If the stock is looking strong just buy it for the short time. I did it long back but failed miserably.

Later after a lot of research I learned that there in nothing as trend following in stock markets. Can you tell me about your own life seeing your own trend where you will be tomorrow exactly at this time 24 hours later? If you cannot follow your own life’s trend how can you follow a stocks trend on which you do not have any control?

So please stop what is called Trend Following trading and learn the correct way to trade peacefully and protect your capital.

Anyways those who follow trend must have shorted this stock.

My advice is: This is a sure shot way of destroying your wealth through trading, This is also true for Intraday traders. Which Intraday trader trades with more than 10 lakhs on full capital on one stock? None. If you cannot compound your trading money its better you stop trading that strategy.

Trading peacefully and making less money consistently is much better than watching Nifty from 9 am to 3.30 pm and wasting your time.

I still don’t understand why people still love Intraday trading.

My point is stocks such as Mindtree Ltd. are NOT worth trading at all. So please do not do any trades on it.

My Best Wishes are With You.

Disclaimer: This post is for educational purposes only. Please do your own research before investing money in any stock. I do not hold Mindtree shares. Stock market investments are subject to markets risks.

Thank You.

Axis Bank Looking Strong

INDIA VIX at 14.10 not much drop. Nifty also has not moved much.

Directional traders must have lost a lot of money, but since you are a non directional trader you must be in good profits. 🙂

Check your traders and book profits now. If entered Strategy 1, of my conservative options online course 10 days before. Profit should be more than 2%. This is good enough tension free trading and profits.

Axis Bank Looking Strong now you can do the Stock Option Strategy in Axis Bank Today as per the course.

The above email was sent to my subscribers on 21-October-2016 at 11:37 AM.

Within minutes I got a WhatsApp testimonial from my client who booked profit of 2% in 20 days on his trade.

Here is the update:

2% in 20 Days Course Fee Recovered

Those who think this course has value or not here is proof. Within minutes of my email sent to book profits to my paid clients I got a WhatsApp testimonial from a novice trader who kept losing money before doing my course, making 2% profit in 20 days. I am sure since he took the course last month he must have traded with just the minimum capital required so his profit must be Rs.1800/- in 20 days. He paid Rs.6000/- for the course. So how long does it will take him to recover the course fee? Just 40 days more, or full course fee recovered in 2 months or less. Less for those who can trade with more money. Then for the rest of their life they can keep making money.

Here is his WhatsApp screen shot I got just after sending the email today:

WhatsApp Testimonial on 21 October 2016 – Results may vary

Yes these strategies make money for life because they are based on options logic rather than that useless speculations that Nifty will go up so buy a call or Nifty will go down so buy a Put. All those people lose lots of money still not willing to invest in knowledge.

Why did your parents sent you to school? To get knowledge and get a good job. If speculations in trading made money then no one would have sent their children to school only given them 1 lakh to trade and make money. They know very well that it will not happen so send their kids to school. In fact you must be also sending your kids to school for the same reason. But its strange you yourself believe speculations can make money in stock markets. Sorry stock markets do not care for your speculative trades. Every business gives money to people with knowledge. 🙂 Which I think is the right thing.

Winners invest in knowledge and make money, losers keep speculating and keep losing money.

If you are willing to learn and invest in proper knowledge of trading options you are welcome to my course. If you still believe it is speculations that can keep making money – bye. That dream day never comes even for experienced traders.

It feels really nice to keep getting these thank you messages. Please keep them sending.

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Learn options pricing difference between ask, bid, LTP, best sell and best buy and how they are traded.

Nothing can be traded without money and a price. Options are also traded the same way. To buy an Option one has to pay a price or it comes at a cost. The price is decided by the premium of the Option. In other words every Option has a premium or in simple words a price or cost on which it has to be traded or bought and sold.

