Options Pain Analysis - Nov

Analysis to interpret the Nifty closing price at the end of the contract using Option Pain. There are 6 trading days to expire and 8 days in all to expire. If you take a position now, that is, if you sell 4900 Put and 5200 Call (Nifty @ 5054 now)how much profit or loss you will make. According to Max Pain the nifty should end at or around 5000. The analysis is to find whether this strategy works out.

Proposed Position (taken on 18-Nov -09)

Sell 4900 Put Price - 21

Sell 5200 Call Price – 13

Range was 4989 - 5104. Perfect Month. Profit 34 points.

Total profits

Jun - 90

Jul - 80

Aug - 2

Sep - 62

Oct - -123

Nov - 34

Total -> 145 Points. Maximum Position holding days 5.

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Options Pain Analysis - Oct

Analysis to interpret the Nifty closing price at the end of the contract using Option Pain. There are 5 trading days to expire and 7 days in all to expire. If you take a position now, that is, if you sell 4900 Put and 5100 Call (Nifty @ 4988 now)how much profit or loss you will make. According to Max Pain the nifty should end at or around 5000. The analysis is to find whether this strategy works out.

Proposed Position (taken on 21-oct -09)

Sell 4900 Put Price - 34

Sell 5100 Call Price – 27

A complete failure. Market corrected 10% during this week. Lesson learned..Option Pain will not work when the market is extremel bullish or bearish... Loss -123 points.

In fact market ouched high price of 4826 on the last day. But no excuse.

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Options Pain Analysis - Sep

Analysis to interpret the Nifty closing price at the end of the contract using Option Pain. There are 5 trading days to expire and 8 days in all to expire. If you take a position now, that is, if you sell 4800 Put and 5000 Call (Nifty @ 4958 now)how much profit or loss you will make. According to Max Pain the nifty should end at or around 4900. The analysis is to find whether this strategy works out.

Proposed Position (taken on 16-sep-09)

Sell 4800 Put Price - 18

Sell 5000 Call Price – 44

Range was 4965-5020... A perfect one.. Profit 62 Points.

Thanks

Options Pain Analysis - July

Analysis to interpret the Nifty closing price at the end of the July contract using Option Pain. There are 5 trading days to expire and 7 days in all to expire. If you take a position now, that is, if you sell 4400 Put and 4600 Call (Nifty @ 4568 now)how much profit or loss you will make. According to Max Pain the nifty should end at or around 4400. The analysis is to find whether this strategy works out.

Difference in spot and pain was high so sold 4400 PE and 4600 CE.

Proposed Position (taken on 24-Jul-09)

Sell 4400 Put Price - 20

Sell 4600 Call Price – 60

Look how flat Nifty was... Range 4513 to 4572... my position was a risk one must have sold 4700 CE to be on safer side. But Nifty closed below 4600 and m profit was 80 points.

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Options Pain Analysis - June

Analysis to interpret the Nifty closing price at the end of the contract using Option Pain. There are 5 trading days to expire and 7 days in all to expire. If you take a position now, that is, if you sell 4100 Put and 4400 Call (Nifty @ 4250 now)how much profit or loss you will make. According to Max Pain the nifty should end at or around 4300. The analysis is to find whether this strategy works out.

Proposed Position (taken on 18-Jun-09)

Sell 4100 Put Price – 42

Sell 4400 Call Price – 48

Nifty traded in the range of 4242 and 4313. Net profit is 90 points.

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Options Oracle

Options Oracle is a free software used for analyzing options data. you can get the following data

• Put/Call Ratio
• Option Pain
• Options greek
• Implied Volatility
• Templates for various option strategy

and many more. Just explore it.

To obain the option pain, put/call ratio , OI values ou have to change the settings as shown in the picure.

Press the config button and make the following changes.

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What is Option Pain

In option trading a common belief is that most of the time the option buyers will lose money and option sellers will earn money. Hence the big players will always try to sell the options rather than buying it. These big players will somehow manipulate the underlying stock value so that their options will expire worthless.

For example,

A – option buying group

B – option selling group

A Buys Nifty 5100 CE @ 50 with an anticipation that NIFTY will go up.

B Sells Nifty 5100 CE @ 50 with an anticipation that NIFTY will go down.

Assume nifty trades at 5200 two or three days before expiry, the big players ‘B’ will try to manipulate the stock so that the nifty expires below 5100. In option trading, the game is always to bring maximum loss (Pain) to the option buying group.

The Open Interest will give you clear picture at what strike there are more option buyers and sellers. This OI is used to calculate the Option Pain.

This theory is significant only during last 5 days of option expiry.

If this theory holds, then you can reap maximum profits in short duration.

How to trade Option Pain

Assume the option pain of NIFTY is at 5100 two days before expiry and the spot trades at 5250, you can expect NIFTY to go down towards 5100. The spot need not close below 5100, but may trade around 5100 so that the option sellers can close their positions..

1. Take positions when the spot is near option pain.
2. When the Option pain value is higher than the spot price use bull call spread
3. When the Option pain value is lower than the spot price use bear put spread
4. Naked out of money Call write and Put write.

Thanks