which strike option to choose for intraday?
The high to low range will be 54.66 for the day. Hence I will see nifty at 5310 or at 5201 for 12th January 2011.Hence 5200 and 5300 strike options either call or put is important for me as a trader. For intraday trading point of view.The midpoint of 5310 and 5201 is 5255.50 will decide the trend. Price above 5255.50 will scale maximum till 5310 and below 5255.50 will scale till 5201 under this volatility condition.
When to trade in options and when not to trader in options for intraday?
As per the above discussion I will have maximum price range 54.66 for intraday.
1. If current high, low difference is less than 27.33(54.66/2) point then time has not come for trading in the chosen strike options.
2. If the current price is above 5310 or below 5200 then strike chosen by me to trade in options is not correct.
3. If current opening is above 5255.50 but below 5310 then good time to trade in 5300 ce option
4. If current price is below 5255 but above 5201 good time to trade in 5200 put option
5. If the current price is above the 1.618% growth retracement level of last settlements high and low then do not trade in call options for intraday.( to know why 1.618 revisit the Fibonacci principle)
6. If the current price is below the 1.618% decay retracement level of last settlements high and low then do not trade in put options for intraday.( to know why 1.618 revisit the Fibonacci principle)
How to use intraday binomial option calculator?
Now I have following information : I will do intraday trade only in 5200 or 5300 strike call or put option. Nifty has a chance to go up to 5310 or to 5201.Price above 5255.50 trends is in favor of the buyer.Price below 5255.50 trends is in favor of the sellers. Price range set for the day based on volatility is approximately 54.66 points.
I need to calculate the trend confirmation point: Just use the price point 5255.50 in the binomial option calculator it will give you the buying entry point and selling entry point.
I will buy 5200 call option if nifty cross above 5270.30(0.272 % retracement from 5255.5 to 5310) and buy 5300 put option if nifty fall below 5240.70 (0.272 % Fibonacci retracement drawn from 5255.5 to 5201)
Why so? Since it is the option which is just becoming deep in the money it will have less time value component. click on the trade decission link to navigate to next page