The buyer pays this premium to the seller through a stock market exchange. In India NSE – National Stock Exchange of India Ltd., BSE Ltd. (Bombay Stock Exchange) and MCX – Multi Commodity Exchange of India Ltd. are the major stock trading markets known as Stock Exchanges.

Please note that if someone buys an Option through the exchange NSE, a seller has to be trading in NSE only on that Option. A seller in BSE cannot sell that Option to a buyer in NSE. Same for MCX. Treat stock market exchanges as a business where people come and trade.

How The Stock Market Exchanges Benefit?

If you see your contact note you will see brokerage charges and other charges like STT and others. The highest among them is the brokerage charges which your broker keeps. Rest he has to give to the exchanges where the trade was done every month. If you are paying too much to your broker please fill this form I can help you save money in multiple of thousands and please do not worry they have been awarded the best broker by NSE for three years in a row. They have lots of study modules in Options and trading too.

That money is the profit of the exchanges. However that is not the full profit. Do not forget the infrastructure costs like building, electricity, employees salary, taxes and other expenses. After that whatever is left is their profits.

What Is Ask and Bid Price of An Option?

Now let me take a live example.

See the image below:

Axis Bank Call Option Prices as on 20-Oct-2016 at 11.29 pm

I have selected Axis Bank Options. Axis bank is currently trading at 543.15 so At The Money (ATM) Option is 540. I chose the October 2016 expiry Call Option because when a Stock is moving up trades love to buy ATM CE, when moving down they will buy ATM PE.

Axis Bank Stock Trading Price as on 20-Oct-2016 at 11.29 pm

As you can see its premium is 13.80. LTP is the Last Trading Price. LTP means the last trade was done at 13.80 at the exchange. Best Buy Price is at 13.60 and the Best Sell Price is at 13.80.

This is known as Ask and Bid Prices.

The Bid and Ask is kind of a bargain between a Seller and a Buyer. The sellers asks for a premium (Ask Price or Best Sell Price is the lowest price in the market place for that option where it is being traded for that time) and the buyers asks for a discount because they need to pay (Bid Price or Best Buy Price is the highest price any buyer is offering to pay for that option in that point of time in the same market place). This is just like in any market place where the shopkeeper tells the buyer a price and the buyer asks for a discount.

Ultimately where they agree and trade is the LTP of the Last Trading Price. This software cannot control. This is directly between the buyer and the seller, once the trade is complete the record is sent to the exchange software and they show it on every traders trading platform. By the time you have finished reading this the Ask, Bid and the LTP price might have changed for that Option because of the trades that got completed and the movement of Axis bank price in Equity Markets.

Now let us look at the second Option Price which I chose slightly Out of The Money (OTM). October 2016 580 CE of Axis Bank. As you can see the LTP is 2.15. Best Buy Price (Bid) is 2.10 and the Best Sell Price (Ask) is 2.20. So at whatever price the trade will get completed that will become LTP or Last Trading Price and then new Ask and Bid will start showing according to the traders doing a trade.

Also see that the Open Interest is much more in the 540 ATM CE than the 580 OTM CE. We have already read about Open Interest and why it is more at ATM (At The Money) Options. If you have not read that article click here to read about Open Interest.

Frankly I feel surprised that where the trades should be done more there it is not done rather greed takes over and trades trade only where there is home run of money. One day there is Home Run next day they lose their home. This proves trades do not have much knowledge of Option Trading therefore keep losing money.

That is the reason I opened this website to educate traders on Options and started a conservative option trading course because a lot of my time is consumed in teaching people about Options.

If you are losing money trading Options I recommend my course. If you are making more than 3% a month consistently then it is ok please do not do my course.

The earlier you learn about hedging techniques in my course the better because life has a limit. You cannot keep trading on hope that is the worst form of trading. If you lose 10 lakhs and then do my course and start seeing profits you will regret not doing my course earlier.

