HOW TO IDENTIFY OTM ATM & ITM

HOW TO IDENTIFY OTM ATM & ITM

TO IDENTIFY OTM / ATM & ITM in CALL OPTION...

IN ABOVE PICTURE, YOU WILL FIND THAT MR. A IS CLIMBING UP TO REACH AT TOP OF THE HILL OF 6000 STEPS. THINK HERE THAT MR. A IS BULLISH ABOUT STOCK AND BUYING CALL OPTION.

NOW HE IS STANDING ON STEP NO. 2400

THEREFORE 2400 IS ATM ( AT THE MONEY )

THE DISTANCE WHICH HE COVERED FROM STEP 1 TO 2399 is ITM ( IN THE MONEY )

THE DISTANCE WHICH HE WANT TO COVER OR YET TO COVER ie ABOVE 2400 is OTM ( OUT OF THE MONEY )





TO IDENTIFY OTM / ATM & ITM in PUT OPTION...

IN ABOVE PICTURE, YOU WILL FIND THAT MR. B IS CLIMBING DOWN TO REACH AT BOTTOM OF THE HILL. THINK HERE THAT MR. B IS BEARISH ABOUT STOCK AND BUYING PUT OPTION.

NOW HE IS STANDING ON STEP NO. 3200

THEREFORE 3200 IS ATM ( AT THE MONEY )

THE DISTANCE WHICH HE COVERED FROM STEP 6000 TO 3201 is ITM ( IN THE MONEY )

THE DISTANCE WHICH HE WANT TO COVER OR YET TO COVER ie BELOW 3200 is OTM ( OUT OF THE MONEY )

List of stocks in Bank Nifty index with weightage

My last article was about weight of stocks in NSE Nifty index, in this article I will tell the weight of stocks in Bank Nifty index. Bank Nifty index is the index traded on NSE based on the prices of 12 banks, below are the stocks along with their weightage, this weight can help us in identifying what would be the direction (Up trend or Down trend) of index if the major banking stocks like SBIN, HDFCBANK or ICICIBANK moves.

State Bank of India 24.89
HDFC Bank 21.64
ICICI Bank 16.44
Kotak Mahindra Bank 7.27
Axis Bank 7.21
Bank of Baroda 4.93
Punjab National Bank 4.50
Bank of India 3.42
Canara Bank 3.16
IndusInd Bank 2.54
Yes Bank 2.01
Union Bank 1.97
In the above list first 5 stocks has the highest weight in bank nifty index, so most of the time trend of these five must be considered as trend of bank nifty index.

Stock and their Weight in NSE Nifty Index, How it is Helpful

Here is the list of NSE Nifty stocks along with their weightage in NSE Nifty index. This weightage can be very useful when we have high weightage stock moving in one particular direction, so chances are that nifty index will also move a bit in that direction due to high weightage that stock have. Take an example if TCS, Reliance, ONGC, Coal India, ITC and State bank of India are trending up, then nifty will also move as these six stocks have total weight of appox 27% in nifty, so these 6 stocks has high influence on NSE Nifty.

Look at the NSE Nifty stocks list with their weight:

Tata Consultancy Services Ltd 7.09
Reliance Industries 6.78
Oil & Natural Gas Corp 6.65
Coal India Ltd 6.10
ITC 5.51
State Bank of India 4.32
Infosys 4.11
HDFC Bank 3.70
NTPC 3.68
Bharti Airtel 3.38
Hindustan Unilever 2.86
ICICI Bank 2.83
Wipro 2.83
Housing Development Finance Corporation 2.81
Larsen & Toubro 2.39
Tata Motors 2.20
Cairn India 1.78
Sun Pharmaceuticals Industries 1.77
Bharat Heavy Electricals 1.56
Power Grid Corporation of India 1.44
Bajaj Auto 1.31
Kotak Mahindra Bank 1.26
Axis Bank 1.25
GAIL (India) 1.24
Mahindra & Mahindra 1.21
Jindal Steel & Power 1.19
Tata Steel 1.16
Steel Authority of India 1.14
Hero MotoCorp 1.13
Asian Paints 1.08
Sterlite Industries 0.99
HCL Technologies 0.98
DLF 0.96
Maruti Suzuki India 0.93
Bank of Baroda 0.86
Punjab National Bank 0.80
Dr Reddys Laboratories 0.77
Bharat Petroleum Corporation 0.76
Ambuja Cements 0.73
Cipla 0.71
Siemens 0.68
Hindalco Industries 0.68
Tata Power Company 0.65
ACC 0.64
Grasim Industries 0.63
IDFC 0.59
Ranbaxy Laboratories 0.59
Sesa Goa 0.47
Jaiprakash Associates 0.43
Reliance Infrastructure 0.39

Double your trading capital in just 3 months by trading Nifty Future

Nifty future has large intraday moves and if we look at the monthly ATR you will notice ATR at 500 so in worst case scenario a trader can make 200 points profit in a month. So calculation is quite simple, let me do it for you one lot of nifty future will cost about Rs.30,000 so you need at least 600 points to make Rs.30,000 i.e. 50*600 = 30,000. Our target will be to make 200 points monthly on nifty future for 3 months; this is trick to simply double your trading capital. Two or three positional trades are enough to meet that target or 8 intraday trades of 25 points profit will also do that. You may use short term trading strategies in nifty future and nifty options which we have discussed earlier.

Bank Nifty Future Trading Strategy in Downtrend, Which Banking Stocks to Track

Bank nifty future is also another index future traded with huge liquidity on NSE, on daily charts we see bank nifty is in downtrend, hence trading in the direction of daily trend we will look for selling opportunities using slow stochastic indicator. Here I will discuss a trading strategy that can be used for bank nifty future in a downtrend; I always look for a pullback in opposite direction to enter the trade. Once we enter the trade on bank nifty future we keep on rolling the position to next month till uptrend is intact. Now traders must keep a track on banking stock those are known as heavy weights, such stocks are SBIN, ICICIBANK, HDFCBANK, AXIS BANK and PNB. Look at bank nifty chart shown below.

