Derpo Class 1& 2

DERIVATIVE PORTFOLIO TRADING: CLASS 1: Written Synopsis.
OBJECTIVE: Return on investment (ROI): 2% per month.
DAY 1
1 For virtual trading: We will use Sensibull software (ID, password will be shared by SSEI)
(https://sensibull.com/). Youtube training link: https://youtu.be/X34E4C-sJZU
2 Performance tracking of ~100 participants using google sheet. This sheet is editable by both
SSEI & investor. This need to be sent daily to SSEI for intraday analysis of positions taken by
candidates.
FYI: Master sheet will be formed by SSEI (only editable by SEI), conveying positions of all
~100 candidates. This sheet contains ending day mutual fund value, cash balance value & total
return etc of each candidate.
Following need to be input from Sensibull, end of the day every day, for duration of course:
1.1: if position squared off, candidate inputs squared off price of positions, hence total P&L
will be shown by excel automatically.
1.2: if position not squared off, candidate inputs MTM (Mark to market) based on each days
closing prices. Final closing MTM gain/loss will be conveyed by excel.)
3 5 crores to be allocated between mutual fund (Gild mutual fund: Earning 6% annual compounded
return) & cash. Money is transferable between cash acct & fund acct, depending on investors
discretion
4 Transaction cost on Sensibull: Rs20 /lot includes STT & TOT
5 Margin requirement: Will be taken from Mutual fund. 10% of fund value will be haircut and 90%
can be taken as collateral. Out of this 90%, some capital will be blocked. ????
6 Cash balance always will contain transaction costs & aggregated net MTM losses (CAUTION:
Net MTM gains will not get added in these cash balance). At any time 80% of cash balance
allowed to be used and 20% kept as cash reserves. ?????
7 Macroeconomic overview for next week: highly uncertain.
8 Option Greeks: Vega, Gamma, Theta, Delta
1 Vega: Rate of change in option premium because of implied volatility

2 Gamma: Rate of change in option premium because of change in Delta (Second order
effect)
3 Theta: Rate of change in option premium because of remaining maturity (Decay in
Option).
4 Delta: Rate of change in option premium because of stock price movement.
 Between 0 and 1 for a call option.

o Delta cannot be less than 0: Premium may come negative
o Delta cannot be greater than 1: Ex: With 42-point change in the
underlying, the value of premium is increasing by 63 points: The option
is gaining more value than the underlying itself. Remember the option is
a derivative contract, it derives its value from its respective underlying,
hence it can never move faster than the underlying.
 Between -1 and 0 (-100 to 0) for a put option.

 One of the many outputs from the Black & Scholes option pricing formula.
9 Option Premum = intrinsic value (Stock price - strike) + Time Premium(Remaining maturity)
+ Volatility Premium.
10.1:: Volatility per day till expiry of the option = Annual implied volatility / 16
One should sell option when volatility index is high and buy when volatility index low. (Not
fully correct. More details here)
10.2:: Option premium may stay same for any two days, coz stock might be moving up, but
volatility offsets the increase in premium.
10 Derpo trading Philosophy: Imagine yourself Fund Manager of multi strategy fund, 10 yrs from
now. You will allocate money to different strategies, just like we do "Asset class allocation" in
portfolio mgmt. Different strategies possible are:
1 Event driven strategy (Ex: Firms earnings, coming law suits, Mergers & Acquisitions,
Dividend, Restructuring)
2 Macroeconomic driven strategy (GDP, Inflation, Fiscal , monetary policies)
3 Volatility driven strategy:
4 Gamma scalping strategy (How to profit from delta change)
5 Commodity driven strategy (Basic Metals, Precious Metals, Agro, Livestock)
6 Pair trading: ?????
7 Playing on theta.
8 Expiry day trading
9 Volatility skew
10 Spread based trading (Sub diversification possible in: Call Spread, Put spread, Ratio
Spread, Front Spread, Back spread)
11
12
13
14
DISCLOSURE: I tried to put in writing what Sanjay Sir conveyed in verbal synopsis of class1.
My write up above, may be flawed and may not reconcile with verbal dictation sent by Sanjay
sir.
APPENDIX:
Prepared by Aneesh
Reviewed by Sanjay Sir &

