CPR (Central Pivot Range)

CPR (Central Pivot Range) is a popular technical analysis tool used by traders to identify potential support and resistance levels in the market. It provides several advantages that can enhance trading strategies and decision-making. Here are some key advantages of using CPR in trading:

  • Identification of Key Levels
    • Support and Resistance: CPR helps in identifying crucial support and resistance levels, which are essential for making entry and exit decisions.
    • Pivot Points: It provides a central pivot point along with upper and lower levels, which can be used to gauge market sentiment and potential price reversals.
  • Enhanced Market Analysis
    • Trend Identification: CPR can help in identifying the overall trend of the market. If the price is above the central pivot point, it is considered bullish, and if it is below, it is considered bearish.
    • Market Bias: Traders can use the CPR levels to determine the market bias for the day or a specific period.
  • Improved Trade Timing
    • Entry and Exit Points: By using the CPR levels, traders can better time their entries and exits, potentially increasing the profitability of their trades.
    • Stop Loss and Take Profit Levels: CPR can help in setting appropriate stop-loss and take-profit levels, reducing the risk of large losses and locking in profits.
  • Versatility Across Markets
    • Multiple Asset Classes: CPR can be applied to various asset classes, including stocks, forex, commodities, and indices, making it a versatile tool for traders.
    • Different Time Frames: It can be used on different time frames (daily, weekly, monthly), allowing traders to adapt their strategies according to their trading style (intraday, swing, or long-term).
  • Complementary to Other Indicators
    • Combining with Other Tools: CPR can be used alongside other technical indicators (e.g., moving averages, RSI, MACD) to improve the accuracy of trading signals and confirmations.
    • Confluence Zones: When CPR levels align with other technical levels, it creates strong confluence zones, which can be highly reliable for making trading decisions.
  • Psychological Advantage
    • Confidence in Trading: Using CPR provides traders with a structured approach, increasing their confidence in making trading decisions.
    • Reduced Emotional Trading: Having predefined levels for support and resistance can help reduce emotional trading, leading to more disciplined and strategic trading practices.
  • Backtesting and Strategy Development
    • Historical Analysis: Traders can backtest their strategies using historical CPR levels to evaluate the effectiveness of their trading approach.
    • Strategy Refinement: By analyzing past performance, traders can refine their strategies, improving their success rate over time.
  • Risk Management
    • Controlled Risk: CPR levels can help in managing risk by providing clear areas where price reactions are expected, allowing for better positioning of stop-loss orders.
    • Risk-Reward Ratio: Traders can calculate a more favorable risk-reward ratio by using CPR levels, improving their overall trading performance.

Incorporating CPR into trading strategies can significantly enhance a trader’s ability to analyze the market, make informed decisions, and manage risk effectively.

Profit for June first week

Market was very volatile due to election, and the result was against the exit poll. however, I was able to make profit of 1.15L with 5L capital

  • I had taken long position for June 06th 2024.
  • Booked profit of 1.15L
  • I was holding the position from last 3 weeks.
  • I was expecting more profit up to 1.8L, but due to the election results market was very volatile.
  • This profit was made with the capital of 5L.

Nifty 22600 PE-06-June-2024

How to read Option Chain

Reading options in the stock market involves understanding the key elements and terminology associated with options contracts. Here’s a breakdown of how to read and interpret options:

1. Basics of Options

    Options are financial derivatives that give the buyer the right, but not the obligation, to buy or sell an underlying asset (like a stock) at a predetermined price within a specified period.

    Types of Options:

    • Call Options: Give the holder the right to buy an asset at a specific price.
    • Put Options: Give the holder the right to sell an asset at a specific price.

    2. Option Quotes

    Options are typically quoted in a standardized format. Here’s what to look for:

    Key Elements of an Option Quote:

    • Underlying Asset: The stock or index on which the option is based.
    • Strike Price: The price at which the option holder can buy (call) or sell (put) the underlying asset.
    • Expiration Date: The date by which the option must be exercised.
    • Option Type: Whether it is a call or put option.
    • Premium: The price of the option, usually quoted on a per-share basis (with each contract representing 100 shares).

    3. Interpreting an Option Chain

    An option chain provides a list of all available options for a particular stock, typically sorted by expiration date and strike price.

    Example of an Option Quote:
    • AAPL 140.00 Call 16-JUN-2024 @ $5.00
      • AAPL: Ticker symbol of the underlying asset (Apple Inc.).
      • 140.00: Strike price.
      • Call: Type of option.
      • 16-JUN-2024: Expiration date.
      • $5.00: Premium.