Fact is I do get calls from people who cry and say sorry to me and them pay after losing like 40 lakhs in trading Options. Some have even lost 2 crores. Both are my paid customer now doing well. I was so happy when they told me Thank You we are making money now.

Next we will discuss – Call Option Put Option Pricing Differences as Stock Moves Up and Down.

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This article is on Open Interest in Option trading and will help you to know what may happen to Options with regards to Open Interest.

In short the total number of outstanding option contracts in the exchange market on a particular day is open interest in options.

Let us simplify this.

As we have read for a trade to happen there has to be a seller and a buyer of option otherwise a trade cannot happen.

Now let us suppose At The Money call option is 8700 CE and a lot of traders are looking to trade that.

Lets also assume that India VIX (Option Volatility Measure Index which has a lot impact on option pricing) has gone high and there is no such news that may move the markets to any direction.

Since India VIX has gone high most experienced traders will try to sell this option.

And if you see today’s market Nifty is up by 70 points. So a lot of traders will think it is a great buy option. Mostly the new traders who have no experience.

Due to this a lot of trading will happen in the 8700 CE option and also there is a possibility of a lot of trading happening in 8700 PE option.

In fact this is the main reason why mostly the open interest is higher in At The Money Options.

Just to let you know that in my course I do not teach to trade on At The Money option as they are the most dangerous option to trade even for an experienced or for a new trader.

Only time value is there in At The Money (ATM) options so I tell a different strike to trade in my course. Those who have done are pretty happy with the course, the reason you know now why.

How The Open Interest is Counted?

Obviously this cannot be done by humans so there are software working in the background in NSE and BSE to count the open interest.

Let us take one example.

One seller wants to sell January 2017 8900 CE. There is no buyer there.

Open Interest 0. Trade is open.

Suddenly one buyer sees it and thinks it’s too cheap and buys it.

Open Interest account opens for January 2017 8900 CE. It is 1.

Another seller comes and trade happens.

Open Interest for January 2017 8900 CE is now 2.

Let say over the next three days 200 people have done the trade and so the Open Interest is now 202.

Let say on the fourth day three people closed their trade.

Open Interest on January 2017 8900 CE is now 202-3 = 199.

Hope now it is clear. All open trades on a strike are only counted. The trades that gets closed are taken out. The new trade that happens are added. This is how open interest are calculated by the software working with the BSE, NSE or MCX – the trading houses.

Can We Benefit From Open Interest?

You will see that in Television Business channels a lot of experts keep saying Open Interest has increased in that Call or that Put so it looks like markets resistance is there or support is there with reference to the strike prices where open interest are the most.

Next day they change their view according to the open interest.

So if you ask me I do not care. One day it will be right next day it will be wrong.

Like this one day you make money next day you lose and it will keep happening. So I do not care.

I am a conservative trader happy with small and consistent profits and least bothered about the direction of the markets. That’s the reason my course paid subscribers keep making money. 🙂

Those who think too much about Open Interest, support and resistance keep making and losing money. Those who done care about it and properly hedge their trades keep making money over time.

So do not look at Open Interest and trade these strikes because half of them are sellers and half buyers, so nothing can be concluded for sure.

Where to Know the Highest Open Interest?

In the NSE site here is the link:
https://www.nseindia.com/products/content/equities/equities/oi_spurts.htm

Here is a screen shot as of 18-Oct-2016 at 12.23 pm. Please note that it can change anytime – that is the reason I have written date and precise time.

NSE Open Interest 18 Oct 2016

You can also see increase in open interest here:
http://www.moneycontrol.com/stocks/fno/marketstats/futures/openint_inc/index.php

Decrease in Open Interest here:
http://www.moneycontrol.com/stocks/fno/marketstats/futures/openint_dec/index.php?sel_option=openint_dec&optinst=allfut&sel_mth=all

Highest Open Interest here:

http://www.moneycontrol.com/stocks/fno/marketstats/futures/high_oi/index.php

Lowest Open Interest here:
http://www.moneycontrol.com/stocks/fno/marketstats/futures/low_oi/index.php

In the next class we will learn more important advanced terms on options trading like difference between Ask, Bid, LTP, Best Sell, Best Buy and about the stock exchanges.

