Logic and Application
- Leveraging the price movement in trending stock options where there is a increase is price and open interest
- Logic is to take positions during the last hour of the day and exit next day with short term gains view.
- Recommended to apply for stock or index options with good volume and liquidity.
Steps to setup
- Stock selection , use screens such as in money control website for filter "Increase in OI , Increase in Price"
- Choose the top 10 stocks based on % change in price / OI
- On 1 year chart , apply volume profile to plot the volume high , low and POC levels . If current price is within the VAH and VAL low , movement may be less and such stocks do not qualify for shortlist. Select stocks where price is either above VAH or below VAL levels
- This strategy to be executed after 2 PM i.e about 1 to 1.5 hours to market close
- For selected stocks , on 1 hour timeframe , mark the day's high and low levels.
- If the price is below low line and previous day volume POC , then it indicates bearish stance Sell position, if its above volume POc and high line , then bullish stance buy position. confirm position using chandelier Exit indicator.
- On the next day leverage the price movement following open interest change and exit the trade.
Profit levels
- Profitable when Market remains in the direction of position taken
- Exit if personal target levels reached
- Exit at full profit on current expiry date
- Review and trail stop loss every day once as per personal profit gain levels
Loss
- Exit at personal Stop loss levels breach
- Exit signal of chandelier exit indicator