    4. Option Premium Components

    The premium consists of:

    • Intrinsic Value: The difference between the underlying asset’s current price and the strike price (for in-the-money options).
    • Time Value: The additional amount paid for the possibility that the option could increase in value before expiration.

    5. The Greeks

    The Greeks are metrics that help measure the risk and potential reward of an options position:

    • Delta: Measures the sensitivity of the option’s price to a $1 change in the underlying asset’s price.
    • Gamma: Measures the rate of change of Delta.
    • Theta: Measures the sensitivity of the option’s price to time decay.
    • Vega: Measures the sensitivity of the option’s price to changes in volatility.
    • Rho: Measures the sensitivity of the option’s price to changes in interest rates.

    6. Options Strategy

    Options can be used in various strategies depending on your market outlook:

    • Bullish Strategies: Buying calls, selling puts, bull call spreads, etc.
    • Bearish Strategies: Buying puts, selling calls, bear put spreads, etc.
    • Neutral Strategies: Straddles, strangles, iron condors, etc.

    7. Reading an Options Table

    An options table, or chain, lists options and their details for a specific underlying asset. It includes columns for:

    • Strike Price
    • Bid and Ask Prices: The current prices for buying and selling the options.
    • Last Price: The most recent transaction price.
    • Volume: The number of contracts traded during the day.
    • Open Interest: The total number of outstanding contracts.

    Example of an Options Table Entry:

      Expiry DateStrike PriceTypeBidAskLast PriceVolumeOpen Interest
      16-JUN-2024140Call4.905.105.0010005000
      16-JUN-2024140Put3.904.104.008004500

      Conclusion:

      To read options in the share market, familiarize yourself with the key terms and components of options quotes and chains. Understanding the Greeks and the various strategies will further enhance your ability to interpret and utilize options effectively.

      Profit

      Booked 1.1L profit this,16th May 2024. 22300 PE.

        • Following my analysis, I purchased 22,300 PE contracts at a strike price of 295, expiring on May 16th, 2024.
          • After entering the position, the market unexpectedly moved in the opposite direction the next day, attributed to profit booking.
          • However, I remained faithful to my analysis and opted to wait another day.
          • As time passed and the market trend shifted positively, my losses gradually transformed into gains.
          • Today’s profits mark one of the most lucrative outcomes in my trading history.
          • The Nifty index turned positive today, aligning with my target range.
          • Thanks to this development, I was able to secure substantial profits.

        Elections in India

        Elections in India can indeed impact the stock market, especially in the short term. Here’s how:

        • Uncertainty: Elections often bring about uncertainty regarding the future government’s policies and their potential impact on the economy and various sectors. Investors may become cautious and adopt a wait-and-see approach until the election results are announced.
        • Policy Changes: The outcome of elections can lead to changes in economic policies, taxation, regulatory frameworks, and government spending priorities. Depending on the stance of the incoming government, certain sectors may benefit while others may face challenges.
        • Investor Sentiment: Market sentiment can be heavily influenced by election-related news, opinion polls, and speculation about the potential outcome. Positive or negative sentiment can drive buying or selling pressure in the stock market.
        • Foreign Investor Behavior: Foreign institutional investors (FIIs) closely monitor political developments and election results in India. Changes in government or uncertainty about policies may prompt FIIs to adjust their investment strategies, leading to fluctuations in capital flows and stock prices.
        • Volatility: Elections often result in increased market volatility as investors react to news and developments. Sharp movements in stock prices, both up and down, are not uncommon during election periods.

        However, it’s essential to note that the impact of elections on the stock market can vary depending on factors such as the political landscape, economic fundamentals, global market trends, and the overall investor sentiment. Additionally, the long-term performance of the stock market is influenced by broader economic factors, corporate earnings, and structural reforms rather than short-term political events alone.

        Profit, for one week

        Proft for the week 26 April 202 to 2 May 2024

        • Nevertheless, I stayed committed to my analysis and chose to exercise patience for another day.
        • With the passage of time and a shift in market sentiment towards the positive, my losses slowly evolved into gains.
        • Today’s profits represent one of the most rewarding results I’ve experienced in my trading journey.
        • The Nifty index exhibited a positive turn today, falling within my anticipated range.
        • This favorable development enabled me to secure significant profits.

