| Author |
Message |
manishdave
Senior Member
Joined: 05/Aug/2006
Location: India
Online Status: Offline
Posts: 1371
|
   Posted: 20/Jul/2010 at 10:04am |
Originally posted by vinvestor2010
Manishji just a point would like to add IMHO
-Points 1&2 could be risky , in case of selling derivatives, gains are limited but losses could be unlimited
-Points 3&4 which is covered calls is useful if we are holding the stock in volume in fact it is far better than dividend income
-so when we do not know what to do we should start by buying a put/call option only- that way a worst case loss in a month is about 10-15k |
Point 1 is covered by stock that you are holding. And point 2 is covered by cash as you intend to buy that stock.
|
 IP Logged |
|
|
|
 |
|
Monkey
Senior Member
Joined: 21/Aug/2009
Online Status: Offline
Posts: 770
|
Posted: 21/Jul/2010 at 12:56pm |
Manish sir,
I find assymetric pattern of risk & reward in F&O interesting. For example, it makes sense in buying long term (2 to 3 years out) calls on nifty, which are out of money, after a big correction when nifty valuation contracts to around 15 ttm. Premium one needs to pay on out of money calls would be quite less giving big leveraged exposure to nifty. Chances of losing money after 3 years is very remote considering buying valuation is 15. Since the position is leveraged one, it bounds to give outsize returns.
Similar way, it makes sense to buy long term, out of money puts on nifty after it crosses valuation of 30 ttm. Chances of nifty coming back in 2 to 3 years time from valuation of 30+ is close to 100%, giving outsized returns due to inherent leverage in the position.
Your views are most welcome.
|
|
IP Logged |
|
|
|
manishdave
Senior Member
Joined: 05/Aug/2006
Location: India
Online Status: Offline
Posts: 1371
|
Posted: 21/Jul/2010 at 1:34am |
Originally posted by Monkey
Manish sir,
I find assymetric pattern of risk & reward in F&O interesting. For example, it makes sense in buying long term (2 to 3 years out) calls on nifty, which are out of money, after a big correction when nifty valuation contracts to around 15 ttm. Premium one needs to pay on out of money calls would be quite less giving big leveraged exposure to nifty. Chances of losing money after 3 years is very remote considering buying valuation is 15. Since the position is leveraged one, it bounds to give outsize returns.
Similar way, it makes sense to buy long term, out of money puts on nifty after it crosses valuation of 30 ttm. Chances of nifty coming back in 2 to 3 years time from valuation of 30+ is close to 100%, giving outsized returns due to inherent leverage in the position.
Your views are most welcome. |
This is exactly how Nassim Taleb trades!!! But trading like this is for purpose of speculation. What I wrote about was F&O as a tool for "investors". Personally I speculate into F&O sometimes. But generally my preference is writing Calls and Puts instead buying them. And yes I know it is risky.
|
|
IP Logged |
|
|
|
prabhakarkudva
Senior Member
Joined: 16/Jan/2008
Location: India
Online Status: Offline
Posts: 1624
|
Posted: 21/Jul/2010 at 11:22am |
Originally posted by Monkey
Manish sir,
I find assymetric pattern of risk & reward in F&O interesting. For example, it makes sense in buying long term (2 to 3 years out) calls on nifty, which are out of money, after a big correction when nifty valuation contracts to around 15 ttm. Premium one needs to pay on out of money calls would be quite less giving big leveraged exposure to nifty. Chances of losing money after 3 years is very remote considering buying valuation is 15. Since the position is leveraged one, it bounds to give outsize returns.
Similar way, it makes sense to buy long term, out of money puts on nifty after it crosses valuation of 30 ttm. Chances of nifty coming back in 2 to 3 years time from valuation of 30+ is close to 100%, giving outsized returns due to inherent leverage in the position.
Your views are most welcome. |
These opportunities come only once or twice in so many years.This is also what buffett has done by writing long dated put options on the major indices world over.This gives him premium money to invest elsewhere and also when the indices are undervalued he can go and buy them.Man's a genius.
|
|
Take your chances and keep them in a box until a quieter time.
|
|
IP Logged |
|
|
|
hit2710
Senior Member
Joined: 15/Jun/2009
Location: India
Online Status: Offline
Posts: 4013
|
Posted: 22/Jul/2010 at 12:14pm |
Originally posted by manishdave
But generally my preference is writing Calls and Puts instead buying them. And yes I know it is risky. |
Two questions:
1. Do u write covered calls and puts?
2. Do u follow any technicals or if not then what other method for writing these options?
3. Have u ever been badly hurt writing these?
regards
hitesh.
|
|
Stockmarket is a weird place. For every person who buys a stock there is a person who sells it and both think they are very smart.
|
|
IP Logged |
|
|
|
manishdave
Senior Member
Joined: 05/Aug/2006
Location: India
Online Status: Offline
Posts: 1371
|
Posted: 22/Jul/2010 at 2:33pm |
Originally posted by hit2710
Originally posted by manishdave
But generally my preference is writing Calls and Puts instead buying them. And yes I know it is risky. |
Two questions:
1. Do u write covered calls and puts?
2. Do u follow any technicals or if not then what other method for writing these options?
3. Have u ever been badly hurt writing these?
regards
hitesh. |
1. I also write naked calls, puts. Covered calls if I hold something, premium is high and if I was thinking about exiting that stock. Covered put is If I am interested in increasing exposure below certain price. Then I write puts at that level and willing to buy stock. 2. No technicals. Experience and situation. Difficult to explain. 3. No. If trend is strong against me I am generally not there unless conviction is strong. But in that case I keep exposure low. So far it has worked out well.
|
|
IP Logged |
|
|
|
vinvestor2010
Senior Member
Joined: 19/Mar/2010
Location: India
Online Status: Offline
Posts: 299
|
Posted: 23/Jul/2010 at 6:39pm |
Hi Manishji have you also tried the more advanced strategies such as straddle, butterfly etc?
Any ideas if they could be of use in this situation?
|
|
IP Logged |
|
|
|
manishdave
Senior Member
Joined: 05/Aug/2006
Location: India
Online Status: Offline
Posts: 1371
|
Posted: 23/Jul/2010 at 8:05pm |
Originally posted by vinvestor2010
Hi Manishji have you also tried the more advanced strategies such as straddle, butterfly etc?
Any ideas if they could be of use in this situation? |
No. I dont'. But some times I use call put both in same script. Advanced or old fashioned doesn't matter. What matters is if you are right or wrong and how you manage risk.
|
|
IP Logged |
|
|
|
Active Topics
Memberlist
Calendar
Search
Help
Register
Login
