GOOD PROFIT: Hedged nifty positions with straddle...

[skgarg]

I personally don't find any sanctity for the 17-20th dates. You can do it anytime you want. Doing it just before the series becomes F1 or on the day the series opens is also fine. Again I would not wait for the round figures to be hit. There are more whipsaws around the round figure. I prefer around xx30 or xx70. This is again more or a personal choice.

I beleive the 17-20 dates are because the next month series becomes liquid only by then. Is it so ? Should the criteria be that as and when next month series has become liquid ??

I agree to xx00 price being more prone to up and down. But how do I trade other figures because options are for round figures only?

I mean if price is 5124 and I short straddle of 5100 and go long NF at 5124, I have already missed 24 points.

 

[skgarg]

never do that... !

remember price near the strike price is the weak point of this whole strategy.
criteria for strike price selection is the top or bottom of the trading range. say we are trading in the range of 4900 to 5100, then going for 4900 or 5100 is desired. We are using a directional strategy that aims at using the premium as hedge for our nifty futures positions. as long as NF is away from the strike price we can afford to be inactive. ...

While I agree to this point in theory, but how can we be so sure about the trading range?

Remember you are trading nifty... and if i want to stay short below 4700, i would rather hold short above 4700 just after a key resistance level is broken or a trend line is broken. I wont wait for 4700 to break to initiate a short. For all i know, it can just bounce from 4690 as price remains unpredictable...

Exactly !!! Thats also my point.

If I have shorted 4700 straddle, there will be cases when I will be short above 4700 also. For eg.

NF started from 4700 and went to 4820. I kept riding it starting from 4710 with a 10 point trailing SL and a 20 point trailing sell order.

Suppose after reaching 4820, it falls to 4810, I get stopped out. I will put another long order at 4820. So now I have a buy order at 4820 and a sell order at 4800 with current price being 4810.

NF falls further from 4810 to 4800 where my short order is there. So I will get short at 4800 even though my straddle is of 4700. I will now put a SL at 4810 and my long order of 4820 will also be there.

 

[trader.trends]

I agree to xx00 price being more prone to up and down. But how do I trade other figures because options are for round figures only?

I mean if price is 5124 and I short straddle of 5100 and go long NF at 5124, I have already missed 24 points.

When NF is at 5124 and you short the straddle of 5100, the amount of premium that you get is more or less the same that you would get if NF was at 5100. The more expensive CE will get compensated by the cheaper PE. So when you go long at 5124, "the missed 24 points" is made up by getting the extra premium on CE. So essentially there is no difference when the shorting level is 30pts this side or that side of the strike price.

As for entry date, I meant there is no huge advantage in doing it around 17-18 as the far month options are in the slow lane. You can enter on settlement date or the day the new series opens. You can track it for June before taking the trade.

In one way if you want to trade less, after entering the straddle and opening the cover for NF you can wait for a substantial move on NF, say 100 pts before bringing up the trailing stop loss and the trailing reverse order. This way you will be trading less and have less stress than if you are pushing the SL for every move of 10 points. Say you enter at 5124 then wait for either 5224 or 5024 to be hit before you change your SL. This will help you to avoid whipsaws at every 10 point move. If you get trapped in the 20-30pt trading zone on any day(and the chances are bright) then the whipsaws will kill the profits made and you will abandon the system fast. Unless you want to be a scalper. But then if you want to be a scalper then there is no need for shorting a straddle in the first place.

One more suggestion is if you have shorted one lot of straddle, you can go in with more than one lot of NF for cover. Think of the advantages.

 

[skgarg]

When NF is at 5124 and you short the straddle of 5100, the amount of premium that you get is more or less the same that you would get if NF was at 5100. The more expensive CE will get compensated by the cheaper PE. So when you go long at 5124, "the missed 24 points" is made up by getting the extra premium on CE. So essentially there is no difference when the shorting level is 30pts this side or that side of the strike price. .

Thanks a lot for this extremely important piece of information. So now instead of shorting straddle at NF price of xx00, I will short straddle 30 points away from round figure and take NF position accordingly.

As for entry date, I meant there is no huge advantage in doing it around 17-18 as the far month options are in the slow lane. You can enter on settlement date or the day the new series opens. You can track it for June before taking the trade..

By shorting straddle earlier, one shud get more premium due to time value. I mean a July month expiry straddle will have more time value on 20th of June than on 1st of July. This date of 20th can be pushed more back if that particular option is liquid enough.

In one way if you want to trade less, after entering the straddle and opening the cover for NF you can wait for a substantial move on NF, say 100 pts before bringing up the trailing stop loss and the trailing reverse order. This way you will be trading less and have less stress than if you are pushing the SL for every move of 10 points. Say you enter at 5124 then wait for either 5224 or 5024 to be hit before you change your SL. This will help you to avoid whipsaws at every 10 point move. If you get trapped in the 20-30pt trading zone on any day(and the chances are bright) then the whipsaws will kill the profits made and you will abandon the system fast. Unless you want to be a scalper. But then if you want to be a scalper then there is no need for shorting a straddle in the first place. ..

Consider this scenario, I long at 5124 and NF goes all the way upto 5200 and now it starts coming back and settles at say 5130. Now in this process, I lost the long move from 5124 to 5200 and also the short move from 5200 to 5130...thats 146 points.

