FACE 2 FACE WITH

BIJAY KUMAR SHARMA (CA)

INTRADAY TRADING STRATEGY
 AGENDA

• OPTIONS – UNDERSTANDING THE COMPONENTS

• INTRODUCTION OF INDICATORS USED
• TRADE RULES
• TRADE SETUP
• TRADE PLAN – EXAMPLES OF EXECUTION
• INTRADAY – ADVANCED OPEN INTEREST ANALYSIS
 OPTIONS – UNDERSTANDING THE COMPONENTS

• PRICE
TO KNOW THE PRICE LEVELS, WE WILL USE VWAP AND AVWAP
• TIME
TO UNDERSTAND THE TIME, WE WILL USE THE HUMAN LIFE CYCLE
• VOLUME
TO UNDERSTAND THE VOLUME, WE WILL USE OPEN INTEREST
 PRICE - INTRODUCTION OF INDICATORS USED

• VWAP (VOLUME WEIGHTED AVERAGE PRICE)

Textbook Definition : The volume-weighted average price (VWAP) is a trading benchmark used by traders
that gives the average price a security has traded at throughout the day, based on both volume and price.

VWAP = ∑Price * Volume / ∑Volume

Personal Understanding :
• VWAP is the LAKSHMAN REKHA for Buyers and Sellers.
• Below VWAP an Instrument (option / future) is Bearish and Above VWAP it is Bullish
 PRICE - INTRODUCTION OF INDICATORS USED

• AVWAP (ANCHORED VOLUME WEIGHTED AVERAGE PRICE)

Textbook Definition : Anchored VWAP displays the volume-weighted average price for a specific time period,
starting from a user-selected reference point. This could be a point in time in Minutes, Hours, Days, Weeks or
Months.

Personal Understanding :
• AVWAP is a Flexible and User Dependent tool. The most important thing while using AVWAP is the selection
of the ‘Reference Point’. This selection needs to be valid and with particular logic.
• Valid reference points which I use are:
• Weekly Expiry – First Day
• Monthly Expiry – First Day
• Event Days – Budget Day / Policy Announcement / Company Results
• Series High & Low points
 TIME – THE HUMAN LIFECYCLE

A WEEKLY OPTION’S LIFE IS BASICALLY 5 DAYS, FROM FRIDAY TO THURSDAY. LETS RELATE THAT TO A HUMAN LIFECYCLE
• FRIDAY : FIRST DAY OF THE CYCLE, THE OPTION BEHAVES LIKE A NEWBORN. INDIFFERENT TO THE MARKET MOVEMENT UNLESS THERE IS
A LARGE ONE SIDED MOVE. IT DOESN’T LOSE MUCH VALUE.
• MONDAY : STEPPING INTO YOUTH. FULL OF ENERGY MOVING WHERE THE MARKET MOVES. TRYING TO FIND ITS PATH IN LIFE. THIS
DAY ACTS AS A BIG DECIDING FACTOR IN THE LIFECYCLE OF THE OPTION.
• TUESDAY : ADULTHOOD, FULL OF RESPONSIBILITY AND BURDEN TO GET THINGS DONE. SOME MAKE IT TO HEIGHTS WHILE THE REST
GET LEFT BEHIND. SIMILARLY ON TUESDAY EITHER THE OPTION RUNS IN A DIRECTION AND ATTAINS NEW HEIGHT OR WILL START TO
GET LOST.
• WEDNESDAY : PAST ITS PRIME IN OLD AGE, THE OPTION LOSES MAXIMUM VALUE / PREMIUM ON THIS DAY. MOSTLY MOVING
TOWARDS THE ITS FINAL STAGES, BUYING OPTION ON FRIDAY HAS HIGH CHANCES OF MAKING A LOSS.
• THURSDAY : THE DAY OF THE ULTIMATE TRUTH. LIKE HUMANS, EVEN OPTIONS HAVE TO DIE. SOME WILL LEAVE A LEAGACY BEHIND
WHILE THE MAJORITY WILL BECOME DUST (ZERO VALUE FOR AN OPTION).
 VOLUME - INTRODUCTION OF INDICATORS USED

