FTF SESSION

BUILDING A MARKET RANKING SYSTEM

& LONG OPTION RATIONALS

ASIT BARAN PATI

WHY OPTION BUYING MAKES SENSE*
The real danger is not in the market itself but in the leverage used in trading. Leverage magnifies your risks and profits

1 RANKING
SNAPSHOT 4 ALL ABOUT
DATA

SUCCESSFUL
2
RENKO &
FRACTALS 5 TRADING
JOURNEY

RATIONAL
3 BEHIND LONG
OPTIONS
The Delta
Phenomenon
RANKING
SYSTEM
TMV RANKING SYSTEM DEFINED
TMV Trading strategies result in higher probabilities of Return with defined Risk. There is great value in trading from a probabilistic
approach. The challenge comes from trying to quantify probabilities. Usage of mix of leading and lagging indicators will give an overall
picture of what the crowd looks like. We have a lot of Indicators and they DO tell a story..

Trend Momentum Volume Volatility Data Strategy Market Breadth

• 8 / 21 EMA • MACD • OBV • ATR - Stoch • OI • VWAP EMA • Pivot D / W

• Alligators • RSI • MFI • BB-RSI • Premium • Anch. VWAP • Pivot W / M

• Fractal AMA • ADX • Keltner - • PCR • ADXBO • RSI H / D / W

Regression EMA,VWAP
• Hull MA • 20/50 Period
• Coefficient Of EMA + Regression
• ST Variance Line

• Adj VIX • Relative Reg.

Slope
• NR4 / NR7
• TPR Trend
Pattern Persistence
Rate /Duration
• Patterns

• Cloud
Indicator
RANKING SYSTEM – PROBABILITY CONVERGENCE
The most recent daily RANK becomes a collective and accurate reflection of all traders’ current sentiment. By framing the
indicators into the model, better judgement of placing trades in stronger trend.

Multi Time Frame (MTF) : Time Frame Confluence

• Different time frames may present opportunities when they have differing relative volatilities. As a
directional system, more weights are given to Momentum & Trend indicators.

• No matter how lagging the indicators are, they do tell a story. That story has to be read and analysed
across different timeframes, 15-30 minutes (For Piloting the Trade); 60-75 minutes (For Execution); 3-6 hours and
2D (presents the big picture which offers Strategic).

• Price action signals become more reliable when move from lower timeframes to higher timeframes.

• The key is to look for an agreement between these sub-groups under different time frames.

• The Convergence/Confluence among multiple indicators from different categories in different

timeframes offer multiple points of confirmation about the probable move.

• One of the most effective ways to confirm an entry is through time frame confluence i.e. each time frame
should have the same bias. If bullish on weekly, daily should be having the same bullish bias along hourly
timeframe.
MULTI TIME FRAME BULL RANK – LATEST
MULTI TIME FRAME BULL RANK – LATEST
BULL RANK BUILT UP
A good scoring system should start by identifying key parameters to be scored. The system should include enough parameters to
provide for a strong score. An effective scoring system should attempt to reduce the influence of user bias. This is best accomplished
by using binary scores when possible.
BEAR RANK BUILT UP
To sum up, there are two different uses for a Ranking system. One use is to scan stocks on momentum & Trend in MTF (to go long or
short) the other is to know the list of stocks for which no action to be taken.
MARKET INTELLIGENCE - 2
FRACTAL BASED RENKO
RENKO
INTERPRETATION

• Composed of Bricks that are created at 45-degree angles to one another

✓ Consecutive bricks do not occur beside each other

✓ Less noisy and cuts through a lot of the noise between the swing low and swing highs
✓ Renko charts show a time axis, but the time intervals are not fixed. One brick to could take months to
form, while several bricks may form within a day

• Bricks are all of the same size. Brick size is determined by the ATR 14. (derived from the closing price)
• Regardless of a Trade Setup, Don’t Buy a red brick or Sell a Green one

• For confirmation of a breakout use the 2 BRICK Rule. If two consecutive bricks close above/below a key SR
level or EMA the breakout will extend

• A wick is printed on a Renko brick only when there is a strong attempt to produce a reversal (a change of
brick’s color from green to red and vice versa)
• Once a brick is drawn it is not deleted.

