Buying options—whether Call or Put—is all about timing + volatility + trend. Here's a breakdown to help you decide the right time to buy an option:
Showing posts with label Learning. Show all posts
Showing posts with label Learning. Show all posts
Saturday, April 12, 2025
Tuesday, May 5, 2020
How to cut losses in stock Market
How to cut losses in stock Market : Many investor selling stocks after a small gain only to watch them head higher, or holding a stock with a small loss, only to see it lose even more.
Taking corrective action before your losses worsen is always a good strategy. In investing, avoiding losses is not always possible, but successful investors accept this and try to minimize their losses rather than avoid them.
Stop Loss Order: Losses can be limited by applying various loss cutting strategies and stop loss is one of them. The stop-loss order prevents emotions from taking over and will limit your losses. Importantly, once the stop loss is in place, do not adjust it as the stock price moves lower. It makes more sense to adjust the stop price when shares are moving higher.
In long term investment before investing in any stock first of all risk/reward ratio should be decided and when we achieve our profit goal we should either take our full profit or book partial profit with cost to cost stop loss order.
Likewise profit target, loss limit also be pre-decided and whenever we hit out loss limit, we should exit from the stock.
How I limit my Losses
Step I - In first step, I set my risk/reward ratio before investment in any stock. Your reward should always be equal to more than your risk. Like 1:2 Ratio is better but one can take 1:1. In percentage it can be 4% or 8%.
Step II - Always strict to ratio and mark a stop loss equal to your risk. For e.g. I set my Loss percentage equal to 4%.
Step III - Whenever my trade goes wrong and i suffer from losses equal to half of my risk ratio E.g. 2%. I ask myself this simple question: "If I did not own this stock, would I buy it today?" If the answer is a resounding "No," then I sold it immediately.
If the answer is yes and still stock fundamental and technical indicator are in bullish side then i add more quantity to average the stock and exit half of the add more quantity at my previous cost with trail stop loss.
Step IV- If still there is loss and stock price reach to my risk percentage than without thinking i exit from the stock and release my capital to invest again in quality stock.
The material on this site is provided for information purpose only. This associated sites do not accept liability for your use of the materials provided.
Monday, May 4, 2020
India Vix Vs Nifty correlation
Typically, there is a inverse correlation between India VIX and Nifty. The India VIX represents the fear or risk factor in the stock market. Therefore, an increase in India VIX means risk is increase therefore market falls. If the India VIX is decreasing then it means that market should go up due to low risk and fear.
You can gauge the fear factor in the markets. If India VIX has risen anything over 10% then that day is a dangerous day to trade. You have to trade with caution.
The material on this site is provided for information purpose only. This associated sites do not accept liability for your use of the materials provided.
You can gauge the fear factor in the markets. If India VIX has risen anything over 10% then that day is a dangerous day to trade. You have to trade with caution.
India VIX has a range, usually from 10-15 which is normal.
In the last five years India VIX was highest at 86.64 on 24-March-2020 where on the same day nifty was 7511 at its 52 week low.
India VIX is fear factor index of traders. In the US traders can trade VIX but in India the volume is almost zero.
The trading symbol of the future contract of India VIX is INDIAVIX but no one trades.
The material on this site is provided for information purpose only. This associated sites do not accept liability for your use of the materials provided.
Friday, April 24, 2020
Currency Tading at NSE FAQ
FAQ on Options on USD-INR Spot Rate
A. What are Currency Options?
Currency Options are contracts that grant the buyer of the option the right, but not the obligation, to buy or sell underlying currency at a specified exchange rate during a specified period of time. For this right, the buyer pays premium to the seller of the option.
B. What is the need for Exchange traded Currency Options?
The need for Exchange traded currency options arises on account of the following
reasons:
1. Options have the comparative advantage of maintaining a certain degree of flexibility in hedging, as, while protecting against a downside risk, they allow the
investor from profiting from favorable movements of the foreign exchange rates
by simply not exercising the option.
2. The exchange platform brings in all attendant benefits of transparency, finer
spreads, access, safety, central counterparty, etc.
C. What is the underlying for USD-INR options?
Underlying is US Dollar – Indian Rupee (US$-INR) spot rate.
D. What is the type of options?
USD-INR option contracts are Premium styled European Call and Put Options.
E. What is the trading hour and size of USD-INR options contract?
The trading hours are from 9 a.m. to 5.00 p.m. on all working days from Monday to
Friday and the contract Size is US$ 1,000.
F. What is the quotation of USD-INR options?
The premium is quoted in rupee terms. However, the outstanding position is in USD terms.