How traders across India make living from trading Nifty future contract

Nifty future is most popular futures contract traded on NSE (National stock exchange), traders usually make 25 points in intraday trade (day trading). So a intraday nifty future trader can make about Rs.20,000 per month, here is how. Let us assume that a trader make 25 points in intraday trading, suppose he trades 8 sessions only out of 22 trading session in a month. In intraday trading you also require less margin, most of brokerages offer intraday nifty trade for minimum margin of about Rs.15,000 so a trader can trade 2 lots of nifty future for Rs.30,000. Now total points is 25*8 = 200 points, total number of lots being traded = 2 lots (100 quantity). Simple math for calculating total profit is 200*100= Rs.20,000 just by trading nifty future for 25 points gain anyone can make a living at least in India. However you must take help of technical analysis to make this trading a better and profitable.

Things to check when trading NSE Nifty Future contract

Here is my list to check before open / entering into the trade on nifty future contract, if trader follows this list believe me there is lot you can improve on you trading side. Here it is:
1. Check the medium term trend on weekly charts.
2. Find the trading opportunity in the direction of medium term trend.
3. Watch for global markets like DAX, Dow Jones and Shanghai Composite.
4. Have a look at major currency pairs i.e. EUR/USD, AUD/USD, GBP/USD, USD/JPY, USD/CAD, USD/CHF and NZD/USD.
5. Wait for global news events like PMI, GDP data, Interest rates decision, Unemployment data and Inflation data.
6. See if there is news release for Indian economy. If yes, wait for release.
7. On charts draw Fibonacci retracement and moving averages (100 EMA & 200 SMA). Check is current market price of nifty future is at any of these levels, if yes see how nifty future reacts to it.

Nifty ETF, advantages and disadvantages over nifty future

Nifty ETF is new way of holding nifty future in your demat account, now no need of rolling over positions at time of expiry. Nifty ETF has been one of the smartest ways of investment in nifty index for long term. Let us see advantages and disadvantages over nifty future:

Advantages of Nifty ETF:
1. Nifty ETF can be held on your demat, it is just same as you take delivery of shares.
2. No need to roll over your positions on F&O expiry, as you have nifty ETF on your demat account instead of trading account.
3. No need of M2M (mark to market) settlement, as you are holding nifty ETF on demat account for delivery.
4. Nifty ETF can be used as margin for buying shares for trading, this facility is provided by many stock brokers.

Disadvantages of Nifty ETF:
1. Nifty ETF requires full margin i.e. total value of contract at time of placing orders. Whereas nifty future need as low as 10% margin requirement of total contract value.
2. Fund expense is also applied and this can be around 2%.
3. Liquidity in nifty ETF is much lower as compared to nifty future.

What factors can change the trend in nifty future

When we speak about factors that has direct impact on nifty future trend, mostly fundamental factor are more responsible then technical factors. Let me share these fundamental factors:
1. Food inflation: Food inflation has been recent challenge for central government, we see whenever food inflation goes high there is always hike in key interest rates. Interest rates hike kills growth of rate sensitive sectors like realty sector, banking sector and automobile sector.
2. RBI Policy: RBI credit policy is also major fundamental factor in deciding for trend of nifty future, when interest rates are hiked nifty future generally crashes.
3. Industrial Production: IIP is the number that is being looked when we say about industrial production, when IIP is below expectation or lower than previous release nifty future goes down for few trading sessions. If IIP is better than the expectation nifty future bounces for some trading sessions.
4. Results: Results here are quarterly and annual, mostly watched are annual results as it shows the performance of a company for complete 1 year. Good results are reason for nifty future to move higher, we are talking about those companies that are included in nifty index. Results lower than expectation can drag nifty future lower also that stock will underperform.
5. Policy Reforms: Policies from government can be very good support for sectors, if they are focused on growth. India is still waiting for some policies reforms to be done to improve the capital flow into the economy.
These factors has direct relations to our stock market so such events must be watched and analysed before taking a medium to long term positions on nifty future.

How strong growth in US is bad for Nifty Future

US economy was growing with its fastest pace since 2008, we have seen Dow Jones Industrial Average and S&P500 index making fresh 52week high. This good news is not really good for India, as we see US Dollar was gaining strength across all other currencies. This impact was seen in Indian rupee INR, due to strong US dollar there was weakness in Indian rupee. Weakness was a bigger one as we saw, INR quotes on MCX was seen around 54 level mark this move was from 46 to 54. Indian rupee being depreciating, this creates extra cost on imports. India being one of largest oil importer, depreciating Indian rupee makes oil imports costlier. Due to hike in fuel prices direct impact is on food inflation, it becomes an issue, government then tightens monetary system by hikes in interest rates. Interest rate hike has direct impact on growth; slowdown in growth is then responsible for selling in nifty future. This is how strong growth in US is not good for nifty future, however IT sector outperforms in such time due to added USD revenues.

Why to buy nifty future, Fundamental and technical reasons

Nifty future has gone through many fundamental and technical changes, we have seen how technical and fundamental analysis change nifty future trend. Now I am sharing few most important reasons that suggest to buy nifty future.
First of all fundamental reasons:
1. IIP data was seen improving, also we have seen capital goods sector registering growth, power sector saw increased growth, and even core industries were seeing better growth.
2. Inflation was in comfortable zone now; latest reading shows it below 7%.
3. RBI has given a hint in its policy review, that it may consider lowering interest rates. Experts believe this will be great boost for economy.
4. Quarterly results were also inline to street’s estimate.
Now let us see technical reasons for adding long position to nifty future:
1. Nifty future weekly charts saw bullish divergence and downward momentum was losing its strength. Hence up move is possible in near term.
2. Nifty future bounced from its major support i.e. 50% Fibonacci retracement level on weekly chart.
3. RSI shows nifty future was highly oversold and some pullback should be seen shortly

Understand open interest in nifty future, why it is so important

Open interest is the total number of long and short positions open in a particular contract; it is major indicator for professional traders trading in high volume. Nifty future being most traded future contract, it is very important for nifty future traders to know the basics of open interest. Here I will explain you with the help of an example.
Trader P buys 1 lot nifty, trader Q sells 1 lot nifty – Total open interest in nifty future is 2 lots.
Trader P sells 1 lot nifty, trader R buys 1 lot nifty – Total open interest in nifty future is 2 lots.
Trader S sells 2 lots Nifty, trader T buys 1 lots nifty – Total open interest in nifty future is 6 lots.
This goes on and on, here the trading volume is much low, actually thousands of lots change hands every day. If you want to be successful trader in long run then you need to follow open interest seriously. Open interest can tell how strongly traders are positioned in a direction, so it’s really a priority of a nifty future trader to know how open interest works and how it can be used for trading.