• Price needs to travel double the price distance of the brick size in order for the Renko brick to change color
• If the brick size remains 20, it means it needs to actually move 40 points for a red brick to be printed
after a green brick
LAWS OF FRACTALS – POINTS OF SHORT TERM
SUPLY & DEMAND
There is no argument that market prices are fractal. Price charts look similar regardless of time frame. Fractal shapes
are self-similar

INTERPRETATION
• Every bottom will show a V-shaped pattern made up of three bars. Similarly, every top will have to look like
an inverted V to the highest high it represents
• Implies that at the most basic level, regardless of what time frame being looked at, there will be 3 bars that
form the atomic building block of any chart

• Trends or reversals will always end or begin with

three bars of which the one in the middle will be
the lowest low or the highest high
• For the 5-Bar up fractal, ideally at east two bars on
each side of the top or bottom before they start
calling it a Fractal
FRACTAL – RENKO BASED STARTERGY
LONG OPTION TRADING
 LONG OPTIONS GIVE YOU WEALTH*
Limiting Risk is the Primary Economic Purpose of Options

Delta and Gamma Option Buyer must

give enough know when to
mileage than Theta trade and when not
in a TRENDING Chase Not to Stay to trade
market Delta & Put for And Must Do Delta
Gamma Long Drifting

Magnitude of RISK. Buy option at high

The real danger is
Defined
*TERMS & To trade premium and sell
not in the market
itself but in the RISK / CONDITIONS only it higher
Not To Trade in
Leverage trending
leverage used in APPLIED market Sideways Market
trading. It Kills!!

Beware of Stick to
Theta & IV ATMs for
Theta is not linear in higher POP With low POP, OB
the rate of decay offers Higher ROI,
HIGH IV: All Option Low Risk Profile and
strike prices behave better Capital
like ATM with high Management
Vega
 SNIPER MINDSET OF AN OPTION BUYER

Awaits for Momentum,

rest of the time step
aside
Option
Value
Pro Option Buyer: Unmatchable ROI
Mein Sasta nahi Newbie Option Buyer:
Buys Strike with Cheap Mein Roj Roj, har Ghante trade nahi
keemat (value 40- Growth mein limitations Nahin. Pura
price in greed for karta, par trend aur momentum ke
60 D) wala Option 100 Delta Chahiye 10 Deltas Nahin.
Jackpot. saath Gamma Hulk ko use karta hoon,
strike pe Vishwaas Aur Khud key Paise se, leverage se
damakaa karne ke liye . NO
rakhata hu nahin. In The Game for making
CONVICTION NO TRADE
Wealth
Theta Decay
Favourable Stays in the doesn’t kill you
Greeks market for short alll the time
period of time Maintain SL
Delta Gamma Na Raaj Ma Option Buyer Maja Ma.
Chasing Delta gives Wealth!! (20%) Always Friend to Option Buyer:
Option Buyer: Jab trade mein
Bhai shayaad Trend aur
Awareness tu Bhul gaya Momentum ho to
of VIX teri trade mein Theta aur yeh
Theta Shani Decay se koye
Vix pe Dyaan rakh aache aache Iss jagat saraye Mai musafir Option woh cheez hai ban kar bhet pharak nahi
buyer ke lag jaate hai rehna Do din ka jo jala bhi sakti aur gaya hai. padta
ujala bhi kar sakti hai
 THE DELTA PHENOMENON
In essence, Delta is actually measuring the slope of the curve that connects the option price to the underlying asset.