G. What is the contract cycle for USD-INR options?
The contract cycle consists of three serial monthly contracts followed by three quarterly contracts of the cycleMarch/June/September/December.
H. What is the settlement mechanism for USD-INR options?
USD-INR options contracts are cash settled in Indian Rupee.
I. Which day is the expiry/last trading day?
The expiry / last trading day for the options contract is two working days prior to the last working day of the expiry month.
J. How settlement price is derived?
The final settlement price is the Reserve Bank of India USD-INR Reference Rate on the date of expiry of the contracts.
K. Which day is the final settlement day?
The options contract would expire on the last working day (excluding Saturdays) of the contract month. The last working day would be taken to be the same as that for
Interbank Settlements in Mumbai. The rules for Interbank Settlements, including those for ‘known holidays’ and ‘subsequently declared holiday’ would be those as laid down by FEDAI.
L. How would contracts be settled at expiry?
On expiry date, all open long in-the-money contracts, on a particular strike of a series, at the close of trading hours would be automatically exercised at the final settlement price and assigned on a random basis to the open short positions of the same strike and series.
M. What is the Initial Margin levied in USD-INR Options?
The Initial Margin is based on a worst scenario loss of a portfolio of an individual client comprising his positions in options and futures contracts on the same underlying across different maturities and across various scenarios of price and volatility changes. In order to achieve this, the price range for generating the scenarios is 3.5 standard deviation and volatility range for generating the scenarios is 3%. The initial margin is deducted from the liquid net-worth of the clearing member on an online, real time basis. The sigma is calculated using the methodology specified for currency futures in SEBI circular no. SEBI/DNPD/Cir-38/2008 dated August 06, 2008 and is the standard deviation of daily returns of USD-INR futures price.
N. What is the Extreme Loss margin?
Extreme loss margin of 1.5% of the notional value of the open short option position is
deducted from the liquid assets of the clearing member on an on line, real time basis. Notional Value is calculated on the basis of the latest available Reserve Bank Reference Rate for USD-INR.
O. What is Net Option Value?
The Net Option Value is the current market value of the option times the number of
options (positive for long options and negative for short options) in the portfolio. The Net Option Value is added to the Liquid Net Worth of the clearing member. Thus, mark to market gains and losses is not settled in cash for options positions.
P. What is the Calendar Spread Margin levied on USD-INR Options?
A long currency option position at one maturity and a short option position at a different maturity in the same series, both having the same strike price is treated as a calendar spread. The margin for options calendar spread is same as specified for USD-INR currency futures calendar spread.
The calendar spread margin is calculated on the basis of delta of the portfolio in each
month. A portfolio consisting of a near month option with a delta of 100 and a far month option with a delta of –100 would bear a spread charge equal to the spread charge for a portfolio which is long 100 near month currency futures and short 100 far month currency futures.
Q. How premium paid by the buyer is settled?
Premium is paid by the buyer in cash and paid out to the seller in cash on T+1 day. Until the buyer pays in the premium, the premium due is deducted from the available Liquid Net Worth on a real time basis.
R. What is the Position Limit at Client level?
The gross open positions of the client across all contracts (both futures and options
contracts) not to exceed 6% of the total open interest or USD 10 million whichever is higher. The Exchange disseminates alerts whenever the gross open position of the client exceeds 3% of the total open interest at the end of the previous day’s trade.
S. What is the Position Limit at Trading Member level?
The gross open positions of the trading member across all contracts (both futures and options contracts) not to exceed 15% of the total open interest or USD 50 million
whichever is higher
T. What is the Position Limit for Banks?
The gross open positions of the bank across all contracts (both futures and options
contracts) not to exceed 15% of the total open interest or USD 100 million whichever is higher
U. What is the Position Limit at Clearing Member level?
No separate position limit is prescribed at the level of clearing member. However, the
clearing member ensures that his own trading position and the positions of each trading member clearing through him is within the limits specified above.
The material on this site is provided for information purpose only. This associated sites do not accept liability for your use of the materials provided.
A. What are Currency Options?
Currency Options are contracts that grant the buyer of the option the right, but not the obligation, to buy or sell underlying currency at a specified exchange rate during a specified period of time. For this right, the buyer pays premium to the seller of the option.
B. What is the need for Exchange traded Currency Options?
The need for Exchange traded currency options arises on account of the following
reasons:
1. Options have the comparative advantage of maintaining a certain degree of flexibility in hedging, as, while protecting against a downside risk, they allow the
investor from profiting from favorable movements of the foreign exchange rates
by simply not exercising the option.