Major news event that affect nifty future the most

Most important news release that move nifty future significantly are related to fundamentals, these fundamental news events when becomes public nifty trades with very high volatility. These news events are:
1. GDP data: GDP data is a simple figure that implies growth of any economy, it is seen that nifty future move almost 120 points when this is released.
2. Inflation data: Inflation is watched by many experts as it decides road map for interest rates and has direct impact on growth.
3. Interest rates decision: This is done by RBI, interest rates are decided by data of inflation and liquidity available in banking system. Banking sector is highly impacted when key rates changes.
4. Fuel price review: Fuel prices are directly correlated with inflation, so market participants watch it very carefully, on hike in fuel prices nifty future corrects by more than 100 points.
5. IIP data: IIP is overall view of industrial growth, so higher the IIP data, nifty future will move higher.
6. Results release: Here results we are talking about are of front line stocks or nifty 50 stocks, blue chip stocks. Results give direction to price movement in future.
7. Global events: These events include news release from US and Europe. Most of them being fundamental news.
8. Currency war: Well currency war is latest fight against freely floating currencies, recently we have intervention in JPY and CHF, by the bank of Japan and by Swiss national bank.
9. Election results: Results of recent election also plays important role in deciding direction, in 2009 election when results were declared we saw nifty future hitting upper circuit for first time in last 8 years. Nifty future was up more than 10% or 450 points.
10. Rating downgrade / upgrade: Rating agencies also has impact on nifty future as we have seen recent downgrade by S&P on Indian banking system. SBI was downgraded and stock was down by 15% in few days time. Recently we saw European economies being downgraded; direct impact was seen on global equities as well as currencies.

Trend Following Trading System for Nifty Future and Bank Nifty Future

If you are a trader your first priority will to know the overall trend, if you are a nifty future trader or bank nifty future trader you must have an idea which way market will be moving. You need to take the position in direction of daily trend and not against it; these are one of the principles of a successful professional trade. You will need a charting software and EOD data for nifty future and bank nifty future, on charts you will first of all place an indicator named slow stochastic. This indicator will be used to get us entry signals on nifty future and bank nifty future. Steps to follow:
1. Look for the trend; find out the trend on daily chart by simple observation. We will need only uptrend or downtrend, no for ranging markets.
2. If trend is up, then you will look only buy crossovers on indicator, if trend is down you will wait for only sell crossovers. Trading in direction of daily trend will make a difference in trading.
3. Strategy to maximize profit will be to keep scaling-in to position till this trend continues. Once there is end of the trend, you will need to exit all your trading positions.

Trade Nifty Future Using Fibonacci Support Resistance Levels with High Accuracy

Fibonacci retracement levels are highly used by professional traders, as these levels acts as support resistance. This tool just needs recent high (Swing High) and recent low (Swing Low) to plot retracement levels over the nifty future charts. Price action reacts to these levels in a very accurate fashion, you will see market finding support or facing resistance around these levels. Professional traders are main traders at Fibonacci levels; they are mainly concentrated at tops and bottoms of the trend, unlike the retail traders. You can see on nifty future chart, how this index reacted to Fibonacci retracement level. Just after moving towards this level a sharp bounce was seen by gaining over 150 points in just 2 days. In this case we have found the exact bottom and this strategy will even work for the finding tops for nifty future.

How to Find Support and Resistance Levels of Nifty Future for Short Term

Nifty future charts are very useful to find out exact areas of support as well as resistance over the daily chart. As charts are representation of historical data, it becomes very useful to see how markets have reacted earlier to those levels and depending on that reaction, history may repeat itself. Now see a level where nifty future previously found support on that daily chart, then check which was the level that proved to be a resistance, this is as simple as that. Now you have support and resistance from the historical charts (EOD chart), next you may use the technical analysis tools such as trend lines, price channels and Fibonacci retracement to get more support resistance zone. Here I prefer to use Fibonacci retracement levels, In my trading career I have mainly used this tool and my success rate was about 75% in a long run.

Nifty Options Trade Setup for Guaranteed Return in Trending Market

When nifty future is showing strong trends, then you can make more money with guaranteed trade strategy. For using this strategy you must have charting software which can show you historical data on daily charts. Then you will apply slow stochastic indicator over the chart and now your settings on charts is done. Now just check the trend on daily chart, if nifty future is making higher tops and higher bottoms then trend is clearly up, while if there is formation of lower tops and lower bottoms it is downtrend. Once you are clear with the trend you have to wait for crossovers in slow stochastic indicator, once the crossover is spotted in right direction, we will take trade on nifty options i.e. place our buy orders for nifty options. If it was uptrend we would have bought nifty call options and if there was downtrend nifty put options would be chosen.

Why in the Money Nifty Options Better to Trade in Expiry Week

In the money style nifty options are best when expiry is near, simple reason behind this is Nifty options has the premium for time (days left for expiry). When the expiry comes near this premium also gets reduced and if you have observed then you will find the all out of money nifty options expire worthlessly i.e. at 0 (zero). If you chose in the money nifty options, they will at least have the real value in it. Like Nifty future is trading at 5533 level, nifty 5500 call option must have value of at least 33. If Nifty future moves to 5560 then nifty 5500 call option will be trading at least at 60. But if nifty future is trading at 5560 and nifty 5600 call options would be at 2 or 3 only and if nifty expires at 5566 then nifty 5700 call will become worthless at expiry.