        India VIX

        The India Volatility Index (India VIX) is a measure of market volatility and investor sentiment in the Indian stock market. It is computed by the National Stock Exchange of India (NSE) based on the implied volatility of NIFTY 50 index options

        • Implied Volatility: Implied volatility is a key concept in options pricing. It represents the market’s expectation of future volatility of the underlying asset, as implied by the prices of its options. Options prices tend to rise when investors expect higher volatility and fall when they expect lower volatility.
        • NIFTY 50 Index Options: The NIFTY 50 index is a benchmark index of the National Stock Exchange of India, comprising the 50 largest and most actively traded stocks across various sectors. The NSE computes India VIX based on the implied volatility of near and mid-term NIFTY 50 index options.
        • Volatility Index Calculation: India VIX is calculated using the Black-Scholes model, a widely used mathematical model for pricing options. The formula takes into account the prices of call and put options on the NIFTY 50 index, along with their respective strike prices and time to expiration.
        • Time Frame: India VIX represents the expected volatility over the next 30 calendar days. It provides a forward-looking measure of market volatility, helping investors gauge potential market moves in the near term.
        • Interpretation: Higher values of India VIX indicate higher expected volatility, suggesting increased uncertainty and risk in the market. Conversely, lower values indicate lower expected volatility, implying a relatively stable market environment.
        • Market Sentiment Indicator: India VIX serves as an important indicator of market sentiment and risk appetite. When investors are fearful or uncertain about market conditions, India VIX tends to rise. Conversely, during periods of confidence and stability, India VIX tends to decline.
        • Trading and Hedging: Traders and investors use India VIX to manage risk, hedge portfolios, and make informed trading decisions. It helps them anticipate potential market movements and adjust their strategies accordingly.

        Overall, India VIX plays a crucial role in the Indian financial markets, providing valuable insights into market volatility and investor sentiment.

        My Trading, Indicators

        Indicators I am using in my kite API

        • Central Pivot Range (CPR)
        • Pivot Points (Standard)
        • 26 EMA (Exponential Moving Average)
        • 12 EMA (Exponential Moving Average)

        Use of CPR

        • Support and Resistance: CPR helps in identifying crucial support and resistance levels, which are essential for making entry and exit decisions.
        • Pivot Points: It provides a central pivot point along with upper and lower levels, which can be used to gauge market sentiment and potential price reversals.

        Use of Exponential Moving Average (EMA)

        • Direction: An upward-sloping EMA indicates an uptrend, while a downward-sloping EMA indicates a downtrend.Crossovers: EMA crossovers (e.g., when a short-term
        • EMA crosses above a long-term EMA) can signal potential trend reversals.

        False breakout

        Today Nifty 50 and Bank Nifty had false breakout.

        • The market initially exhibited an upward trend by touching the Critical Price Range (CPR), indicating a positive trajectory.
        • However, this turned out to be a major trap, catching many traders off guard and potentially triggering their Stop Loss (SL) orders.
        • In just one candle, the Nifty index plummeted by 280 points.
        • This sharp decline resulted in an overall fall of around 360 points.

        Note: This is only in my view.

        Why option selling is safe in trading

        Option selling can be perceived as relatively safer in trading for a few reasons:

        • Time Decay (Theta Decay): Options have a time value component, which diminishes as the expiration date approaches. Option sellers benefit from this time decay, as they can profit from the erosion of this time value if the option expires out of the money.
        • Probability of Profit: When you sell options, you can choose strike prices that are out of the money, meaning they have a lower probability of being exercised. This increases your likelihood of making a profit, as the option would expire worthless.
        • Limited Profit, Unlimited Risk Myth: While it’s often said that selling options exposes you to unlimited risk, this is typically only true for naked option selling (selling options without owning the underlying asset). However, many option selling strategies involve risk management techniques like covered calls or credit spreads, which limit potential losses.
        • Income Generation: Option selling can be used to generate regular income. By collecting premiums from selling options, traders can create a steady stream of income, especially in sideways or range-bound markets.
        • Flexibility and Control: Option sellers have more control over their positions compared to buyers. They can adjust their strategies by rolling positions, adjusting strike prices, or buying back options to close positions early if market conditions change.

        However, it’s important to note that option selling also comes with risks, including the potential for significant losses if the market moves against your position. It requires careful risk management and understanding of the market dynamics. Some traders find option selling to be suitable for their risk tolerance and trading objectives, while others may prefer different strategies. As with any trading strategy, it’s crucial to thoroughly understand the risks involved and consider consulting with a financial advisor before engaging in options trading.