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Option Trading Advanced Terms – Today we will discuss some advanced option trading terms like what is an option buyer and an option seller and how they make profit and losses.

Any business can be done only when there is a seller and a buyer. Otherwise a business cannot be done. Same is the case with stock trading.

Option is a derivative contract on which business is done. So someone is a seller and some buyers.

In other business sellers make money while buyers get a product but will lose money. However in option trading both sellers and buyers can make money. But logic of the way business is done is applied here too. It is mostly the option sellers who make money not the option buyers. And if you properly hedge your traders the sellers can keep making money for life. My course 100+ testimonials is a proof that it is option sellers who keep making money. Since 2014 all my course subscribers are making money.

Option Buyer:

Any trader who buys an option to sell. Currently the At The Money Nifty option of 27-Oct-16 8600 CE is trading at 75.05. Suppose an option buyer wants to buy one lot. Since the lot size of Nifty option is 75 he will have to pay 75*75.05 = Rs.5628.75 + brokerage charges. Once the trade is completed he owns one lot of Nifty 27-Oct-16 8600 CE option for Rs.5628.75.

How Option Buyer Makes a Profit?

If anytime after he buys till expiry he sells the option at let say 85. He will make the profit of the difference between the buy price and the sell price.

His Profit = Sell price (85) – Buy price (75.05) = 9.95 * 75 (one lot) = Rs.746.25/- minus brokerages and taxes.

How Option Buyer Makes a Loss?

If anytime after he buys till expiry he sells the option at any price less than 75.05 he will make a loss. His loss will be the difference between the buy price and the sell price. Let say after two days Nifty falls and the option is traded at 50. He panics and sells it at 50.

His Loss = Sell price (50) – Buy price (75.05) = -25.05 * 75 (one lot) = Rs.-1875.75/-plus the brokerages and taxes.

Note: If you are paying too much for brokerages you are losing money which can be saved. Please fill the form here and I will help you to open an account with the best discount broker in India (best broker declared 3 years in a row in India). Their charges are just Rs.20/- per order not per lot like many other brokers charge. Which means even if you buy 10 lots you still pay only Rs.20/- for the order even if it takes half an hour to complete to order. You will save thousands just in brokerages.

Option Seller:

Any trader who sells an option to buy it back later some day. Currently the At The Money Nifty option of 27-Oct-16 8600 CE is trading at 75.05. Suppose an option seller wants to sell one lot he can place a sell order.

Here the broker blocks more margin. Why? Because on paper selling an option is unlimited loss. Those who have done my course know very well that if we hedge the sell trade the losses are going to be limited and we can keep making money for life. Anyways your broker does not want to take a risk so they block more money.

How much is blocked to sell an option?

If I go for proper explanation than this will take a long time to explain. So I will write some other day. In your trading platform you can try pacing the sell order for an option and see how much margin money your broker is asking. If you have that much money you can sell the option, if not your order will be cancelled due to lack of funds.

Since it is very hard to calculate how much margin will be blocked for an option since it differs from stock to stock it is best to put a sell order in the trading platform to see how much money will be blocked. This will help you to know how much money will be blocked.

To sell an option in Nifty most brokers block anywhere from Rs.35,000/- to Rs.40,000/-.

How an Option Seller Makes a Profit?

Going by the above example assuming the seller was able to sell the option for 74.50. Now after that next day Nifty falls and his option is trading at 50.

He sells it and books a profit.

His profit is the difference between sell and buy.

His profit: Sell at 74.50 – Buy at 50 = 74.50-50 = 24.50*75 = Rs.1837.50 minus the brokerages and taxes.

How an Option Seller Makes a Loss?