But yes, this no. '10' is critical and there shud be a some better way of determining its value isntead of keep it same on all days. Like you said, on a 20-30 pt range bound day, there will be lot of whipsaws and frustration.

May be if using some calculation, a dynamic value of this no. can be arrived to be used for each day, it wud be better. But then one can never be sure what markets will do.

One more suggestion is if you have shorted one lot of straddle, you can go in with more than one lot of NF for cover. Think of the advantages.

Cudnt get you, can u please clarify with some example.

 

[trader.trends]

Consider this scenario, I long at 5124 and NF goes all the way upto 5200 and now it starts coming back and settles at say 5130. Now in this process, I lost the long move from 5124 to 5200 and also the short move from 5200 to 5130...thats 146 points.

What if it goes from 5124 to 5174 and retraces? Loss of 50 points? If it goes to 5154 and retraces? Where do you want to cut it off? You have to identify how often you want to trade. How many points of book profit are you willing to give up in the short term for a bigger profit in the higher time frame? These are very individual things. Each of us will be comfortable at different levels.

Although the strategy is outlined broadly, each of us has to work out the details on our own and make it our personal strategy.

 

[rrmhatre72]

Hi Linkon,

This is great logic.
I am reading this for the first time. But I find this very interesting.
I am sure you might have tested it for long time before releasing it.
1. Appreciate if you can let us know how many points/ expected out of it.
2. Just curious to know if we apply same logic for options(Instead of Future) will it work?
I mean to say on daily basis if one place order for OTM call or PUT with stop loss of 5points(instead of 10points in future) . Will your logic work?

Anyway I will be waiting for your 500points/month statergy eagerly

Hi Linkon,

I am not sure if you have released your new statergy of 500point/month.
If it is already released in different thread then pls advice accrdingly.

 

[linkon7]

Hi Linkon,

I am not sure if you have released your new statergy of 500point/month.
If it is already released in different thread then pls advice accrdingly.

its not a new way of playing... its playing NF with a straddle as a hedge... money comes from NF... short straddle ensures that we gain something from that as well...

the whole strategy last roughly 15-20 days... and roughly gain is around 500-600 points.

 

[rrmhatre72]

its not a new way of playing... its playing NF with a straddle as a hedge... money comes from NF... short straddle ensures that we gain something from that as well...

the whole strategy last roughly 15-20 days... and roughly gain is around 500-600 points.

Thanks Linkon.

I hope you are talking about the same statergy explain in this link above. Pls confirm.

Appreciate if you can walk us(new guys) for next 15-20days with live market & advice how to take position. so that our concept become very clear.

Today market closed at 5197. If we have to start from tomorrow then what should be first step? Which straddle we should go for?
Your inputs will really help us lot on daily basis till one cycle of 15-20days is over.
Thanks in advance.

 

[vssoma]

its not a new way of playing... its playing NF with a straddle as a hedge... money comes from NF... short straddle ensures that we gain something from that as well...

the whole strategy last roughly 15-20 days... and roughly gain is around 500-600 points.

dear,
explain the strategy bit more that we ( like me) can understand clearly.
tnx,

 

[AW10]

Thanks Linkon.

I hope you are talking about the same statergy explain in this link above. Pls confirm.

Appreciate if you can walk us(new guys) for next 15-20days with live market & advice how to take position. so that our concept become very clear.

Today market closed at 5197. If we have to start from tomorrow then what should be first step? Which straddle we should go for?
Your inputs will really help us lot on daily basis till one cycle of 15-20days is over.
Thanks in advance.

Rahul/ Swamy/Others, I have been watching very closely the expectations of others to get free 500 points strategy from Linkon.

Let me share my view on this strategy in different way. I think u guys are expecting some holy grail here.. In my understanding,

1) Linkon collects money from market by selling straddle. Sell ATM straddle so that u select maximum.

2) Supplement his daytrading of NF, with this market's money to pay for his stoploss.

3) As someone else is paying for stoploss, his account balance has better chance on remaining above prev months close.


If one has collected 450 points from market, and have 5 points of stoploss on NF trades, then it will take 90 stops to be hit before the account balance gets first hit.
This is almost impossible that someone will have 90 loosing trades in a row (if that happens then something drastically wrong with person's trading).

He is active trader (infact super active), so he is always in the market with NF trade positioned in one or other direction. As far as I understand, the NF trades, and their signal come from different system.. nothing to do with what has been discussed here.

So while timedecay is putting extra earning in the account, the profitable NF trades
are already increasing the account balance above the last month's closing balance.

Crux of this strategy is EFFECTIVE TRADING SYSTEM for NF Trading. It is very much possible that u collect 450 points from market but if NF trading looses 1000 points, u are down by 500 points.

In my experience with Short Straddle, it is almost impossible to keep full premium cause market will never expire on the strike price of short straddle. Now the question is when to cut the short straddle, if u are pure option trader, or how to protect it thru NF, if you trade Futures as well.

Linkon, please correct me if I have misunderstood it.

Try to look at your own trading of last few months.. and add short straddle on top of that and you will be able to see if it really makes difference or not. Maybe by this weekend, you will have the answer.. or u can ask very specific question to Linkon here.

Happy Trading