• OPTION CHAIN

The most important part of any Option Chain is the ‘Option Strikes’ and Prices. As we all know, the Option
Strikes are classified as below:
• ITM : In The Money Strikes
• ATM : At The Money Strikes
• OTM : Out of Money Strikes
Bank Nifty Spot Price : 37300.
ITM ATM OTM
< 37300 > 37300
CE eg : 37200, 37100 etc 37300 eg: 37400, 37500 etc
> 37300 < 37300
PE eg: 37400, 37500 etc 37300 eg : 37200, 37100 etc
 TRADE RULES

BUYING SELLING
• PRICE OF THE INSTRUMENT IS ABOVE VWAP • PRICE OF THE INSTRUMENT IS BELOW VWAP
• PRICE OF THE INSTRUMENT IS ABOVE • PRICE OF THE INSTRUMENT IS BELOW
AVWAP AVWAP
• OPEN INTEREST OF THE INSTRUMENT IS • OPEN INTEREST OF THE INSTRUMENT IS
FALLING RISING

All these indicators like VWAP, AVWAP and Open Interest works equally well for BUYING and SELLING of
Options.
 TRADE SETUP

HOW TO TRADE USING VWAP & AVWAP

• DRAW WEEKLY AND MONTHLY AVWAP ON BNF.

• DRAW AVWAP ON 4 STRIKES FOR ITM AND OTM OF BOTH CE AND PE FROM BNF CLOSING.

• BASED ON BNF CLOSING, IT WILL BE EITHER BULLISH OR BEARISH.

• IF BNF CMP IS BELOW BOTH MONTHLY AND WEEKLY AVWAP, THEN LOOK FOR OPPORTUNITY TO SELL CE.

• FOR SELLING CE DURING THE DAY , CE NEED TO TRADE BELOW VWAP AND AVWAP.
 EOD ANALYSIS ON 05TH DECEMBER 2021

AT EOD WE NEED TO PREPARE FOR NEXT DAY. SO ON 05TH DECEMBER WE PLOT THE AVWAP TO
TRADE ON MONDAY 06TH DECEMBER 2021.
1. DRAW AVWAP ON BANKNIFTY FROM MONTHLY EXPIRY. IN THIS CASE WE ARE DRAWING FROM 1ST DAY OF
NOVEMBER EXPIRY, AS THE DECEMBER EXPIRY IS ONLY 4 DAYS OLD.
2. DRAW AVWAP FROM CURRENT WEEKLY EXPIRY, I.E. FROM 3/12/21.
3. DRAW ONE AVWAP FROM HIGH OF THE MONTH
4. DRAW ONE AVWAP FROM LOW OF THE MONTH
EOD ANALYSIS ON 05TH DECEMBER 2021
 CONCLUSION OF THE AVWAP

Now we need to plot AVWAP of +/- 4 strikes for both ITM and OTM of both CE & PE on Option Chart or
prepare an Excel as below. We will concentrate on selling CALLS for Monday (06th December 2021) as both
Monthly and Weekly Expiry data is giving Strong Sell Signal.
OPTION CLOSING PRICES AS ON 3/12/21
CE OPTION PUT OPTION
STRIKE PRICE
SELL BELOW BUY ABOVE CMP CMP SELL BELOW BUY ABOVE
672.00 880.00 606.00 35900 261.00 230.00 350.00
635.00 820.00 560.00 36000 291.00 270.00 390.00
542.00 754.00 480.00 36100 335.00 305.00 420.00
494.00 650.00 425.00 36200 390.00 340.00 480.00
458.00 580.00 380.00 36300 415.00 363.00 520.00
440.00 560.00 328.00 36400 471.00 383.00 580.00
400.00 500.00 275.00 36500 524.00 417.00 640.00
380.00 450.00 239.00 36600 576.00 422.00 710.00
340.00 390.00 201.00 36700 640.00 460.00 760.00
 36000 CE – Sell Example

