Thanks Vikas!! So if I calculate as per last traded rates on NSE :
-55 Call : 2.45
-55 Put : 3.00
+60Call : 0.80
+50Put :0.90
Would it be correct to say that our BEP would be : 51.25 and 58.75 (Your original levels were 49.55 and 60.45)
Our max profit is 3.75 if close is at 55. You had max profit also at 55 and it was the total premium collected.(Rs.5.45) as per NSE closing rates.
And we loose max : 1.25 irrespective of the close of IFCI at any level whatsoever in the present strategy!! Where as in the original it was theoritically unlimited.
I apologise before asking it but as you had mentioned your family history I dare it : Do ask your elders which of the two "trade" would they prefer!!! (I will readily delete this portion if you find it hurting your feelings!!)
I do know that people do trade the original 'strategy' suggested by you. They are either pure speculators or have a view on the direction of the market, in this case IFCI would not go anywhere from its present level till Oct expiry!!!
Yes, RKK, your calculation and interpretation is 100 % correct.
you can loose max 1.25 on this position (even if IFCI goes to 0 ot 100) or make max of 3.75 (if expriy is at 55).
That gives u RRRatio of 3:1.
Most of the time, we won't get the max profit on short straddle cause for that IFCI has to expire at 55. Identifying such a perfect close price in 10 days ahead of expiry is very very difficult.
Just put the trade and go on holiday.. Let time and expiry work for you.
I love this type of trade where we know the exact risk to the last paisa right before entering the trade. No worry about quarterly result, open gap, trend etc..
In my experience, finding this type of RRR is bit difficut in Nifty options. but stock options can give u many such chances..
Happy Trading