INTELLECTUAL TRADING

  Definition:  Butterfly Spread Option, also called butterfly option, is a neutral option strategy that has limited risk. The option strategy involves a combination of various bull spreads and bear spreads. A holder combines four option contracts having the same expiry date at three strike price points, which can create a perfect range of prices and make some profit for the holder. A trader buys two option contracts – one at a higher strike price and one at a lower strike price and sells two option contracts at a strike price in between, wherein the difference between the high and low strike prices is equal to the middle strike price. Both Calls and Puts can be used for a butterfly spread. Any butterfly option strategy involves the following: 1) Buying or selling of Call/Put options 2) Same underlying asset 3) Combining four option contracts 4) Different strike prices, with two contracts at same strike price 5) Same expiry date Description:  The Butterfly Spread Option strategy works b

PCR - PUT CALL Ratio It is a way to measure whether traders are feeling bullish or bearish about the market. To calculate it, you just need to divide the open interest of PUT options by that of CALL options. PCR is a market sentiment indicator and is used as a contrarian indicator by many traders Analysing PCR PCR > 1 is Bullish PCR = 1 is Neutral PCR < 1 is Bearish Above 1.5 and Below 0.5 are extreme zones and are likely places where on-going trend can halt or reverse

  What is Kaufman’s Adaptive Moving Average (KAMA)? Kaufman’s Adaptive Moving Average (KAMA) was developed by American quantitative financial theorist Perry J. Kaufman in 1998. The technique began in 1972 but Kaufman officially presented it to the public much later through his book, “Trading Systems and Methods.” Unlike other moving averages, Kaufman’s Adaptive Moving Average accounts not only for price action but also for market volatility . The Kaufman Advantage When market volatility is low, Kaufman’s Adaptive Moving Average remains near the current market price, but when volatility increases, it will lag behind. What the KAMA indicator aims to do is filter out “market noise” – insignificant, temporary surges in price action. One of the primary weaknesses of traditional moving averages is that when used for trading signals, they tend to generate many false signals. The KAMA indicator seeks to lessen this tendency – generate fewer false signals – by not responding to short-term, insi