This is the chart of BNF 36000CE on 6/12/21 for 9/12 Expiry. Prices were staying above VWAP (Black Line) till 11.25 AM . Since
morning the option was trading below AVWAP. So we wait for the CE price to go below VWAP to trigger the trade. At 12.00 noon
it broke 475 (VWAP) and then made a low of 400 by 12.20 PM. It again crossed VWAP on upside at 12.55 PM and made a high of
510. Around 1.10 PM , it again broke VWAP of 470 to close the day at 269. (The lowest level).
 TRADE EXECUTION

RULES :

1. TRADE HAPPENS ONLY WHEN CE OPTION PRICE IS BELOW BOTH VWAP AND AVWAP
2. AT 12.00 NOON IT BROKE 475 (VWAP). ENTR SELL TRADE WITH SL AT 501, I USE 20-25 POINTS SL ON ANY
OPTION I SELL. BOOK 50% ONCE TRADE CROSSES 1R (RISK POINTS 25) POINTS AND THEN TRAIL
CONTINOUSLY AS PER RISK PROFILE.
3. SECOND TRADE HAPPENED AT 1.10 PM ON BREAK OF VWAP OF 470, THE CE PRICE CLOSED AT THE
LOWEST LEVEL OF 270. KEEP BOOKING / TRAILING THE TRADE AS THE STRIKE MOVES IN YOUR FAVOUR
 36500 PE – Buy Example

This is the chart of BNF 36500PE on 6/12/21 for 9/12 Expiry. AVWAP at open was Rs. 420, The PE started trading below VWAP
since morning but AVWAP was providing support whenever it was falling. It can be seen around 10.40-10.50 AM (The RED LINE).
Once the PE crossed VWAP and closed above it at 1.50 PM, the entry was triggered at Rs. 570. The PE closed at day high of
Rs.800.
 TRADE EXECUTION

RULE :

1. TRADE HAPPENS WHEN PE IS TRADING ABOVE BOTH AVWAP AND VWAP

2. ALSO CHECK WHETHER OPEN INTEREST IS FALLING WHEN THE PRICES OF PE IS RISING
3. FROM 1 PM, 36000 PE OPEN INTEREST STARTED FALLING AT THE PE CLOSED ABOVE VWAP AT 1.50 PM , PRICE
WAS RS 570 APPROX.

4. SL WILL BE 544, LOW OF BIG BAR AT 1.35 PM. SO RISK IS 570-545 = 25 POINTS.

5. FIRST TARGET FOR 50% QNTY WILL BE 570+25 = 595, FOR NEXT 25% WILL BE 570+40 = 610 ( 1.5R).

6. REMAINING TRAIL WITH SL AS PER RISK APPETITE, PE CLOSED AT HIGH OF THE DAY AT 800.
EOD ANALYSIS ON 06TH DECEMBER 2021
 CONCLUSION OF THE AVWAP

