Earning 25% per month using Option strangle strategy

[shinchan]

IMO, your friend is expecting nifty to close between 5800-6100.

Total premium you will be collecting is 368 ( 149 for CE and 219 for PE) and you investment may be around 60K.

Now, if nifty closes any where between 5800-6100, your profit will be 68 Rs.

Between 5732-5800 and 6100-6168, your profit will be reduced by the difference. For eg. if nifty closes at 5750 your profit will be Rs. just Rs. 18.

If Nifty closes below 5732 or above 6168 your position will be in a loss.

one of my friend suggested me to sell nifty 5800 CA and 6100 PE and keep till expiry week.
what is the logic behind the above trading...anyone plz help to understand the same . is my friend correct in suggesting

 

[borsaric]

Excuse me for my ignorance and for my english.
What is a nifty option?
Thank you.

 

[rocky9281]

Hi Frnds,

Just wanted to share my options trading strategy which has the potential to earn 25% per month.

The secret lies in selecting the option pair.

With the right selection of the pair, you can:
1. Make 80-100% in trending months
2. 50% in most of the rangebound months

 

[Gaur_Krishna]

Hi Rocky,

Can you suggest any guideline for selecting this option pair?

Regards,
Gaur_Krishna

The secret lies in selecting the option pair.

With the right selection of the pair, you can:
1. Make 80-100% in trending months
2. 50% in most of the rangebound months

 

[shivasrinivas2012]

Hi rocky, as im new please ignore any mistakes ,ithink this july series may be between 5400 and max 5700 , does 5400 ce and 5700 pe would be correct ? but the premium are looking high it would give profit? , how can i choose premium and calculate profits loss with that? please help me to learn .thank you.

 

[OptionTiger]

Hi Frnds,

Just wanted to share my options trading strategy which has the potential to earn 25% per month. I am personally doing this for past 4 months only, got consistently 25% every month. However still my testing timeframe is small, i would like to share with you people and get ur feedback on this.

Please give ur suggestion/improvement after your review.
Investment required will be higher as we wont get much profit with 1-2 lots.

This trading strategy is completely based on LUCK.
So Old people/Heart patients and particularly 'PPL who dont want to take risk to get reward', stay away from this thread :lol:

Now coming to this strategy:
1. This strategy works well only when NIFTY is trading above 5200(jus my view). So when you see Nifty below 5200, dont try this strategy. (however if nifty is going to go up up up... the profit potential of this strategy will also go up up up).

2. This is based on option strangles. Means, we are going to buy one CALL option and also one PUT option at the same time.

3. Wait for 4-6 trading sessions from the beginning of every month(calender beginning, not the contract beginning).

4. Now see the nifty level.
-> check the price of CALL options for the strike above(and near) to the current NIFTY value.
-> check the price of PUT options for the strike below(and near) to the current NIFTY value.
For example, if nifty is at 5980, check 6000 call and 5900 put.

5. Add both the prices and ENTER the trade for the total of <=150 points.

6. Wait for 6 to 7 days of trading session for a bigger movement on either side on nifty. Once your total nifty points raise to 190 range, exit the trade and you get 25% profit on investment. :clapping:

Now we will discuss the most important points of this trading method, which for most of the traders is the NEGATIVES:
1. What happens if Nifty was in range-bound for those 6-7 days after you enter the trade and you sell your options?
Simple. You will loose money upto 25% of ur investment.
My view: This happens very very rarely in our market. Atleast not every month. To see for yourself, check the past data. Because for 40 points raise in option(call/put), you will need 150 point movement in 1 direction in nifty which most likely wil happen OR in otherwords, this wont happen every month :thumb:

2. What happens if Nifty was in range-bound for those 6-7 days after you enter the trade and you DONT sell your options?
You are taking more risk and naturally the reward will be much more than 25% ....even 80-100% sometimes. This is because nifty is in rangebound for more than 6-7 days and bulls-bears are fighting hard to pull. When one of them succeed, you will see a big movement in nifty.

3. Why is that this strategy wont work well when nifty was trading in < 5200 range?
Because, the movement of 150 points when nifty around 6000 is 2.5%(approx) ... whereas the same 150 points movement in nifty when it is @4500(say) can be acheived only by 3.3% which is significant when compared to 2.5% (approx 30% more movement expected). And if nifty is trading @ 10000, with just 1-1.5% movement we can get profit.

Note: This discussion purely for sharing ideas and not recommending anyone to do trade based on this.

The Strangle trade is nothing new. In fact, I'd recommend doing a Straddle instead of Strangle. In a straddle, you use the same at the money strike prices. The straddle produces a profit quicker, but it will be slightly more expensive than a strangle.