Remember that option was sold at 74.50. Assuming Nifty goes up the next day and the same option is traded at 80.
The seller panics and sells the option at 80.

His loss is the difference between sell price and the buy price.

His loss: Sell at 74.50 – Buy at 80 = 74.50-80 = -5.50*75 = Rs.-412.50 plus the brokerages and taxes.

In the next chapter we will learn what are Option Open Interest and how we can benefit from it.

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In this article you will learn Option Trading Basic Terms like Call Option, Put Option, At The Money, In The Money. Out of The Money Options, CE, CA, PE and PA.

Call Option:

Note:

Put Option:

Note: Traders buy PE or Put Option when they feel the stock will move down. Which Put Option is the best to buy? This is a vast topic. In short it is very dangerous to buy OTM (Out of The Money) Put Options as they do not increase in value fast. New traders with less money in trading account buy them and lose money. Experienced traders buy ATM (At The Money) Option or ITM (In The Money) Options but they also have risks.

In short: The price of an option depends on price of the underlying stock or Indices like Nifty, Bank Nifty. Call Options normally go up when the price of the underlying stock goes up. Put Options normally go up when the price of the underlying stock goes down.

We will later discuss what is ATM (At The Money) and OTM (Out of The Money) and ITM (In The Money) Options. However buying ATM (At The Money) and ITM (In The Money) Options are risky too, but if direction right they make more money. On the other hand if direction wrong they lose more money.

What is the difference between American-style options and European-style options?

American-style options can be exercised any time prior to expiry.
European-style options can be exercised only on the expiry day.

Now you must be thinking in India we can exercise anytime not necessarily on the expiry day so why CE or PE or European-style options?

Actually in India Options are cash settled so they just exchange hands like shares but are exercised on the expiry day only which means they finish trading on expiry day.

Let me take an example:

One trader buys 8500 CE of October 2016 expiry at 100. Next day he sold at 120. 20 points profit for the first buyer. Option is still alive and being traded if the person who bought wants to trade. After three days he sees the price at 70. He fears and sells it at 70. His loss 70-120 = -50 points. Option still alive not yet exercised.

The third person is an Intraday trader. After one hour the same option at 61 he sells and takes a loss of 9 points. Option still alive. Positional trader buys it. Nifty zooms after 3 days. Option now again at 100. Trader sells it and makes a profit of 100-61 = 39 points.

Like this it keeps exchanging owners. On expiry day (Thursday, 27-Oct-2016) this Option expires at 30 points as Nifty closes at 8530. The person who owns it can be either buyer or seller and at 3.29.30 pm closes it and it is exercised. It cannot be traded anymore. It dies.

As you can see in between it was traded like stocks but not exercised until the expiry day. Therefore in India we call it European-style options.

ATM (At The Money) Call and Put Option:

Right now (14-Oct-2016 11.40 am) Nifty is at 8582. So the nearest Option is at strike 8600. Therefore both CE and PE strikes of 8600 will be called ATM Option for now until Nifty moves beyond 8650 or below 8550. In India there are Options at 50s strike also but they are less traded than 100s strike. So I will consider 100s strike only.

OTM (Out of The Money) Call Option:

Nifty is at 8582. All CE Call Options of any expiry above 8600 are considered Out of The Money Options. Like 8650 CE, 8700 CE, 8750 CE, 8800 CE, 8850 CE etc. You will see their price decreasing as strikes move Out of The Money because chances of them getting exercised is very less. In most cases they expire worthless. But sometimes they get In The Money making huge loss for the OTM sellers of Call Options.

OTM (Out of The Money) Put Option:

Exactly opposite for OTM Put Options. All PE Put Options of any expiry below 8600 are considered Out of The Money Options. Like 8550 PE, 8500 PE, 8450 PE, 8400 PE, 8350 PE etc. You will see their price decreasing as strikes move Out of The Money because chances of them getting exercised is very less. In most cases they expire worthless. But sometimes they get In The Money making huge loss for the OTM sellers of Put Options.

