Your intention is to exit nifty below ur strike price... and buy it back when it climbs above it.
I would rather Initiate a Naked 5200 put short.
When I initiate the naked put short, my view would be that NF will take support above 5215, the low of the day, when we gap-ed up and extended the whole EOD trading range upwards. Everyday, the market dynamics change and depending on my current view, my action point can be to
short nf below 5200 and make it a covered put..
or
buy 2x 5100 put and make it a ratio spread...
or
buy 5300 put and make it a bear spread...
The potential profit /loss curve of your covered call (nf long + 5200 call short) is exactly the same as my naked 5200 put short...! Difference is in the variety of action points.
Trading options is a whole different ball game. There has to be room to alter the delta of your positions and you have to cater to all what if scenario...
I would rather Initiate a Naked 5200 put short.
When I initiate the naked put short, my view would be that NF will take support above 5215, the low of the day, when we gap-ed up and extended the whole EOD trading range upwards. Everyday, the market dynamics change and depending on my current view, my action point can be to
short nf below 5200 and make it a covered put..
or
buy 2x 5100 put and make it a ratio spread...
or
buy 5300 put and make it a bear spread...
The potential profit /loss curve of your covered call (nf long + 5200 call short) is exactly the same as my naked 5200 put short...! Difference is in the variety of action points.
Trading options is a whole different ball game. There has to be room to alter the delta of your positions and you have to cater to all what if scenario...
If we initiate a 5200 PE short, if the market moves to 5500 on expiry i will end up in loss right? Say at current price 5200CE Aug is 165 and 5200 PE Aug is 105, if i sell both it will give me a premium of 270 points. But then if on expiry nifty is @ 5500, CE will be 300 and PE will be 0, which will be a 30 points loss to me and the same goes if market closes below 4900.
In the option u said the profit depends on the movement from my strike price say if it closes away 100 points from 5200 either way my profit will be reduced by 100 points.
It increases my profitability but on whipsaws wont i be in trouble? or shd we exit on certain points? And also pls throw some light on how much margin will they charge for this hedging!!!
Thanx in advance!!!