How to Hedge Nifty Future Positions with Nifty Options

Nifty future can be considered as long term investment by large group of nifty future trading community, only thing to keep in mind is rollover to next month when current month contract expires. Now for those long term nifty future traders, when market turns volatile and starts correcting these traders needs to hedge their open position. At such time nifty options come handy to these traders, it becomes insurance for underlying contract in this case nifty future. Suppose you are long on nifty future, but markets have picked short term correction. So here trader can buy same quantity of nifty put options as he is holding nifty future, here all the losses caused by the down move i.e. mark to market losses will be covered by those nifty put option. This procedure is known as hedging the nifty future positions with the help of nifty options.
Here the trick to keep the open positions hedged unless and until markets start to recover and in trader must select proper strike price depending on the days for F&O expiry. Point to remember is you are buying same nifty option quantities as you are holding nifty future.

How Nifty Options has Limited Risk than Nifty Futures Trading

Nifty future are highly popular amongst F&O traders, there are many reason that traders choose to trade Nifty future. But no one can deny the fact that Nifty options have limited risk as compared to nifty futures, I will clear each and every point here to prove this. When you buy nifty options you pay a price know as premium paid, now you are holding this nifty option at the time of expiry this option may become 0 (ZERO). But in nifty future you are required to meet the MTM (Mark to market) at the end of the day, if settlement price is lower than your buy price you need to pay the loss amount for the day and carry position for next day. So if margin of nifty future be Rs. 30,000 and market corrects 700 points in few trading sessions you will lose Rs. 35,000 i.e. more than what you have initially invested. In this way risk in nifty options is low as compared to nifty future.

Nifty Options Put Call Ratio Analysis, Learn Technical Analysis

Put call ratio can be used as additional confirmation for taking a trade, moreover it can be found easily on NSE’s website. Before explaining you put call ratio analysis, I will tell you most important fact about options trading it is: “About 95% option contracts expire worthless.” This means most profitable group of option trader is “Option Writers”. Now you will get put call ratio from this NSE’s link, this is updated daily and it’s only for nifty option.
How it is used in Technical Analysis:
Suppose today’s put call ratio is 1.5. Now this fig. is clearly above 1 so put option writing (shorting) is more than call option, in simple words smart people are expecting nifty future will move higher in coming sessions. Now suppose if Put call ratio is 0.8, here it is below 1 so call writing is more than put writing. This is because large traders are betting that nifty future may correct in near term.

How to Profit in Falling Markets Using Nifty Future with Small Capital

If you are sure about some market movement, like if you know certain important support resistance levels, you can make huge amount of money even if you have small capital (INR 15,000). Here is my personal experience, I had only INR 15,000 but i know that 5180 was strong resistance and nifty future should be shorted there for sure shot gain of 50 to 70 points. I patiently waited for nifty future to trade around 5170 level; once it came there I shorted nifty future 5 lots (250 Quantity), as my offline broker gave me that limit for intraday. After making high of 5176 nifty future attracted huge amount of selling and traded at 5109 in few minutes. At this point of time I booked profit on all 5 lots (Squared off trade).
Profit from this trade was: Sell at 5170, buy at 5110 Gain = 60 points.
Now, total profit is 60*250= INR 15,000 (Without Brokerage and tax). I just doubled my trading capital on one trade.

How RSI can be used to Find Trend in Nifty Future Medium Term

RSI is a mechanical indicator used in technical analysis; this indicator can be used to find whether stock is overbought or oversold. Along with this RSI has a very special purpose, it can find out medium term trend in stocks or Nifty. How that I will show you, now in RSI we have to important levels 30 level which is oversold region and another 70 level considered as overbought region. Whenever RSI lands above 70 then we say stock is overbought and some selling is expected, if RSI reading is below 30 then we conclude stock is oversold and some buying is expected. Above this there is another important level which is 50 level this level can be used to tell if stock is bullish or bearish in medium term. No if RSI on weekly chart is above 50 level then stock is bullish for medium term, if RSI shows reading below 50 then we simply conclude stock is bearish in medium term. Here we have an example to prove this works: On below chart you can see RSI moved above 50 level and a fresh upside rally started and RSI on moving below 50 created panic selling.

How to Trade Nifty Future in a Very Volatile Market Environment

Trading in very volatile market environment may not be suitable for all traders, as risk of hitting stop loss in maximum here. Anyways I am going to teach you how to trade in such scenario. You will need to have intraday chart of nifty future and then just apply RSI indicator with default setting as 14 periods there. Look at (Study) the market movement, simple observations will let you know support and resistance on charts. Then note these levels on charts by drawing horizontal line, each for support and resistance. Now when nifty future moves towards support and RSI is under 30, buy at cmp with 30 points target and 15 points stop loss. In other case, nifty future moves towards resistance and reading on RSI is above 70, short nifty future at cmp with target 30 points from entry level and 15 points stop. This strategy will work in very volatile market (consolidation), but not when market starts to chase the trend.

Breakout Strategy with Nifty Call/Put Options, Steps to Follow

Break out strategy is best applied when some important news is to be announced, that can bring large movements in markets in either direction. This strategy uses Nifty options, both call option and put option, traders generally buy out of money call option and put option just before the news is to be announced. Let’s take an example, when the results of election polls were to be announced, nifty was trading around 3900 level, we advised to buy nifty 4000 call option and nifty 3800 put options condition was to execute this strategy with same quantity. Next day when results were publicly announced nifty was trading higher by 5% and hit the upper circuit in few minutes of trade, then nifty future went 9% higher. In this strategy total premium at the time of execution was 120 and next day we were getting total premium (premium from nifty 4000 call + nifty 3800 put) in excess of 520. Therefore getting more than 4 times gain using this strategy, so the point is in stock markets are lots of events in which large moves are expected but direction is not clear, in those cases traders can implement this breakout strategy. The only drawback this strategy has is, if market gives pause after the news announcement then you may end up in losses.

