Option Trading in India : Its changed in 2021
Derivatives option patterns have changed last 4 years ...traders havent
2021 -2022 wa a dream run for derivative traders
Post the covid -19 crash from november 2020 till September 19th 2021 …almost every day was an all time high in the market .
Option buyers cashed in , specially the amateur ones
option sellers also were doing ok
Option behaviour changed post september 2021
Algo behaviours changed post september 2021
you will keep noticing people who backtest strategies post 2-3 years ago …all face one single challenge …what it shows in backtesting rarely works in real life .
Option Patterns and how do we trade them
A common Myth.
options and derivatives are 100 % dependent on the Index . True from a textbook perspective and so much False from a trading perspective
Infact this is the what is taught by 99.99 % by all trainers in India and they strongly believe the same
Another school of thought is options are based on Futures ..once again True but far from true
Synthetic futures : ?? …Yes. …but Still the answer is no
Options have a completely different system of their own
yes like everything else they are dependent on a system and yet work in their own way
every trader in india knows his / her support resistance levels on the Index
since 2019 and actually much more in detail since 2020 have been deep diving into pure Option charts .
1) Gann Square of 9 should never be used on Indian derivatives . Looks amazing in Backtest ….fails in real life on a pin point accuracy method .
never use the emblem number …rather use the modified sq of 9 method for slightly better accuracy
2) Caramilla Levels can give u upto 70 % accuracy - based on mathematiclly numbers , they work better than SQ9 , but create fomo when one level breaks and suddenly stops midway
3) Fibonacci levels have 75 % accuracy till 1.618 levels , above that there is a 70 % failure rate , so not reliable on Indian derivatives , However they have slightly higher accuracy on the index which doesnt help anyway since options dont depend on spot / future pricing for accurate trading .
4) Gann static/ dynamic levels work with 70 % accuracy - not very different from square of 9 . Keep in mind Bank nifty makes 80-90 point candles any given time …which instantly pierces through multiple such levels
Black-Scholes Method is considered one of the most widely respected formulas to calculate value of the option , But that’s exactly where it stops . it has no role in price movement or intraday trade movement .
using a modified Gann system works with much better accuracy of 80 % in deriving trading levels
vibration numbers work with a 0.5 point difference . - i use this a lot while building charts for traders . the only 1 system i have found which gets you exact levels on indian Options i have shared more than 8000 charts last 3-4 years .
please do continue to make use of it .
The Key to all these methods is how the author initially plotted them .
American options and European options work very differently
e.g If an author created it on a 1 day TF and we randomly want to modify it on a 2/3/4/5 min chart …its will work …but not with accuracy .
so always SCALE your charts . without this ..you might as well leave the markets
scaling allows us to come closest to some of the Authors original methods
a few of the gann methods allow us to plot price and time without scaling .
Indian derivative charts also are very very dependent on small price time squaring levels . you can easily find more than 5-600 charts which use time cycles and price as support and resistance . price can bounce 15-20 % from these levels easily .
these are best done on a 5min chart . very little advantage if you use a 4 min chart ( as a lot of Gann students do )
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