OPTION CLOSING PRICES AS ON 6/12/21

CE OPTION PUT OPTION
STRIKE PRICE
SELL BELOW BUY ABOVE CMP CMP SELL BELOW BUY ABOVE

700.00 800.00 548.00 35500 244.00 180.00 250.00

585.00 700.00 469.00 35600 278.00 204.00 280.00

500.00 600.00 410.00 35700 311.00 236.00 320.00

460.00 550.00 360.00 35800 357.00 270.00 360.00

433.00 550.00 312.00 35900 400.00 295.00 410.00

450.00 550.00 261.00 36000 458.00 320.00 460.00

390.00 450.00 221.00 36100 515.00 358.00 520.00

360.00 450.00 184.00 36200 570.00 386.00 570.00

338.00 400.00 151.00 36300 640.00 408.00 650.00

On Tuesday, 7/12/21, BNF opened at 36326 and 36383 levels by 9.45 AM, showing super bullishness. As both the lowest AVWAP and Weekly
AVWAP were crossed. So now plan shifts from selling CE to Selling PE or buying CE for the day.
Observation : During the day, CE never went below VWAP and hence no Short triggered on CE side. While PE never went above VWAP during the
day. So while the EOD data was very Bearish still the combination of VWAP and AVWAP stopped us from taking wrong trade.
 TRADE EXECUTION 36500CE – BUY EXAMPLE

36500CE : BUY ABOVE VWAP, AT 9:45 AM VWAP WAS AT 176 AND IT CLOSED AT 236. SO WE BUY THIS CE AT 236 WITH SL
AT 176 AND ONCE THIS CE CROSSES AVWAP OF 315 AT 10:50 AM IT GAINED MORE STRENGTH TO HIT HIGH OF 532 DURING
THE DAY.

OBSERVE ONE MORE THING, THE MOMENT AVWAP WAS CROSSED ON THIS CE, THERE WAS HUGE REDUCTION IN OI ALSO.
 TRADE EXECUTION 36500PE – SELL EXAMPLE

36500PE : THIS PE BROKE BOTH VWAP AND AVWAP AT 9.45 AM AT RS 456, A GOOD SELL WAS AT RS 390
AROUND 9.50 AM WITH VWAP AS SL. THE PE FINALLY CLOSED AT 240 AND VWAP WAS NEVER CHALLENGED
DURING THE DAY. ALSO SEE HUGE INCREASE IN OI FROM 9.45 AM ONCE AVWAP WAS BROKEN IN THIS PE.
EOD ANALYSIS ON 07TH DECEMBER 2021
 CONCLUSION OF THE AVWAP

OPTION CLOSING PRICES AS ON 7/12/21

CE OPTION PUT OPTION
STRIKE PRICE
SELL BELOW BUY ABOVE CMP CMP SELL BELOW BUY ABOVE
361.00 700.00 516.00 36300 165.00 337.00 395.00
345.00 600.00 459.00 36400 199.00 345.00 405.00
318.00 500.00 393.00 36500 230.00 370.00 428.00
296.00 400.00 326.00 36600 272.00 360.00 470.00
265.00 400.00 278.00 36700 317.00 400.00 534.00
225.00 340.00 225.00 36800 367.00 445.00 580.00
182.00 285.00 185.00 36900 418.00 507.00 600.00
147.00 200.00 151.00 37000 488.00 605.00 770.00
116.00 195.00 120.00 37100 542.00 633.00 780.00

On Wednesday, December 8, 2021 BNF opened at 37049 and maintained its upward journey. Our both the
AVWAP (Lowest and Weekly) are in BUY mode. It was a RBI policy day, so wait for policy to get over and
then trade after 10.30 AM. After 10.30 AM , we will look to sell PE as all those are below VWAP and
AVWAP.
While there will be no trade in CE as there were above VWAP but OI was not falling significantly after 10.30 AM. Also on
Wednesday there is huge Theeta Decay on option, so avoiding trades on naked buying side is advisable.
 INTRADAY – ADVANCE OPEN INTEREST ANALYSIS

WE WILL USE BANK NIFTY CHART OF 30/11/21 IN THIS EXAMPLE

BANKNIFTY OPENED AT 36100 AND MADE A HIGH OF 36800 BY 10:25 AM AND THEN STARTED FALLING TO
CLOSE THE DAY AT 35680. A FALL OF ALMOST 1100 POINTS FROM THE HIGH. CAN THIS FALL BE ANTICIPATED
BY LOOKING AT THE OPEN INTEREST MOVEMENT DURING THE DAY? LETS SEE!!
WE WILL MAKE OUR STUDY IN TWO PART. ONE FROM 9.15 AM TO 10.30 AM AND THE OTHER ONE FROM
10.30 AM ONWARDS.