2. The exchange platform brings in all attendant benefits of transparency, finer
spreads, access, safety, central counterparty, etc.
C. What is the underlying for USD-INR options?
Underlying is US Dollar – Indian Rupee (US$-INR) spot rate.
D. What is the type of options?
USD-INR option contracts are Premium styled European Call and Put Options.
E. What is the trading hour and size of USD-INR options contract?
The trading hours are from 9 a.m. to 5.00 p.m. on all working days from Monday to
Friday and the contract Size is US$ 1,000.
F. What is the quotation of USD-INR options?
The premium is quoted in rupee terms. However, the outstanding position is in USD terms.
G. What is the contract cycle for USD-INR options?
The contract cycle consists of three serial monthly contracts followed by three quarterly contracts of the cycleMarch/June/September/December.
H. What is the settlement mechanism for USD-INR options?
USD-INR options contracts are cash settled in Indian Rupee.
I. Which day is the expiry/last trading day?
The expiry / last trading day for the options contract is two working days prior to the last working day of the expiry month.
J. How settlement price is derived?
The final settlement price is the Reserve Bank of India USD-INR Reference Rate on the date of expiry of the contracts.
K. Which day is the final settlement day?
The options contract would expire on the last working day (excluding Saturdays) of the contract month. The last working day would be taken to be the same as that for
Interbank Settlements in Mumbai. The rules for Interbank Settlements, including those for ‘known holidays’ and ‘subsequently declared holiday’ would be those as laid down by FEDAI.
L. How would contracts be settled at expiry?
On expiry date, all open long in-the-money contracts, on a particular strike of a series, at the close of trading hours would be automatically exercised at the final settlement price and assigned on a random basis to the open short positions of the same strike and series.
M. What is the Initial Margin levied in USD-INR Options?
The Initial Margin is based on a worst scenario loss of a portfolio of an individual client comprising his positions in options and futures contracts on the same underlying across different maturities and across various scenarios of price and volatility changes. In order to achieve this, the price range for generating the scenarios is 3.5 standard deviation and volatility range for generating the scenarios is 3%. The initial margin is deducted from the liquid net-worth of the clearing member on an online, real time basis. The sigma is calculated using the methodology specified for currency futures in SEBI circular no. SEBI/DNPD/Cir-38/2008 dated August 06, 2008 and is the standard deviation of daily returns of USD-INR futures price.
N. What is the Extreme Loss margin?
Extreme loss margin of 1.5% of the notional value of the open short option position is
deducted from the liquid assets of the clearing member on an on line, real time basis. Notional Value is calculated on the basis of the latest available Reserve Bank Reference Rate for USD-INR.
O. What is Net Option Value?
The Net Option Value is the current market value of the option times the number of
options (positive for long options and negative for short options) in the portfolio. The Net Option Value is added to the Liquid Net Worth of the clearing member. Thus, mark to market gains and losses is not settled in cash for options positions.
P. What is the Calendar Spread Margin levied on USD-INR Options?
A long currency option position at one maturity and a short option position at a different maturity in the same series, both having the same strike price is treated as a calendar spread. The margin for options calendar spread is same as specified for USD-INR currency futures calendar spread.
The calendar spread margin is calculated on the basis of delta of the portfolio in each
month. A portfolio consisting of a near month option with a delta of 100 and a far month option with a delta of –100 would bear a spread charge equal to the spread charge for a portfolio which is long 100 near month currency futures and short 100 far month currency futures.
Q. How premium paid by the buyer is settled?
Premium is paid by the buyer in cash and paid out to the seller in cash on T+1 day. Until the buyer pays in the premium, the premium due is deducted from the available Liquid Net Worth on a real time basis.
R. What is the Position Limit at Client level?
The gross open positions of the client across all contracts (both futures and options
contracts) not to exceed 6% of the total open interest or USD 10 million whichever is higher. The Exchange disseminates alerts whenever the gross open position of the client exceeds 3% of the total open interest at the end of the previous day’s trade.
S. What is the Position Limit at Trading Member level?
The gross open positions of the trading member across all contracts (both futures and options contracts) not to exceed 15% of the total open interest or USD 50 million
whichever is higher
T. What is the Position Limit for Banks?
The gross open positions of the bank across all contracts (both futures and options
contracts) not to exceed 15% of the total open interest or USD 100 million whichever is higher
U. What is the Position Limit at Clearing Member level?
No separate position limit is prescribed at the level of clearing member. However, the
clearing member ensures that his own trading position and the positions of each trading member clearing through him is within the limits specified above.
The material on this site is provided for information purpose only. This associated sites do not accept liability for your use of the materials provided.
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