Nifty Future vs Bank Nifty Future, Which is Best to Trade and Why

Before deciding which is best to trade, let’s get on to detail how they are made. Nifty future is a main benchmark index of NSE, it is made up of 50 best stocks across different sectors. So, in short Nifty future is mixture of stock from different sectors. Whereas Bank Nifty is index formed by the stocks of banking sector, it’s that simple. Now how to decide which is best to trade and why?
For that we have to look at the news if there is positive news flowing in markets then you need to buy Nifty future, as it will move more confidently. If the news is about banking sector, example RBI cuts interest rates, then banking stocks will move up sharply so in that case you should trade long on Bank Nifty Future. If RBI hikes interest rates then you can short sell Bank Nifty Future. So trading idea is to watch the news and decide the instrument to trade.

How to Multiply Your Money with Nifty Options Trading Strategy

Nifty options buying has limited risk but unlimited profit potential, I am going to teach you a trading strategy that can easily multiply your trading capital (money). Before starting with this strategy you need to keep at least Rs. 1,00,000 in your trading account, so that you don’t have to risk much of your trading capital. Now here first thing to do is start looking at Nifty futures chart i.e. daily chart, in that chart just see in which direction the market is moving (up or down), If market is trading sideways then there is no trade. Let us see when market is up (forming higher tops and higher bottoms), We will wait for a decent pullback of about 50 to 80 point to participate in that up move. Whenever that pullback happens, you will need to buy Nifty Call Option, now I am tell how to choose correct strike price for nifty options, just look at this example: If nifty spot is 5400 then buy nifty 5500 call options i.e. out of money options. Set target as double of your buy price, stop loss half of your buy price. This was all about buying, now let’s see how much quantities to buy; you will use 40% of your trading capital for buying this nifty option. So if you have Rs.1,00,000 in your trading account then you will buy nifty options worth Rs.40,000/- Before trading with options remember trading options always involves high degree of risk, moreover it’s your hard earned money invest it wisely.

Trading Nifty Futures in Different Types of Market Conditions

Trading in market can be very simple and easy when you know the direction of market. Any markets can be classified into three types:
1. Bull Market
2. Bear Market
3. Ranging Market

Now I will teach you different strategies to trade in these types of market scenario, lets start with bull market strategy, in the case of bull market (higher top and higher bottom) traders should be looking for only buying opportunities and pullback will give us this trade. In case of bear market traders need to keep looking for selling short, this short position should be only entered in case of some profit booking. So in trending market scenario traders should be trading only in the direction of major trend (trend on daily / weekly chart). Also traders can take help of technical indicators to get confirmed entries, I mostly use slow stochastic while chasing the trends. Ranging markets are not always good for trading as it many time seems to be volatile, in any case you will need to draw support and resistance looking at the daily chart and whenever price hits support its time to enter long, booking profits near resistance region.

Nifty Options Strategy for Trading Bullish Market, Entering the Market

Nifty Option trading strategy when markets are bullish, in this strategy I will be teaching how to check if markets are still bullish then we will see how to trade Nifty option (call option in this case). First thing you need to check is trend just open your charting software and see nifty future daily chart. Now in that chart sense the direction if it is up then markets are in uptrend, in case of uptrend to enter any trade we wait for pullback to happen and this pullback gives trader a buying opportunity. In case of nifty option we select strike price which is out of money, so that we will enjoy nice premium once market turns in our favour. So whenever pullback happens there will be solid trading opportunity with low risk and high reward, entering the market with the help of slow stochastic indicator. When mechanical indicator gives crossover below 20 level (Oversold level), it should be taken as strong buy signal, our idea is if this signal is so strong then traders should buy nifty options so to get excellent returns by leveraging capital.

How to Trade Nifty Options in Bearish Markets, Learn Strategies

Trading Nifty options in bearish market, in bearish people traders say they lose money but fact is bearish markets offer best money making opportunity as panic is higher in these markets so markets react fast. In case of bearish market you always look for selling opportunities or selling signals in technical indicator. We are talking about nifty option so we will be buying out of money put options if time of expiry is greater than 15 days, or else we will go with at the money or in the money put option. After selecting the type of put option now we will completely focus on the price action of the underlying i.e. nifty future and wait for pullback to buy that nifty put option. Target will be 50% of the total premium paid while purchasing put option and stop loss will be 25% of the total premium. In trading nifty options always remember a golden rule that you will never risk more than 10% of your total trading capital at any point of time.

How F&O Expiry can Help You to Maximize Profits with Nifty Options

On the day of expiry volatility in market is at its maximum so taking advantage of this information trader can make some smart profits on F&O expiry day itself. Next thing you should check is any important global data that is to be released on that expiry day, if yes then see at what time data will be made publicly available. Because at this time market may give wide swing in terms of nifty it may be about 40 to 50 points, enough to make huge money. Now just wait and watch, till that global news is being released now look at global index such as Dow future or Germany’s DAX and see how they have reacted to that news, if it is good news then just buy 4 lot of at the money call options on nifty. If news is bad then just buy in the money put option may be 10 lots, you may notice there is big difference in quantities of call and put option. This is because traders react slowly to positive news, where as traders reaction towards negative news is extremely vigorous. This trade setup is not for low risk traders, as on the day of expiry risk is very high on options trading, also remember 95% option contract expire near 0 (zero). So there is high amount of risk involved and also there is no guarantee that market will react to global news. In my past experience news release such as UK GDP, EURO GDP, EURO PMI, UK Rates decision were some events which coincided with F&O expiry. We were able to gain extremely high returns on nifty option.

Trading Nifty Futures Just after IIP Data is Released, How to Trade IIP

IIP stand for industrial production data, if it is higher as compared to previous then we can conclude that industries are growing, showing growth; however if IIP data comes out to be negative then there was contraction in the production. This IIP is very important measure of economy’s growth; it is watched by the professional across country. Now let us learn how to trade this IIP data release news, but remember there are 6 core sectors which contributes to IIP, so traders need to watch even sector to see the performance of industries. Most of contribution comes from capital good, mining and infrastructure. Now if capital goods data comes out as contraction for sector then we will see a sharp fall in shares of capital goods giants like L&T and BHEL. So in that case we can go short on BHEL future or LT future, as fall is likely after contraction on sector. If mining sector shows growth then we are going to see mining companies bouncing sharply, like Sesagoa. IIP data may also affect entire market so in case of bad IIP number market may see strong selling, or in other case if IIP comes good then market will show decent bounce, well IIP is fundamental news release and should be watched carefully as it has high and direct impact to growth.