ITM (In The Money) Call Option:

Nifty is at 8582. All CE Call Options of any expiry below 8600 are considered In The Money Options. Like 8550 CE, 8500 CE, 8450 CE, 8400 CE, 8350 CE etc. You will see their price increasing as strikes move In The Money because chances of them getting exercised is very high. In most cases they expire In The Money. But sometimes they get Out of The Money and expire worthless making huge loss for the ITM buyers of Options.

ITM (In The Money) Put Option:

Exactly opposite for ITM Put Options. All PE Put Options of any expiry above 8600 are considered In The Money Put Options. Like 8650 PE, 8700 PE, 8750 PE, 8800 PE, 8850 PE etc. You will see their price increasing as strikes move In The Money because chances of them getting exercised is very high. In most cases they expire In The Money only. But sometimes they get Out of The Money making huge loss for the ITM buyers of Put Options.

Next class we will discuss some more Options terms like Option Buyer, Option Writer or Seller, Contract, Expiry Dates, LEAPS, Naked Options, Open Interest etc.

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In this article read to know the important factors that determine Option Pricing.

I assume anyone who has directly landed in this page knows what an option is. If you do not know then in simple terms an Option is a derivative contract that give the holder the right, but not a compulsion to buy it back if sold or to sell it if bought when the Option expires on the Expiry day. Expiry day is usually last trading Thursday of the month in India. If Thursday is a holiday expiry happens on Wednesday. Of course one can buy an Option expiring in 2 months or more.

Though I personally close all In The Money (ITM) Options on the expiry day which I hold because most brokers as a risk management will close the ITM Options at around 3.15 pm at prevailing market prices which you need to accept. I would rather close myself.

Of course you can leave all Out Of The Money (OTM) Options to expire worthless whether you bought or sold them to save on Brokerage charges.

Anyway lets discuss today’s topic Option Pricing: The Factors That Determine Option Price.

A few days back I got this email from one of my email subscriber:

===========================
Hi sir,

I am S. MD (CA Student). I am avid reader of your website articles. I started Nifty Options trading from last 2 months. It’s actually mock trading but with small amount like Rs 1000.

I would like to join your course as soon as I start earning and to my best of knowledge. All of your articles are very informative and educative.

Thanks a lot, you introduced me to ZERODHA (greatest platform for all kind of traders in India).

Sir, today I came across a situation where my Nifty Call Option didn’t increase but the next call options increased. (By next he meant further Out of The Money)

I will explain in detail.

I bought Nifty July 8900 CE at Rs.5/- one lot at that time Nifty July 9000 CE was Rs.3.75 only. At the end of the day my Option was at Rs.5.25 and 9000 CE Option was at Rs.6.90.

Literally I could not believe my eyes because 8900 CE Option opens at 6.15 and 9000 Option at 4.35, but at the end of day 8900 CE Option was 5.25 and 9000 CE Option was 6.15.

What is this Dilip? I am looking for true answer. I need your analyses because I believe you.

I am attaching you the screen short also for your reference.

S. MD (CA Student)
===========================

I know a lot of you must be surprised after reading his email by now. So let’s discuss The Factors That Determine Option Price.

Before reading further I would suggest read one article written by me a few months back because this will form the basis of what we will discuss further:

Options Greeks Explained Delta Gamma Theta Vega Rho

Next we will discuss some Option Basics and Terms used while trading Options which will help you to understand Options even more clearly.

Ok now to the answer to the question. By now after reading the above articles you must have understood that there are some factors that determine option prices. But all this is possible only in a normal market condition.

What is a normal market condition?

When there is liquidity in the option being traded. Please note that some strikes may be liquid and some not so liquid. The option strikes that are liquid will not behave like what is written above. However if the number of buyers and sellers are less than the option pricing gets decided merely on demand and supply.