If Nifty is 4500 instead of 6000, have you considered the Implied Volatility of the Nifty at that time ? I can bet you it will be very high. When Implied volatility is very high, this is not a good time to put on a strangle or a straddle. And what about time decay because you have 2 Long options. Both will face time decay. So you need to go as far as possible, but I believe in India you can go only go 3 months ?? Not sure about this..

Just a tip - whether you put a straddle or a strangle, you need the move to happen quickly. If a week or two goes by without the move, the trade will become much more difficult to make money because of double time decay. Look at the risk graph of the trade, and see how the breakeven points gets wider as the days go by.

Best
Hari Swaminathan
Optiontiger.com

 

[singlap]

Although in theory , Long Option strangle may give an impression that one will loose money due to time decay, but practically it gives money almost always. Even if we back test the strategy for past 24 months, it always gives money during the month because of low initial investment(approx rs 150/-). Come what may , market will move at least once in a month for making the overall trade positive. It may not give 25% , but 10 to 15% is always there.

Only thing is, we should know where to book profits and exit the trade. Generally, strong discipline in exiting the trade makes all the difference.

Regards,

singlap
theoptionschool.in

 

[shemz]

1. This strategy works well only when NIFTY is trading above 5200(jus my view). So when you see Nifty below 5200, dont try this strategy. (however if nifty is going to go up up up... the profit potential of this strategy will also go up up up).

Lol this is actually a funny statement for a volatility player. Perhaps because your experience is very limited in trading options yet.

If, and when, Nifty index moves toward 5000-5200 levels, the VIX would shoot up in the sky. That would in reality be the time for you to swing into action as you could make very good profit trading strangles/straddles intraday.

Btw by creating synthetic hedges like this, you are basically trading VIX derivatives.

 

[guruswamy]

Hi Frnds,

Just wanted to share my options trading strategy which has the potential to earn 25% per month. I am personally doing this for past 4 months only, got consistently 25% every month. However still my testing timeframe is small, i would like to share with you people and get ur feedback on this.

Please give ur suggestion/improvement after your review.
Investment required will be higher as we wont get much profit with 1-2 lots.

This trading strategy is completely based on LUCK.
So Old people/Heart patients and particularly 'PPL who dont want to take risk to get reward', stay away from this thread :lol:

Now coming to this strategy:
1. This strategy works well only when NIFTY is trading above 5200(jus my view). So when you see Nifty below 5200, dont try this strategy. (however if nifty is going to go up up up... the profit potential of this strategy will also go up up up).

2. This is based on option strangles. Means, we are going to buy one CALL option and also one PUT option at the same time.

3. Wait for 4-6 trading sessions from the beginning of every month(calender beginning, not the contract beginning).

4. Now see the nifty level.
-> check the price of CALL options for the strike above(and near) to the current NIFTY value.
-> check the price of PUT options for the strike below(and near) to the current NIFTY value.
For example, if nifty is at 5980, check 6000 call and 5900 put.

5. Add both the prices and ENTER the trade for the total of <=150 points.

6. Wait for 6 to 7 days of trading session for a bigger movement on either side on nifty. Once your total nifty points raise to 190 range, exit the trade and you get 25% profit on investment. :clapping:

Now we will discuss the most important points of this trading method, which for most of the traders is the NEGATIVES:
1. What happens if Nifty was in range-bound for those 6-7 days after you enter the trade and you sell your options?
Simple. You will loose money upto 25% of ur investment.
My view: This happens very very rarely in our market. Atleast not every month. To see for yourself, check the past data. Because for 40 points raise in option(call/put), you will need 150 point movement in 1 direction in nifty which most likely wil happen OR in otherwords, this wont happen every month :thumb:

2. What happens if Nifty was in range-bound for those 6-7 days after you enter the trade and you DONT sell your options?
You are taking more risk and naturally the reward will be much more than 25% ....even 80-100% sometimes. This is because nifty is in rangebound for more than 6-7 days and bulls-bears are fighting hard to pull. When one of them succeed, you will see a big movement in nifty.

3. Why is that this strategy wont work well when nifty was trading in < 5200 range?
Because, the movement of 150 points when nifty around 6000 is 2.5%(approx) ... whereas the same 150 points movement in nifty when it is @4500(say) can be acheived only by 3.3% which is significant when compared to 2.5% (approx 30% more movement expected). And if nifty is trading @ 10000, with just 1-1.5% movement we can get profit.

Note: This discussion purely for sharing ideas and not recommending anyone to do trade based on this.

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I too agree with your idea -pls give your cel no/Guruswamy 9442039879

 

[ananths]

Dear Summasumma,
Are you trading this strangle strategy every month and the returns are consistent? I saw this thread is started in 2010 so you must have tried this many times..can you pls share you experience?

or if anyone else doing this consitantly, please share your experience.

Cheers,
Ananth