In the last two expiries, the Vix formula has not come close to meeting it's targets as we had in Feb, March, April and May.Why?
Quite simply,because the calculation is based on the VIX and the Open Interest, with the open interest being the dominant partner.The VIX is a measure of the volatility of an index or any script. Through it we can get an idea of how much our asset can move in a day or any other time-frame of our choice.The formula we have breaks down this time frame for you.Now on expiry day, when options have to be settled ( as these are European) the Open Interest can be used along with the range to get a fair idea of where we close. It will work 10/10 times, provided the Open Interest is resolved.
Today I was watching the 5400 strike all day, but showed no sign of resolution. In the end we had two winners with the PE writers as well as several CE writers ending in profit.
Along with the Vix and the Open Interest, we have added another potent tool in Market Profile. Two days back in this post here I had called for 5382 to be defended. Quite simply because it was the monthly Point of Control or the place where buyers and sellers agreed on value for the month.
When options become more liquid here and we have a strike price every ten points instead of the current 100, as we have for the US SPX Index in the SPY, our tools will be more reliable. Promise!
Here's a look at the August future, from where we have to take levels from tomorrow :
The best trade today was in the bank Nifty, but there were several others like Axis bank, Tata Motors, SBI which were having very good market profile set-ups.
I made 15 points in a Nifty trade all day today, but made 17 points in Axis bank and 14 points in tata motors in minutes all in high probability trades.
We looked at the Nifty and the Bank Nifty so far, but it is clearly time to unleash our wonderful methodology on other setups and on a new platform too !!
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6 comments:
Good stuff Shai!
I sure hope someday we have options at 20 points interval.
And I am all ready for vtrender2. Rather than just asking for help, I hope to contribute too once my MP setup is up - hopefully by next week.
Vtrender2 sounds like more trading, which means more opportunity to make more money.
I took the Axis bank trade-200 shares= 3000 rupees.Thanks.
That's great..just can't wait for Vtrender2 especially the AIAT stuff.
Please accept my best wishes.
Although options data on first day of series doesn't matter much but - at least one can look at biggest OI on puts and call side to decide current market range.
http://1.bp.blogspot.com/_xQfPkpQXjMc/TFHGTu7n46I/AAAAAAAAArQ/IvwHt1g_l6c/s1600/OI_analysis.GIF
Next series Futures OI observations:
Nifty futures OI:
August series starts off with OI of 2.6Cr whereas July series began with an OI of 2.96Cr
OI deficiency this series was due to profit booking/long unwinding (21L futures contracts) seen a few days back - on 26th July - in the price range 5463-5422.
Banknifty futures OI:
August series starts off with a MONSTROUS OI 27L compared to just about 19L on first day of July series.
This to me is a bearish sign especially because most of the rollovers have come above 10000. There were at least 4 gap ups on the way up to 10000. So watch out for air pockets top POP. If a serious selling starts in Banknifty it could tank 300+ points in 1 day.
Gm Shai,
Lets hope Vtrender-2 will be more intresting & more profitable too.
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