COFORGE LTDEducation
COFORGE Options Trading Strategy: Breakout and Momentum-Based
In this post, we’ll explore a couple of options strategies for COFORGE using the data for strike price 9000. By closely monitoring the price action and key option data, we can make informed decisions that align with market trends. Here’s how we can approach trading this stock’s options effectively:
Key Option Data Breakdown
Call Short Covering: Indicates that the market sentiment is bullish as traders are closing their call positions, signaling a potential upward movement.
Put Writing: A strong sign of bullishness as traders are actively writing puts, expecting the price to stay above the 9000 strike.
Call and Put LTP (Last Traded Price):
Calls LTP: 278.8 (indicating that calls are gaining traction).
Puts LTP: 100.7 (a lower LTP for puts suggests lower demand).
Open Interest (OI) and Change in OI:
Calls OI Change: -47,850 (indicating a reduction in call positions due to short covering).
Puts OI Change: +123,975 (signifying an increase in put writing, which reinforces the bullish sentiment).
Strategy 1: Buying the Call or Put Based on the First 5-Minute Candle
This strategy involves observing the price movement in the initial 5 minutes after the market opens and deciding whether to buy a call or put, depending on the price action and option data.
When to Buy the Call or Put:
If the first 5-minute candle shows a bullish move, consider buying the call option as the market sentiment appears to be in favor of upward movement.
If the first 5-minute candle shows a bearish move, consider buying the put option. However, given the overall data showing strong put writing, this could be less likely.
Why It Works:
The first 5 minutes are crucial for gauging market sentiment, and with the data indicating strong bullishness (due to call short covering and put writing), a call option is likely to perform well.
Considerations:
This strategy requires watching for clear momentum during the first 5 minutes. If the market remains indecisive, it may be better to stay on the sidelines to avoid wasting premium.
Strategy 2: Breakout Strategy – Buy Calls or Puts on the Break of Highs
This strategy involves waiting for a breakout of the call or put’s high price. The breakout indicates a shift in momentum, and we’ll enter the trade based on whichever direction triggers first.
When to Buy the Call:
Watch for the call’s high price (389.85). If the call option breaks this level, it signals that the upward momentum is gaining strength. Buy the call to capitalize on the breakout.
When to Buy the Put:
If the call option doesn’t break its high and the price starts to show weakness, consider buying the put once it breaks its high (360.6). However, the data suggests that the market bias is bullish, so a call breakout is more likely.
Why It Works:
Breakouts are powerful signals of market momentum. Since the data shows heavy put writing, the call option is more likely to break its high first. This creates an opportunity to buy calls in a bullish trend.
Considerations:
Always monitor the volume and the price action for confirmation of the breakout. If both calls and puts test their highs without clear direction, consider waiting for a clearer signal.
Conclusion:
Given the strong bullish sentiment reflected in the options data—call short covering and put writing—the most reliable strategy is Strategy 2. Watch for a call breakout above 389.85 or a put breakout above 360.6 (if the call fails to break its high). The bullish bias suggests that the call option is more likely to outperform, but a breakout in either direction can trigger the strategy.
Pro-Tip: Set a stop loss just below the breakout level to manage risk effectively. The market sentiment is heavily tilted towards bullishness, so a call option breakout is the most probable outcome.
Key Option Data Breakdown
Call Short Covering: Indicates that the market sentiment is bullish as traders are closing their call positions, signaling a potential upward movement.
Put Writing: A strong sign of bullishness as traders are actively writing puts, expecting the price to stay above the 9000 strike.
Call and Put LTP (Last Traded Price):
Calls LTP: 278.8 (indicating that calls are gaining traction).
Puts LTP: 100.7 (a lower LTP for puts suggests lower demand).
Open Interest (OI) and Change in OI:
Calls OI Change: -47,850 (indicating a reduction in call positions due to short covering).
Puts OI Change: +123,975 (signifying an increase in put writing, which reinforces the bullish sentiment).
Strategy 1: Buying the Call or Put Based on the First 5-Minute Candle
This strategy involves observing the price movement in the initial 5 minutes after the market opens and deciding whether to buy a call or put, depending on the price action and option data.
When to Buy the Call or Put:
If the first 5-minute candle shows a bullish move, consider buying the call option as the market sentiment appears to be in favor of upward movement.
If the first 5-minute candle shows a bearish move, consider buying the put option. However, given the overall data showing strong put writing, this could be less likely.
Why It Works:
The first 5 minutes are crucial for gauging market sentiment, and with the data indicating strong bullishness (due to call short covering and put writing), a call option is likely to perform well.
Considerations:
This strategy requires watching for clear momentum during the first 5 minutes. If the market remains indecisive, it may be better to stay on the sidelines to avoid wasting premium.
Strategy 2: Breakout Strategy – Buy Calls or Puts on the Break of Highs
This strategy involves waiting for a breakout of the call or put’s high price. The breakout indicates a shift in momentum, and we’ll enter the trade based on whichever direction triggers first.
When to Buy the Call:
Watch for the call’s high price (389.85). If the call option breaks this level, it signals that the upward momentum is gaining strength. Buy the call to capitalize on the breakout.
When to Buy the Put:
If the call option doesn’t break its high and the price starts to show weakness, consider buying the put once it breaks its high (360.6). However, the data suggests that the market bias is bullish, so a call breakout is more likely.
Why It Works:
Breakouts are powerful signals of market momentum. Since the data shows heavy put writing, the call option is more likely to break its high first. This creates an opportunity to buy calls in a bullish trend.
Considerations:
Always monitor the volume and the price action for confirmation of the breakout. If both calls and puts test their highs without clear direction, consider waiting for a clearer signal.
Conclusion:
Given the strong bullish sentiment reflected in the options data—call short covering and put writing—the most reliable strategy is Strategy 2. Watch for a call breakout above 389.85 or a put breakout above 360.6 (if the call fails to break its high). The bullish bias suggests that the call option is more likely to outperform, but a breakout in either direction can trigger the strategy.
Pro-Tip: Set a stop loss just below the breakout level to manage risk effectively. The market sentiment is heavily tilted towards bullishness, so a call option breakout is the most probable outcome.
Disclaimer
The information and publications are not meant to be, and do not constitute, financial, investment, trading, or other types of advice or recommendations supplied or endorsed by TradingView. Read more in the Terms of Use.
Disclaimer
The information and publications are not meant to be, and do not constitute, financial, investment, trading, or other types of advice or recommendations supplied or endorsed by TradingView. Read more in the Terms of Use.