Some of you have asked about "DELTA NETURAL STRATEGY" of trading futures and options. Well it is beyond my capabilities to explain here in detail. However I would like to walk you through this strategy. This strategy can be implemented no matter what you think the market is going to do. Let us play the mock trade here and learn and understand the strategy. Our mock trade is going to be on future and options on nifty index expires on August 25, 2005
THE LAST TRADE ON NIFTY INDEX FUTURES EXPIRES 25 AUGUST, 2005 Rs.2362.00 ON
FRIDAY 12TH AUGUST, 2005.
Action:
1) We will sell five calls options on the future of nifty index with strike price of 2380 which will give us Rs.12000.00 (The denominator is 100) The last traded price on Friday 12th August 2005 was Rs.24.00
24x500=12000.00.
2) We will also sell five put options on the future of nifty index with strike price of 2340 at Rs.22.95 (The last traded price on Friday 12th August 2005 thus will collect premium of 22.95x500= 11475.00.
By taking the above action we have collected total premium of Rs.23475.00.All we have to do is to keep this premium until expiry of the options i.e., August 25, 2005.
Note: The options call and put are usually sold at the resistance and support levels. This strategy is suitable for well-funded accounts only as the margin requirements could be high. We will watch from here what the market is going to do and will adjust our trade accordingly. Those of you who would like to know more about this trade and this trading strategy should read about the Greeks of options and at the end of this trade I will answer any questions you may have. Please hold your horses until the trade is over which will end after 9 trading days only.
THE LAST TRADE ON NIFTY INDEX FUTURES EXPIRES 25 AUGUST, 2005 Rs.2362.00 ON
FRIDAY 12TH AUGUST, 2005.
Action:
1) We will sell five calls options on the future of nifty index with strike price of 2380 which will give us Rs.12000.00 (The denominator is 100) The last traded price on Friday 12th August 2005 was Rs.24.00
24x500=12000.00.
2) We will also sell five put options on the future of nifty index with strike price of 2340 at Rs.22.95 (The last traded price on Friday 12th August 2005 thus will collect premium of 22.95x500= 11475.00.
By taking the above action we have collected total premium of Rs.23475.00.All we have to do is to keep this premium until expiry of the options i.e., August 25, 2005.
Note: The options call and put are usually sold at the resistance and support levels. This strategy is suitable for well-funded accounts only as the margin requirements could be high. We will watch from here what the market is going to do and will adjust our trade accordingly. Those of you who would like to know more about this trade and this trading strategy should read about the Greeks of options and at the end of this trade I will answer any questions you may have. Please hold your horses until the trade is over which will end after 9 trading days only.
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