Is profit from derivates directly proportional to the participation?

F&O
1

I wanted to ask this question, and now that @nithin has said this, I want to know.

So if the participation, particularly in options reduces, would there be lower volume, or the existing permanent participants are enough to bring in the volume which was there before? And does this mean it will be tough to make the profits even for the experienced and institutions, or they will make money but it will be less, and even more ordinary retail will lose?

I have some understanding in the equity segment, not derivatives, so what can happen?

@AlgoEye @t7support @VijayNair @viswaram and all others.

2

if the volume dips too low then sebi will have to come up with incentives to improve liquidity like leverage.

brokers will love it as their income will increase, slippage for the participants will increase ~ freak trades and arbitrageurs will love it.

profits for directional traders are not dependent on the participation per se because they know the money is in the trend.

according to me if the brokers stop accepting collateral pledge, people like me will run out of business

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3

You can be a buyer, cant you?

4

option buying will work only if the direction is more powerful than time decay.

it will work 5/100

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5

Simply put if participation reduces it will reduce liquidity. This means more slippage that will eat in to profits. But as an option buyer looking to ride trends a dip in liquidity shouldn’t affect me much.

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6

But you are an experienced trader, so you can make decent if not like in the past in intraday with buying too?

7

What has been your observation since you started using your system, about the profitability w.r.t the participation. You were making X before, and since the participation got increased you started to make 3X, and if liquidity reduces you will go to 2X or X?

8

okay. on a Sunday evening i might spill more beans than usual.

option buying will only work if the price you get is lesser than the intrinsic value.

if bank nifty atm is 200 on a monday, but the usual is 300 then yes buying makes sense because any time in the day you have some probability in your favor

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9

I trade with near ITM options where there is great amount of liquidity. In my journey from 1 to 25 lots per trade I haven’t seen an impact of slippage increase on my trades in the last 6 yrs.

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10

Buy you can close your existing positions, move along with the market if it changes its direction mid session, you can also do make opposite bets along with direction bets etc.

You wont be running out of business is what I mean, because if you will, I guess the doors will be shut for me :roll_eyes:

I have got a big utensil for all the beans I can get, so continue please :grin:

11

I guess that is more than enough to come to a reasonable conclusion of the impact on the profit, considering the increase in participation is lesser that time period :+1:

12

tradingview has introduced a feature called like MINDS

its like running commentary, any one can post their views .

there is one guy who posted a buy on banknifty 40000 pe @290 at around 2.15pm

from then 40000 pe went from 290 to 395 came back to 291 and then closed at 325 something

@GB26 according to you when will you exit?

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13

Obviously I am not knowledgeable enough to say anything. And I have no idea about BN, I am learning only Nifty.

And personally, I would have booked profit at a previous price if the price had gone to 290-395 before, if it is ATH, I guess I would book at CMP.