Trading Nifty Futures Using Support and Resistance Basic Rules

Trading Nifty Futures Using Support and Resistance Basic Rules



Before trading Nifty Future let’s get to basic about support resistance, now support is a technical level or key level, from where stock / market starts to bounce, hence we say stock took support. Resistance is also technical level from where stock starts to fall. These were simple definitions of support and resistance; let us discuss some facts about support resistance before we actually apply it in trading nifty future:
1. Whenever support level gets broken, it becomes resistance.
2. When price action breaks resistance level then same level now becomes support level.
3. Number of times the stock finds support/resistance, that level becomes much stronger.
Just using these three points a trader can make millions just trading nifty future, if previous resistance gets broken then it becomes new support level, now if stock corrects then one can aggressively buy around that support (previously resistance). So this type of trading is only possible if you know what support resistance is and facts about it. Even I have made thousands and thousands of money using support resistance principle not only in nifty future but also in stocks like Reliance, ICICI bank, Infosys, Crompton greaves, TCS, Wipro, ACC, Tata motors, DLF, Hindalco, IDFC, IDBI, Chambal Fertilizer, HDIL and many other F&O stocks. Lets us take an example of support resistance on Reliance stock, now on charts you can see stock took support near 900 level earlier, but on breaking below 900 level, that support level is now resistance level so at any point of reliance goes towards 900 level it will attract strong selling near 900 level. On chart you can see how strong selling came when reliance came towards 900 level. Simply taking reliance to 700 level, you can just imagine how much important these support and resistance levels are for trading.

Nifty Options Trading Strategy on F&O Expiry day, 90% Accuracy

Nifty option trading on the day of F&O expiry can be very risky, here is a trading strategy to reduce risk and trade can be as accurate as 90%. Remember on the day of F&O expiry volatility as well as trading volume remains very high, now in case of volatile markets you just need to remember support resistance rules.

How to trade on Intraday chart:
When nifty future is trading at support zone as seen on intraday chart, you need to buy in the money nifty call option for a gain of at least 20% on the premium amount. Exit strategy will be executed when support level breaks or when target is met. Horizontal trend lines can help you easily locate support resistance on intraday charts, now just wait and watch the play of volatility. I have back tested this strategy, with doing 50 paper trades (virtual trading) on F&O expiry on last one year data; I found that my accuracy was about 90%. If traded with high leverage, trader can also multiply his trading capital in very short time. but do not forget that leverage is double edged sword, which has its advantages and disadvantages. Before taking trade read our trading risk disclaimer.

How can Currencies Impact Nifty Futures Movements in Short Term

How can Currencies Impact Nifty Futures Movements in Short Term


Our local currency is Indian Rupee INR, Indian government spend large amount of foreign exchange in importing crude oil from oil exporting countries like Iran. If the cost of USD is high then crude import cost also rise, pressuring oil marketing companies to hike fuel prices. As we all know if fuel prices were hiked, inflation becomes the problem.

How high inflation is problem:


Rising inflation has to be controlled by interest rates hike, this results in slowdown in manufacturing industries hence affecting entire manufacturing sector. This results in major selling in nifty future; slowdown not only changes the market trend but also dissolves confidence in policy making. Nifty future is badly affected by the currency movement, especially when US dollar gains strength across other currencies. Even European debt crisis is responsible for this currency war. There has been series of downgrades in euro zone economies and further warning is give with more possible downgrades.

Decide Stop Loss in Nifty Future Trade Using Candlestick Charts

Decide Stop Loss in Nifty Future Trade Using Candlestick Charts


Placing the stop loss is very crucial skill of a trader, losses in stock market is just inevitable. But trader can minimize his/her losses by placing a properly planned stop loss for the open trade.

Stop loss can be placed with the help of following methods:
1. Equity Stop Loss
2. Time Stop Loss
3. Chart Stop Loss

Which Method to use:

From the above 3 type’s most popular way of placing stop loss is chart stop loss, most of nifty future traders are looking for support and resistance to keep their trading stops. Candlestick charts are used because on charts we get complete idea of support and resistance, trends, retracements, momentum, based on them trading idea can be executed. On nifty future charts traders mainly focus on support resistance for placing stop below or above these important zones. However it is not mandatory to use candle stick charts, traders can however use bar charts or line charts for placing stop loss on nifty future trades.

How to Use Options Open Interest Data to Find Trading Range of Nifty Future

How to Use Options Open Interest Data to Find Trading Range of Nifty Future


Many traders told me that they find it difficult to judge the range of nifty future for short term, so today I am here with an article that will teach you how to find that exact top and bottom range for complete F&O series. First of all you should know what open interest is in Future and Option.

I will explain this with an example:

Trader A sells 1 lot nifty, trader B buys 1 lot nifty – Total open interest at this point is 2 lots.
Trader A buys 1 lot nifty, trader C sells 1 lot nifty – Total open interest at this point is 2 lots.
Trader D buys 1 lot Nifty, trader E sells 1 lot nifty – Total open interest at this point is 4 lots.

After knowing what open interest is, let get back to point

Market Range for Short term:

Upper range: Strike price of the call option having highest open interest out of all call option for that instrument.
Lower range: Strike price of the put option having highest open interest out of all put option for that instrument.
Understand this with an example: Nifty 5400 call option has highest open interest in all nifty call option, so higher range for nifty future in short term is 5400. Nifty 5100 put option has highest open interest when compared with all nifty put options, hence lower range for nifty future in short term is 5100.

Traders must keep in mind this strategy will work when time (in days) of expiry is between 18 to 10 days.