BANK NIFTY OPENED AT 36200 ON 30/11/21, SO WE WILL OBSERVE WHAT WAS HAPPENING IN 36000/36500
STRIKE TILL 10.30 AM
• 36000CE Writers running away since morning.
• CE OI started at 9.77Lk in the morning and dipped to 5.15Lk by 10:30AM.
• This is a OI reduction of 4 Lk contracts ( hugely bullish).

• 36000PE was being written aggressively at the same time.

• PE OI increased by 8 Lk contracts within the first 1.15 Hrs.
• ITM PE Option OI increase is hugely bullish.
• WHILE 36000CE WRITER WERE RUNNING AWAY SINCE MORNING, THE 365000CE (OTM) WAS GIVING
US THE INDICATION THAT THE UPRISE WILL STOP SOMEWHERE NEAR 36500 BNF.

• 36500 PE WAS ALSO GETTING WRITTEN HEAVILY FROM 3.58 LK TO 12.28 LK, A RISE OF 9.00 LK OI.
• 37000S STRIKE PE WHICH WAS DEEP ITM WAS NEVER WRITTEN IN THIS MORNING MOVE OF
BANKNIFTY 700 POINTS (36800-36100).
• THIS WAS A CLEAR CUT INDICATION THAT THE UPMOVE WILL NOT CROSS 37000 THAT DAY.
NOW LETS SEE WHAT WAS HAPPENING AFTER 10.30 AM ONWARDS. SO WE AGAIN OBSERVE THE ABOVE
MENTION STRIKE OF 36500/36000/35500
• WE CAN CLEARLY SEE THAT FROM 10.45 AM ONWARDS 36500 PE WRITER STARTED RUNNING OUT OF THEIR
POSITION.
• AT 10.45 AM BNF WAS AT 36700 AND 36500 PE (OTM) STARTED COVERING THEIR POSITION, A CLEAR CUT
SIGN OF IMPENDING FALL OR STOP IN MOMENTUM IN UPTREND.
• HERE ALSO WE CAN CLEARLY SEE, 36000 PE WRITER BEING DEEP OTM, STARTED UNWINDING THEIR
POSITIONs FROM 11 AM ONWARDS.
• AT THE SAME TIME 36000CE (DEEP ITM), STARTED INCREASING THE POSITION. THIS IS A CLEAR CUT SIGN OF
BANKINFTY MOVING TOWARDS 36000 DURING THE DAY.
• THIS 35500 PE WAS DEEP OTM. WE CAN SEE EVEN WHEN BNF WAS FALLING FROM 36700 TO 35700, THERE
WAS NO SERIOUS UNWINIDING OF POSITION IN THIS PE.
• WHICH CLEARLY SHOWS THAT BIG MONEY WAS BETTING ON BNF TO HALT ITS DOWNMOVE DURING THE DAY
ABOVE 35500 LEVELS.
• ALSO OBSERVE ONE MORE THING, DURING THE RISE IN MORNING 37000 PE OI WAS NOT WRITTEN AND
HENCE CAPPING THE RISE TO 37000 LEVELS OR BELOW AND DURING THE FALL 35500 PE WAS NOT RUNNING
AWAY AGAIN CAPPING THE FALL ABOVE 35500.
 OI ANALYSIS SUMMARY

Positive View Negative View

Increase Decrease Increase Decrease

ITM PE OTM CE ATM CE ITM CE OTM PE ATM CE ATM PE

ATM PE

Very Very
Bullish Bearish
Bullish Bearish
 BIJAY KUMAR SHARMA (CA) – DERIVATIVES TRADER

I AM A TRADER – NEITHER A BEAR NOR A BULL

I AM OPTION PLAYER – NEITHER A BUYER NOR A SELLER
TELEGRAM CHANNEL - @BJYBNF