If there are too many buyers but few sellers – the option premium may become too high and if there are too many sellers and few buyers the options premium will drop below normal level.

Note that every strike behaves as per the liquidity. So what the above person saw was purely because both buyers and sellers were few in both the strikes. With time as more traders join then the option premium becomes normal.

Hope that helped you understand why sometimes option premiums are not in sync.

Here is a PDF to help you understand options better:

https://www.theoptioncourse.com/Option-Basic-Course-by-DILIP-SHAW.pdf

Since morning today I have been reading in various online journals and I see that most experts are feeling that the markets right now are looking a bit stretched as they cannot break the barrier of 9000 and cross over it so it looks like it will fall.

Some say the fall might be around 10%. Frankly I read news just to see if there is some REAL NEWS in it. Not just what experts feel. Markets do not have any emotions – humans have but markets dot bother for human emotions.

So the reason that 9000 is not crossed for long does not fit into real practical news. There can be a fall but not because 9000 unable to break but could be for some other reason. But frankly 10% fall looks a bit far at least not this year until some real bad news hits in. In fact this strays true for ever.

History is a proof that many times the experts were proved wrong by the markets. So just read to know if there is some reality in the news, if not just ignore. Like I did today.

One news I felt correct was that results of US elections may propel markets higher. At least till then I feel 8,600-8,900 range will stay.

If you have done my Option Trading Course and reading this, it is a very good news for you. Keep making money and let the directional traders guess and lose while we keep making money. 🙂

What may move the markets in coming weeks?

Quarterly results are coming from blue-chips like TCS and Infosys. These are big companies and any good or bad news may move the markets but not more than 100 points for Nifty.

Also announcement of macroeconomic data – IIP and inflation is coming. I will keep an eye on this and will inform you.
The above factors will definitely move the markets. Up or down depends on what the news is.

Markets will remain closed on 11-October-2016 (Tuesday) for Dussehra or Vijay Dashami, and 12-October-2016 (Wednesday) for Muharram.

In my last article on Option Chain And Myth In Stock Markets there was a comment from Michael:

Hi Dilip,

If you dig deep in to the option chain, you will see that the market generally reverses direction at the strike price of max open interest. For eg, its good to buy when price is nearing the max puts (provided puts at that strike are continuously increasing with price is near) and its good to short when price is nearing max calls (provided calls at that strike are continuously increasing when price is near).

If the price is about to break out from the max open interest strike, the numbers of puts (for a break down) and the calls (for break out) will generally decrease. You can back test this for yourself, in the recent months and see the option chain predicted precisely.

Combining this with your directional strategy improves the odds of success 🙂

The reason this works it, professionals usually write options & hence by aligning with their direction, we have the upper hand. No wonder option buyers lose money.

Thanks,
Michael

My reply:

IMP NOTE For People Who Have NOT Done My Option Trading Course: Please take this as educational purpose only as it is just a comment. Please do your own research before doing what Michael is saying. I will do research on this and write a post some day. But what he says is if true then why most technical analyst fail? They should be doing the above and make a lot of money. So on the face of it I do not agree until research confirms this.

I will do some research on this. I have given a solid reason for not doing as anyone says. So please if you are a technical analyst (TA) do your own research on the above comment and let me know your results. It will be great help.

IMP NOTE For People Who Have Done My Option Trading Course: Since our trades are properly hedged and we are least bothered about direction of the markets you can try this. Since the hedge will take out tensions of trading nothing wrong to try this out. But please paper trade at least three times before trying this out and also send me the results. I am more interested in what my clients are doing rather than what I am doing as I am more interested in your profits and Thank You emails or WhatsApp messages which money cannot buy. I only get it by giving proper guidance and knowledge. In fact your Thank You emails and/or WhatsApp messages makes me more happy than when you pay for the course. 🙂

I still have some 150+ Thank You emails and WhatsApp messages which I am unable to upload in the site due to lack of time since customer service still taking too much time. Anyway if I find time I will upload – but I am saying this since last one year I think. 🙂

So please keep sending those messages it motivates me a lot and makes me very happy.