Trading Nifty Options to Benefit in Rising Market up Trend

Trading Nifty Options to Benefit in Rising Market up Trend


Uptrend is always considered as markets of investors, but even if you are a trader with limited capital you can make big money in trading nifty options. When markets are rising you will have to wait for a decent correction where market seems to be oversold, that would be the time to enter long position in nifty future or just buy nifty call options (Out of money call option in this case). Then just have some patience and set targets twice as you entry level, you will simply double your trading capital in single trade. In this trade idea you have to patiently wait for correction, once nifty future becomes oversold on RSI you will soon see good buying interest, which will start a new uptrend.

How to Select Correct Strike Price for Trading Nifty Options

How to Select Correct Strike Price for Trading Nifty Options


Secret of success in nifty options trading lies on its strike price that a trader chooses. A strike price in nifty option has much to do with number of days left for expiry. If expiry is near then you select in the money nifty option, if expiry is far away then you may choose out of money nifty option. Here is how I choose the strike price depending on time left for expiry:
1. When expiry is 15 sessions away you choose options which are out of money, example: If nifty future is trading at 5600, then you buy nifty 5700 call option.
2. When F&O expiry is just 7 sessions away, then I choose in the money nifty option. Example: If nifty future CMP is 5850 then, I’ll buy nifty 5800 call option.

What is Discount and Premium in Nifty Futures, How it may Benefit Traders

What is Discount and Premium in Nifty Futures, How it may Benefit Traders

While trading in nifty future we can benefit from a simple thing known as discount / premium on future price compared to spot price. Now how to check if nifty future is trading at discount or premium, quite simple procedure; just compare nifty future with nifty spot:
1. If Nifty future is trading higher than nifty spot, then nifty future is trading with premium.
2. Second case, if nifty future trades lower than nifty spot level, then we conclude nifty future is trading with discount.
At this stage you have learnt to find if nifty future is trading at premium or discount. How to use it in actual trading here are points:
1. Premium shows near term demand and is more likely that nifty future will trade higher in coming sessions. Demand is sole reason for premium in futures trading. So when nifty future is quoting premium over nifty spot then, nifty is buying opportunity and more trade idea will be enter long position.
2. Discount is just opposite to premium; in case of discount, supply is higher than demand. It suggests nifty future is likely to correct soon. Trading idea is short sell nifty future when future quotes lower as compared to nifty spot.
Trader can go through historical charts of nifty future and nifty spot, when markets were in uptrend nifty future had huge premium, but at time of recession in 2008 nifty future entered bearish market and at that time we saw premium was changed to discount.

Nifty options strategy for range bound market, High risk trade setup

Nifty options strategy for range bound market, High risk trade setup

It is always observed that when markets lack triggers we see sideways move, these triggers may be results, global markets, news, important data release. Now I will teach you how traders can benefit of this range bound movements, this strategy is based on nifty options. First of all find nifty call options that has highest open interest note it down, and then look for nifty put option that has again highest open interest. If markets are in range if still lacks the trigger and it is only mid of the month, then only one must execute this strategy. Now you need to go short on nifty call option and nifty put option which had highest open interest. This strategy uses time decay that nifty option faces at the period of F&O expiry, as we are writing nifty options hence risk will be much higher compared to profits.

Let me elaborate with an example:

Consider Nifty 5500 call option and Nifty 5100 put option has highest open interest, assume total combined premium is 240 and you have shorted those options in same quantities. Now if nifty future expires in between 5500 and 5100 then total gain will be 240 points. However if nifty future has broken this range then trader would have suffered losses.

Nifty future analysis with volume and open interest

A new analysis for Trading Nifty Future, traders must know what is relation between open interest and trading volume. Today I will explain this with a tutorial, now for open interest you can refer to open interest article. Once you are clear with open interest we will continue with its relation to trading volume.

How is volume important?

Now according to Dow Theory, when ever markets start to build up trends volume is highly watched as it directly reflects traders (speculators) and investors participation in the market. This move continues till we see fading of the current trend or when there is some unexpected change in fundamentals. In technical analysis trading volume always precedes price of underlying, so looking at these volumes one can predict that trend is weakening and may reverse. For trading with volume you must always remember these points:

When volume is high – Trend is likely to continue.
When volume is low – Trend may reverse / Pullback.
Now let me show you how you can relate trading volume, open interest and price action. For this you need to have your concept of open interest clear.

Follow the cheat sheet to get clear idea of open interest, volume and price action:

Volume - Open Interest - Price Action - Conclusion
Rising - Rising - Rising - Strong Market
Falling - Falling - Rising - Market Loosing Strength
Rising - Rising - Falling - Weak Market
Falling - Falling - Falling - Market Gaining Strength
So next time, when you are trading nifty future remember to look at nifty future trading volume and open interest of nifty future. Traders, the open interest we are talking about is of nifty future and should not be misunderstood with nifty options open interest.

Finding Tops and Bottoms Using Technical Analysis and Fundamental Analysis

Finding Tops and Bottoms Using Technical Analysis and Fundamental Analysis

Technical analysis and fundamental analysis when combined, yields much accurate and better trade setups. There is simple line you need to follow “Know the fundamentals and trade the technicals”. So according to this statement traders need to know the fundamental of the current market, fundamentals like IIP data, inflation, GDP figures, Interest rate decision.



Finding Tops and Bottoms:
Next we will watch chart patterns carefully to watch for important technical levels. Then we will see how market reacts to these important levels, now look for options open interest data and find out which call option has highest open interest and then put option which has highest open interest. Now corresponding call and put option levels will be looked with technical’s levels and positional trade will be taken with outlook for 3 to 4 days. You can also look for Fibonacci retracement /extension level for profit booking (Top) and support/resistance. Most of the time, technicals and fundamentals are used together to improve trading analysis and get most profitable strategy. In my analysis articles I most of the time look fundamental first and then look for technical levels in same direction of fundamental analysis.

Stocks Trading Strategy at time of Results and Advance Tax Numbers

Stocks Trading Strategy at time of Results and Advance Tax Numbers

After receiving many mails from traders, suggesting me to reveal some trading strategies on stock trading at the time of results declaration. So I have decided to share one stock trading strategy that can give you sure shot 100% guaranteed return, I am seeing smile on your face. Here it is, before results data come into market there is also something known as Advance tax numbers. This advance tax, name only suggest us that tax which are to be paid in advance or before declaration of financial results.



