Nitin Murarka, a booming stock market investor with many years of experience, decodes how to do intraday options trading.
This blog is devoted to all of our intraday traders as well as those individuals who are working toward the goal of becoming effective intraday stock traders. Therefore, if you want to learn about intraday trading, Mr. Nitin Murarka is the best person to learn from since he owns a large proprietary trading organization. In the blog, he will reveal his company’s unique trade secrets, including one that has brought him enormous returns on investment.
This blog begins with a short introduction of the author, Mr. Murarka, in which he discusses his experience working in the financial markets. In addition, he will discuss the lessons he has learned from D. Agarwal, the CEO of SMC Global.
He has tested various options trading techniques, but in this presentation, he will provide one of the most successful options trading tactics that not only he but also his prop desk employs.
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Fundamentals of the Options Chain for Those Who Trade Options
Now, you need to realize that this is data on choices used and watched by many people, but we designed it to analyze in a different method.
Let’s try to get a grasp on this choice chain. This data on a certain day is about 11, and the principle that we are applying in this is that if you are engaging in intraday trading, then you should do it at the bare least between 10:30 and 11:00 in the morning.
It is necessary to view the data to get higher accuracy levels. For example, if you make your trades between 9:15 and 9:30 in the morning, you will not get a higher level of accuracy.
You will receive more accurate results if you look at the data from the morning and then make your trade after 11 in the morning.
Excel must be used for this task, during which data must be imported and exported. You will need a striking price, which is the price at which you are now looking, followed by the most recent trading price;
You can see the change in the open interest here. Next, I will tell you about the call side, and this will also be about the call side. Additionally, there is something on the put side: the strike price, the last traded price, and the open interest.
Now that we have all the information, I will describe how to profit from intraday trading. Since the weekly options have been introduced, The value of intraday options can change drastically within a single day, with some increasing from 50 to 100 while others may decrease from 100 to 50. thus, there are strong prospects to earn gains in the intraday market and the index options. Therefore, the intraday time frame is where this model shines.
In other words, the objective is to figure out how to generate a profit in the index on an intraday basis. You simply need to pay attention to the open interest in this table, including the open interest of calls and puts. In other words, you should concentrate on the at-the-money strikes and 4-5 points above and below the at-the-money.
If this is the case, I have made 6-7 strikes above or below the money, which is 12200.
There ought to be an equal number of strikes on both sides and after that, I need to determine how much of a change there has been in the total open interest on the call side and how much of a change there has been in the total open interest on the put side.
We have deduced the reasoning for this based on what we saw in both our brokerage house in SMC and other brokerage houses, namely that the options purchasing is where retail customers are showing the most interest.
Because ninety percent of the customers buy options because they have limited funds, a limited capacity for taking risks, and a greater I am determined to enhance the volume of purchases on the buying side., we have assumed that whatever changes there, The open interest is changing due to purchasing activity from certain sources. Retail investors.
The shift of $490,000.00 in open interest may be attributed to retail investors’ increased interest in purchasing. As a result, these investors are more likely to purchase. In the same vein, if we see that there has been a movement of 540,000 in the open interest on the put side, we may deduce that the retail public is purchasing.
FIIs, proprietary accounts, hedgers, and arbitragers may all buy in their respective positions. We should consider the possibility of this buying activity coming from the retail public. To determine whether the overall market sentiment is leaning towards buying or selling, we need to observe the sentiments present in the market.
This information can be obtained through statistical analysis.s, it is clear that the general public is purchasing 540,000 put contracts and 49,000 call contracts. Therefore, their perspective is more focused on the business side of things, and they are more interested in feedback than the call itself.
How can the options chain be used to analyze the prevailing mood in the market?
You need to pay attention to the change in open interest, the change in open interest of calls, and the change in open interest of puts in this table. This essentially boils down to the at-the-money strikes and 4-5 points above and below the at-the-money.
Therefore, if the at money is at12200, I have taken 6-7 strikes either above or below the money level.
There ought to be an equal number of strikes on both sides and after that, I need to determine how much of a change there has been in the total open interest on the call side and how much of a change there has been in the total open interest in the put side.
We have deduced the reasoning for this based on what we saw in both our brokerage house in SMC and other brokerage houses, namely that the options purchasing is where retail customers are showing the most interest.
Ninety percent of the clients buy options because they are more interested in purchasing to increase buying volume due to their limited funds and risk-taking capacity. So because of these factors, we have assumed that whatever change there is in the open interest is changing because of buying from retail investors.
The shift of $490,000.00 in open interest may be attributed to retail investors’ increased interest in purchasing. As a result, these investors are more likely to purchase. In the same vein, if we see a shift of 540,000 in the open interest on the put side, we may deduce that the retail public is purchasing.
Now, you can assume that foreign institutional investors. There are several groups currently engaging in purchasing positions in the market. These groups include FIIs, proprietary accounts, hedgers, and arbitragers. It is crucial to take note of this buying activity and thoroughly analyze market sentiments rather than simply assuming that it is only coming from retail investors. It’s important to comprehensively understand the various players involved in the market to make informed decisions.
Suppose the feelings are more favorable for purchasing or selling, respectively. Then, according to the statistics, it is clear that the general public is purchasing 540,000 put contracts and 49,000 call contracts.
Thus, their perspective is more on the side of selling, and they are more interested in feedback than in the call itself.
How can I locate the best or lowest-risk entrance levels?
Therefore, we will be using VWAP for the entry. The green line in the graph shows the volume-weighted average price. The weighted market volume average price, or VWAP, is another name for the weighted average price. Therefore, the market trading expenses, from the morning till now, the average traded price, is extremely helpful information to have.
So how do we create new entries? Therefore, please make certain that we do not engage in the trading of options before 10:30 in the morning. Before that, all we do is watch what the general population does when it comes to the markets.
Suppose the majority of players are taking long or short positions. If other people are bearish and trading in PUTs, then it is a good time to purchase a CALL. However, knowing when to purchase the CALL is essential. Following that, we come to the VWAP. We purchase the CALL near the VWAP, close enough.
Therefore, he makes an effort to utilize the periods when the price reaches the VWAP, and the times when it bounces back from the VWAP are the trading levels that he considers to be the most profitable. When you purchase here, we’ll relocate your belongings quickly. Look, you get a move here. It came all the way up to here and then came down again, but the stop loss didn’t get triggered since it is a bit broader than that. Therefore, the stop-loss for futures trading should be set at least 30–40 points lower from here on out.
If, on the other hand, you trade in options, you may put a stop loss 20 points below the VWAP using that indicator. The Call Option of the ATM. You decided to buy an ATM call option for a hundred dollars. If the purchase price is close to the VWAP, setting the stop loss at Rs80 would be a really good idea. Or, whether you are writing options or selling put options, it is recommended that you choose a stop loss of 20 rupees in either case.
Bottomline
Therefore, throughout the whole of this model, Mr. Nitin Murarka intends to place a focus on two fundamental aspects. First, you’ll need to determine the path the data will take. If the trend of the market’s data is heading higher, then the same can be said about our path.
Second, we have to wait until the price equals VWap. Then, when it gets within a reasonable distance of the VWAP, we make a purchase. You will have a chance like that ninety percent of the day when the price comes somewhat near to the VWap. You need to be patient and wait for things to happen. In a week, you may miss out on two to three possibilities; nevertheless, the risk involved in pursuing those opportunities will be minimal.