Wishing You All The Very Best.

Since there is absolutely no movement in Nifty since the India-Pakistan tensions I am sure all directional traders by now must have lost much more than they made when they bought calls and puts on that day.

This is the life of directional traders. They seldom make money but do not let their ego die and still are willing to lose money trading the direction.

Whereas the non-directional traders rarely lose money and even if they do, if the trades are properly hedged the losses gets limited which does not affect their pockets. They are happy and move on.

If you are my paid subscriber of my course please note that India VIX has again fallen today. If you entered the trade Strategy 1 last month it should be in profit now. If the profit what we need is met please close the trade and take money off the table. Do not forget to thank the directional traders.

It is strange that people still ask me questions on where and how to find direction so that they can make a lot of money trading the stock markets.

Today morning itself at 9 am I got a call asking how to predict direction of Nifty from Nifty Option-Chain?

Option Chain is nothing but quoting of options prices through a list of all of the options for a given security like Nifty, Bank Nifty, or any other Stock. An option chain is simply a listing of all the put and call option strike prices along with their premiums for a given maturity period.

In India the best way to see current Option Chain is to visit the following link:
https://www.nseindia.com/live_market/dynaContent/live_watch/option_chain/optionKeys.jsp?symbolCode=-10006&symbol=NIFTY&symbol=NIFTY&instrument=-&date=-&segmentLink=17&symbolCount=2&segmentLink=17

Most Active Call Options are here:
https://www.nseindia.com/live_market/dynaContent/live_analysis/most_active_calls.htm

Most Active Put Options are here:
https://www.nseindia.com/live_market/dynaContent/live_analysis/most_active_puts.htm

Most Active Securities:
https://www.nseindia.com/live_market/dynaContent/live_analysis/most_active_securities.htm

Most Active Contracts:
https://www.nseindia.com/live_market/dynaContent/live_analysis/most_active_contracts.htm

Now tell me after seeing all this can anyone tell where is Nifty Direction heading? No you cannot. That’s the reason please do not run after direction – it will change the direction of your life from positive to negative. Whatever you have made in life will be lost running after direction of the markets.

I agree that if you can really get the direction right 80% of the times you can double your money in 6 months or less and make a lot of money trading Nifty or stocks.

But both are a huge myth – finding the direction of a stock or Nifty in the short term and making a lot of money trading stock markets in the short term.

If you write exactly the opposite it becomes true. See this:

Finding the direction of a stock or Nifty in the long term and making a lot of money trading stock markets in the long term. I just replaced short with long and the whole myth turns into a reality. 🙂

Let me also give you another example why finding the direction of Nifty with 80% success rate is nearly impossible.
Can tell me in which direction your life will go tomorrow? But you will have to tell me with a guarantee. For example will you get a promotion tomorrow or will you fall sick or not or will you meet with an accident or not or will you reach your office on time or not? Can you answer me all of the above questions with guarantee? I am sure your answer is no.

When you cannot predict direction of you own life within a few hours from now (on which you have full control) – how can you predict where Nifty will be tomorrow (on which you have no control) with a guarantee? No you cannot.

If you were right it was fluke. If wrong it was reality that most of the times you cannot predict movement of a stock in a very short period.

That is the reason I keep a reality check on my subscribers from time to time so that they avoid losing money. What do I get by writing these things in return? Nothing. But I will write the fact whether you enroll for my course or not.

I could have easily written do my course and make money fast and I would have get a lot of clients in a month. But sorry I cannot lie and take your money I am not like others and never will be.

If you believe what I am telling is correct only then do my course. It is a slow and steady process of making money without any tensions or hassles of keep looking at Nifty.

And yes with time do compound your money. So that after a few years you have enough not to worry any more about money.