Trading Options – 3 Powerful Indicators!

elliott wave nifty volume profile Apr 05, 2022
Elliott Wave, volume profile, nifty

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Options are powerful instrument to trade in any market condition only if one knows how to forecast the market and form the strategies accordingly.

Trading Options Using Elliott wave and a few Option indicators like Open Interest, Volume profile is the best combination. In below research we have shown how one can combine Volume profile with Elliott wave and channels to derive trade setup in options

Nifty futures hourly chart:

Elliott wave is one of the best forecasting tools that I have come across over the decade. This is a powerful technical study if one can apply in correctly. We can see from the above chart that prices are moving higher in the form of double corrective pattern. This is nothing but combination of two patterns connected by wave x. The first pattern was a Zigzag in form of a-b-c. Post its completion the fall was slower that confirmed that it is only wave x. After completion of wave x another set of up move started. This up move can be attributed to HDFC Bank and HDFC merger news but as wave practitioner we were anyways bullish even before the up move started from 17500 levels.

Channels: As of now we are near the upper trendline of the channel which is connected by drawing the b-x trendline and taking parallel to the wave c. Thus Elliott wave also tells ways to draw trendlines and channels. Now that we are near the upper resistance line the overall tone is bullish but buy on dips is the strategy.

Volume profile: With above information let us see important support and resistance as per Volume profile. This is another way of seeing the volumes and it represents volume at a specific price point. We can see that 17300 is the Point of Control (POC) which is the area where big players were accumulating. Later near 17520 just before the minor dip there was another level of accumulation and then the sharp rise was witnessed. On upside 18200 (futures) is where there is high volume area which can possibly act as short term hindrance to this up move.

Options Trading – Now with this information a Trader can form precise strategy using Options as instrument. As the overall tone is positive but price can run into a hurdle of resistance one can look forward to sell OTM put options on dips to ride the up move and at the same time if there is consolidation benefit from deteriorating time value. Buying call options is not a preferred strategy given that the risk reward is not favorable at this level but one can still participate in the ongoing trend by way of selling puts once there is dip on downside and enough room as per the channel which is derived using Elliott waves.

Options Trading Using Technical analysis (OTTA) and Elliott Waves (MOW) – You can see that one can trade Options with such clarity once there is an indication of how prices will behave as per Elliott wave along with maturity of trend. OTTA will focus on Candlestick along with Volume profile, Open Interest analysis and deriving trades in Options buying / selling using Bollinger Bands. Master of Waves (MOW) will be about forecasting markets to the very hour, day and minute using Elliott wave / Neo wave analysis. Both combined together we call as BMW (Become Market Wizard) program. Early Bird ends on 15th April 2022, Register now and get access to Bonus videos, free research until the Early Bird. Know more here