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.