How to Trade Advance tax Number:


What I do is I closely watch advance tax numbers for blue chip stocks (Nifty index stocks), higher the advance tax better will be result as compared to previous result and lower the advance tax number result will be not good. Based on this you can take the positions early as compared to other traders. Let me clear that I take position only on the day of result and that too before it is announced. If you study the advance tax numbers correctly then you have strategy that can give you guaranteed profit opportunity in this market much early than others.

RBI announces Liberalisation Measures for Capital A/C

The Reserve Bank of India (RBI), in consultation with the Government of India has decided to introduce the following measures with immediate effect: RBI’s third move to arrest the declining INR against USD has little to reverse the trend in the short term. It may however be effective only in the longer term.



It has been decided to allow Indian companies in manufacturing and infrastructure sector and having foreign exchange earnings to avail of external commercial borrowing (ECB) for repayment of outstanding Rupee loans towards capital expenditure and/or fresh Rupee capital expenditure under the approval route. The overall ceiling for such ECBs would be USD10 billion.



The existing limit for investment by Securities and Exchange Board of India (SEBI) registered foreign institutional investors (FIIs) in Government securities (G-Secs) has been enhanced by a further amount of USD5 billion. This would take the overall limit for FII investment in G-Secs from USD15 billion to USD20 billion. In order to broad base the non-resident investor base for G-Secs, it has also been decided to allow long term investors like Sovereign Wealth Funds (SWFs), multilateral agencies, endowment funds, insurance funds, pension funds and foreign central banks to be registered with SEBI, to also invest in G-Secs for the entire limit of USD20 billion. The sub-limit of USD10 billion (existing USD5 billion with residual maturity of 5 years and additional limit of USD5 billion) would have the residual maturity of three years.



The terms and conditions for the scheme for FII investment in infrastructure debt and the scheme for non-resident investment in Infrastructure Development Funds (IDFs) have been further rationalised in terms of lock-in period and residual maturity.



Further, Qualified Foreign Investors (QFIs) can now invest in those mutual fund (MF) schemes that hold at least 25 percent of their assets (either in debt or in equity or both) in infrastructure sector under the current USD3 billion sub-limit for investment in mutual funds related to infrastructure.

How to control Emotions, when making regular profit in Nifty Future trading

How to control Emotions, when making regular profit in Nifty Future trading

If you have been trading nifty future and making consistent profit, and still you feel like taking one more trade, remember its a case of performance curiosity. This can affect you negatively in your next trade. This Performance anxiety mostly happens when you think of every single detail of your trade, its common for beginner traders and its very common thing. You feel like you will loose a very good trading opportunity, but has disastrous impact on your performance.

As trader, we are always bound to have the pressure of making profits and in search of making profits, many times we neglect the importance of following our trading plan / trading system or using proper risk management skills and plans. I have prepared some points, which will help you to overcome performance curiosity while trading:

1. Forget those Profitable trade.

Forget your profitable trades quickly, but do write them in your trading journal. never think that I will 100% make profits, so I can leverage my trading positions. If you think so you will end up making huge losses. So trading plan must be in your mind and not the trade. A proper stop loss and you may end up loosing some money, but still you will be much better condition than you would have not place stop loss and ended up your trading career on just single trade.



2. Focus should be on Plan, not the Profits.

Your main focus must be on trading plan and not on profits you’re making. It will be much easier to meet your goals and track the performance. Once you end your trading day, you should question yourself that: Did I do my trades as per my trading plan? Did I adopt risk manage properly? If your answers are yes to both these questions, then you are on the right path of trading Nifty future.



3. When increasing your risk, take smaller steps.

If you have done some profitable trading, next thought on your mind would be to take bigger quantities in next trade. This mostly happens when traders gain high confidence in trading. This over leveraging will teach you unforgettable lessons and you may give up trading at all, so be careful.

So to avoid this, you can increase your risk at a suitable pace instead of just doubling or tripling it. Your must also keep in mind that the only thing your are changing is the amount you’re risking, still you are following your same trading plan rules.



4. Step away from the screen.

Once you close a profitable trade successfully, avoid trading that day. Get away from your computer screen and enjoy your day as you have got enough time and money. Intraday traders or day traders do most of the over-trading and this leads to emotional based trade, taking away much of your profits. So its always a better solution to move away from the screen once you’ve hit your maximum trading loss/profit. Protect yourself for next trading day, even next day you will see plenty of trading opportunities.

Share your view / trading experience on emotional based trading, comments below.

When should you use long straddle strategy for Nifty Options Trade

When should you use long straddle strategy for Nifty Options Trade


Let me tell you friends, taking long straddle on nifty option means buying both call option and a put option for nifty. These two options i.e call and put option are bought at the same time, same strike price and expiry. You will make profit in long straddle if Nifty future moves a long way from the strike price, either above or below. So a trader take nifty long straddle position if he thinks nifty may move sharply, but not sure about the direction. On this position trader has limited risk, which is limited to cost of acquisition of both nifty call and put options. This strategy has unlimited profit potential if price of nifty move sharply in one direction. Just look at the payoff diagram of this strategy:

When we apply long Straddle on Nifty Option:
Suppose there is very important news being released in 1 or 2 days, that news may move nifty 150 to 200 points in a single day. But we are not sure if that news will be positive or negative, hence in such condition trader can enter into a long in straddle strategy for nifty. In such case if Nifty move strongly in one direction then straddle holder will make profit. Suppose news was very good and nifty went up, trader will keep the call option and exit nifty put option. Other way if news was bad and nifty goes down sharply then trader will hold put option and exits from nifty call option. Third case is if market don’t react to news at all and nifty moves sideways then, trader loses money, both call and put option will erase some of the premium. In long straddle risk is limited to total premium paid for buying call and put options, but gains are unlimited if market moves in one direction strongly.