• The Change in an Option’s value for a change in SPOT price

• Delta signifies Directional Risk

• The derivative of the graph of an option value in relation to the P

Delta
Delta
In
In The
The Money
Money (ITM)
(ITM) 0.75

At
At The
The Money
Money (ATM)
(ATM) 0.50

Out
Out of
of The
The Money(OTM)
Money(OTM) 0.25

• Two ATM is equivalent to one future as it is almost 0.5 of the underlying

 POWER OF DELTA & GAMMA FOR OPTION
BUYER IN DIRECTIONAL TRADE

Comparative Case Study For Cash vs Future vs Option Buying For Reliance

• Consider a trader is bullish on Reliance trading at Rs 2,400

• Assume he foresee a upside of Rs 100 in next couple of days MERE PAAS
• One can initiate this directional strategy in three different ways DELTA
DRIFTING KA
CONFIDENCE
Buy/ Entry Exit P&L Total HAI
Type Sell Price Price Points QTY P&L Investment ROI AAJ MERE PAAS
Cash Buy 2,400 2,500 100 250 25,000 6,00,000 4% THETA, 9.20
Future Buy 2,400 2,500 100 250 25,000 1,50,000 17% STRADDLE HAI,
2400 CE Call Buy 70 120 50 500 25,000 35,000 71% STRANGLE HAI,
CONDOR HAI,
• Option Buying needs much less investment as compared to Cash & BUTTERFLY HAI,
Future Buying, thus making ROI much higher for Option Buyer TUMHARE PAAS KYA
HAI
• Delta & Gamma, the two friends of Option Buyer can help to
propel the ROI even further (Provided IV remains same or increases
with time) with ATM becoming ITM
MISTAKES TO AVOID WHEN TRADING LONG
OPTIONS

Not understanding the independent effects of time and Volatility of Option

1 • Variables Time and volatility depleted more value out of the option contract than the delta put into it,
creating a loss even with a rising stock

Not understanding the proper meaning of leverage as it applies to trading

2 • The ability to use the same amount of money to create a larger position. The ability to create the same-size
position with less money

Assuming that if an option is cheap or expensive is determined by the PREMIUM

3 • Absolute cost does not dictate expensiveness or cheapness; strike price does. The study of volatility sheds
new light on whether an option is cheap or expensive (1% change in Volatility = 3 Days of Theta)
Not to AVERAGE it down in the same strike price
4 • AVERAGE it down in the same strike price Unlike stocks and futures, Option pricing gets determined other
variables than Delta. Hence operating too far away from the spot can be suicidal

Narrow Bid/Ask Spread

5 • Choose markets with options that are liquid. Stay away from any instrument with narrow bid/ask spread
IT’S ALL ABT DATA
MARKET INTELLIGENCE - 1
PIVOT WATCH
Combining different technical analysis techniques can make trading decisions easier and produce trades with a higher chance
of success.
 SUCCESSFUL TRADING: The Secret To Breaking The Code
Three parties are involved in trading: Buyer - Seller and YOU. You are the Most important Variable in the Trading Equation: Mike Elvin

For those who succeed, there is a sizable pot of gold at the end of the rainbow
1 Knowing Your Trading DNA & The Whys
2 Trading Plan with Risk Management & Position
20% 3 Sizing
Confidence & Conviction: Developing The Mind That
Trades
4 Commitment / Perseverance
Knowledge Base
1 Inadequate Capital
Effort & Research
Money Management
2 Over - Revenge Trading / FOMO
3 Riding losing positions too long
4 Lesser Understanding Of Risk / VAR
80% 5 Unsustainable Return Expectations
6 Lack of Patience and Discipline (Like any other
profession, trading will also takes time & bring
Time Jata Nahi Hai, Time Lata Hai.
maturity with experience )
Experience...
Aur Experience Ka Na Apna Value Hai 7 Believe that market remains sideways 80% of the
time (Reality is it remains sideways in one TF, market
always trends in some or other TF all the time)
 THANK
YOU!!!!!!!!!
@asitbaran