Gudduji
World economic Calendar

By Ronak
Tutorial: Sensibull https://youtu.be/X34E4C-sJZU
By Ayush Saraf
SSEI document
DAY 2
Sir’s view was mkt expected to rise steeply.
1) Sir started with saying that according to his opinion and by seeing sgx nifty and nifty
futures the market will open at 8400
2) US market also increased by 5% which was another factor for positive opening
3) Then he continued with why India's lockdown should be extended.
Mkt expected to open at 8400 & target 9000, 9400….in few days further
IV has inverse relationship between index. This is general. As mkt rises, IV falls (options writers
aggressive).
Trade should take advantage of -ive vega & IV falling.
Option should be sold to take advantage of falling IV and -ive vega. BULLISH INVESTORS
STRATEGY: Investors who would have done C- and P- would have benefited (some rebalancing
needed afterwards) but naked option shouldn’t be sold. Calendar sauda done below. Two tyoes of
calendar sauda, if we're intraday bullish
CALENDAR SAUDA 1: BULLISH STRATEGY

 STEP1:Sell call & put slightly below (8200) the mkt (8400) for nearest expiry (9 April).
(Get premium + enjoy positive theta decay gain). My view bullish so I will make money.
I am assuming Stop loss is in place for Put & software used in ‘Symphony Presto’. It
enables investor to put Stop Loss order.
 STEP2: Buy call of next week expiry at 8100 or 8200
FYI: BEARISH STRATEGY: If mkt would have been expected to fall & IV rising, then
I would have replaced STEP2 by buying put of next week expiry
CALENDAR SUADA 2: PUT REVERSE CALENDAR SPREAD
BULLISH STRATEGY: The market was expected to open at 8400 so our strategy was to
 Buy 8300pe of 9th April and Sell8300pe of 16th April (next week)
i.e. niche ke pas wala put option buy and same strike peh durr wala put option sell
We also expected that VIX (implied volatiltity) will fall Here Vega(-) as conveyed earlier,
Theta(-), Gamma(+)
FYI: BEARISH STRATEGY: If mkt would have been expected to fall & IV rising, then I would
have replaced Calendar suada 2 by selling Call of this week expiry and buying another call for
next week expiry
Next we wanted to check Bullish option buy sell, during the weak when finance minister
announced Corporate Tax Rate Cut
We went to option opstra for that which is a paid software. We went to 20th September,2019 and
put following trade
 C+:: 3 Oct, 2019 10500ce Buy 10lot
 C-:: 26 Sep, 2019 10600ce Sell 10lot
 P-: 26 Sep,2019 10600pe Sell 10lot
Initially we saw every 5minute what happened then we checked every 30minutes.
As it was a bullish strategy and we knew from knowledge that Nirmala Sitharaman will
announce tax rate cut so it showed good profit
We applied the same above bullish strategy; Calendar Sauda1 in the current scenario where we
put following trade.
 Sell 8200 Put, Call 9th April
 Buy 8100 Call 30th April
Caveat: We usually choose the next expiry but because of liquidity "prabhav😛" we had
to choose next to next expiry.
Here, we had Theta(+), Gamma(-), Vega(-)

The last bearish strategy we discussed was a BEARISH STRATEGY Sauda which sir asked
everybody not to take in the current scenario.
Say Spot: 8200

 P-:: Sell 8500 Put, Call 9th April
 P+::Buy 8500 Put, 30th April
Above sauda is ULTA of previous one

Next leg of the class was when market finally opened positive and we used Sensibull to
put the first strategy that was REVERSE CALENDAR SPREAD (Refer above) and then Bullish
option buy sell
Sir then showed us how to use Algo Trading Software ‘Blitz Trader’ where he showed the
different functions of the software then he selected the Multi leg function
Click on Add --- Select Leg(1,2,3,etc.) --- Enter the strategy --- Select the number of
rounds you want to do this strategy --- Select the timing in which you want the round of
strategy to take place --- click on current value (if (-) then credit, if (+) then debit) ---
Select entry point --- select target stop loss --- Then click on Done --- Finally right click
on the strategy and click on Start
Today sir showed us by actually entering into the Reverse Spread Strategy
****** The End *****

Derpo Class 1& 2

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Derpo Class 1& 2

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What are the different trading strategies discussed in the document?

What are the greeks (vega, gamma, theta, delta) and how do they impact option pricing?

DERIVATIVE PORTFOLIO TRADING: CLASS 1: Written Synopsis.

OBJECTIVE: Return on investment (ROI): 2% per month.

1 Vega: Rate of change in option premium because of implied volatility

 Between 0 and 1 for a call option.

 Between -1 and 0 (-100 to 0) for a put option.

Reviewed by Sanjay Sir &

World economic Calendar

CALENDAR SAUDA 1: BULLISH STRATEGY

Here, we had Theta(+), Gamma(-), Vega(-)

Say Spot: 8200

Above sauda is ULTA of previous one

** The End *

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