Low Risk Low Returns- Target 50 NF per month per NF Lot

jamit_05

Well-Known Member
Dan,

In your opinion, am I taking any unreasonable risk here. Could you point it out.

The idea behind doing this is to take sensible and minimal risk. This portfolio has a time decay of Rs.50,000 each month.
 
Dan,

In your opinion, am I taking any unreasonable risk here. Could you point it out.

The idea behind doing this is to take sensible and minimal risk. This portfolio has a time decay of Rs.50,000 each month.
Hi Jamit

Risk is always biggest when not is understood that it is risk. :)

It is a good portfolio to learn how to trade such option strategies. Some comments from my side as you asked for:

In your first trade you show a synthetic call with a Dec put and the current Nifty future. Here I would have legged in, but that is personal choice.

Then you have some sort of a calendar strangle. Here the Sep 7600 put has to be watched, as if Nifty further plunges this leg will become deep itm. Itm means no time decay and increase in value. And that is exactly the opposite from what you want with this leg. So this leg is at risk.

As next you show a short Aug Straddle. Also here you have to keep an eye on it, as the put side is already itm. This is not what you want.

Then the fourth trade is a Call Calendar Spread. It is a risk limited trade but not one which guarantees you any profit. If you would have a call credit spread and market does move down, then you could tell that the spread of what ever it was is a safe bet. But with a Call Calendar Spreads you are less safe compare to the normal CSP.

Over all: It is a portfolio which needs a lot of attention. To me it not looks like a portfolio with minimal risk. It is one with high risk if not manged well. I have come away from such portfolios as in strong market moves it is very critical to manage all the legs the right way. But that is personal choice and if you manage such a portfolio within a small team then it is again an other situation as then each person can manage only his strategy.

Hope it helps and take care / Dan :)
 

jamit_05

Well-Known Member
Hi Jamit

Risk is always biggest when not is understood that it is risk. :)

It is a good portfolio to learn how to trade such option strategies. Some comments from my side as you asked for:

In your first trade you show a synthetic call with a Dec put and the current Nifty future. Here I would have legged in, but that is personal choice.

Then you have some sort of a calendar strangle. Here the Sep 7600 put has to be watched, as if Nifty further plunges this leg will become deep itm. Itm means no time decay and increase in value. And that is exactly the opposite from what you want with this leg. So this leg is at risk.

As next you show a short Aug Straddle. Also here you have to keep an eye on it, as the put side is already itm. This is not what you want.

Then the fourth trade is a Call Calendar Spread. It is a risk limited trade but not one which guarantees you any profit. If you would have a call credit spread and market does move down, then you could tell that the spread of what ever it was is a safe bet. But with a Call Calendar Spreads you are less safe compare to the normal CSP.

Over all: It is a portfolio which needs a lot of attention. To me it not looks like a portfolio with minimal risk. It is one with high risk if not manged well. I have come away from such portfolios as in strong market moves it is very critical to manage all the legs the right way. But that is personal choice and if you manage such a portfolio within a small team then it is again an other situation as then each person can manage only his strategy.

Hope it helps and take care / Dan :)
Would like to put the entire portfolio in proper light.

The base of this portfolio is:

BUY 15 Lots NF @ 7570
BUY 30 Lots 75PE DEC @ 185

They give me a decay cost of around 50K a month. 50K and profit I have to recover from making low risk sensible adjustments against the initial stock.

For ex. when I sold 79CE OCT, I saw that market won't go above 7900. And if it did I have NF to cover for it. This is now in a M2M profit of 15K. Similarly, I have already collected a profit of 102K in days of August.

In this strategy, I seek such opportunities, where each sold option leg is completely covered. There is not a single naked SOLD option.

Even the purchased 15 lots of NF are covered by twice as many DEC puts from day 1. If market tanks and NF go into a loss, one DEC put will cover NF lot, and other DEC put will be used to make adjustments and extract decay cost and profit each month.

Point I am trying to make is, this method is low risk from day 1. However, it becomes VERY risky if I sell too much too early!

If I sell all NF at an average 150 points profit (150*15*50=112K), then how will I ever recover the cost of buying DEC PEs (184*50*30=276K) if market continues up.

Therefore, I have to sell in a staggered way. Sell a little, then watch for momentum and calculate.

The above is my approach. Please free to point out if there is a blind-spot.
 
Would like to put the entire portfolio in proper light.

The base of this portfolio is:

BUY 15 Lots NF @ 7570
BUY 30 Lots 75PE DEC @ 185

They give me a decay cost of around 50K a month. 50K and profit I have to recover from making low risk sensible adjustments against the initial stock.

For ex. when I sold 79CE OCT, I saw that market won't go above 7900. And if it did I have NF to cover for it. This is now in a M2M profit of 15K. Similarly, I have already collected a profit of 102K in days of August.

In this strategy, I seek such opportunities, where each sold option leg is completely covered. There is not a single naked SOLD option.

Even the purchased 15 lots of NF are covered by twice as many DEC puts from day 1. If market tanks and NF go into a loss, one DEC put will cover NF lot, and other DEC put will be used to make adjustments and extract decay cost and profit each month.

Point I am trying to make is, this method is low risk from day 1. However, it becomes VERY risky if I sell too much too early!

If I sell all NF at an average 150 points profit (150*15*50=112K), then how will I ever recover the cost of buying DEC PEs (184*50*30=276K) if market continues up.

Therefore, I have to sell in a staggered way. Sell a little, then watch for momentum and calculate.

The above is my approach. Please fell free to point out if there is a blind-spot.
Hi Jamit

I hope we do here not get into some kind of confusion with our posts. :) I only had a look at post 320, which shows a certain portfolio and nothing more. It did not say any thing about how you implemented those legs nor about your main idea behind it. It just shows all the legs you have and my post was directed to post 320 with what I saw there. More I can not do, as I not have the time to read whole threads just to make one post. Kindly accept that.

Now you posted some more information about it in the above post:

Now knowing also this, then there is nothing to complain about it if you do handle your portfolio the way you explained just now. Risk you know, break even points you know, how to protect with Nifty you know and you do act when needed. If you love to trade such a portfolio you showed here and have enough cash in the background to fill any margin you need for any situation, kindly move on with it. What do you want more? Ah I know: A nice weekend. :) Take care / Dan
 

jamit_05

Well-Known Member
I have sold 79CE OCT at 170 and now its trading around 100. I would like to hedge this gain. Ordinarily I would just book profit as I know that the Daily trend is up, but this time I feel price may go deeper near 7450 spot.

If price continues down or sideways, then I am good. 79CE OCT will go lower.
If price starts going up, then this is what i need to cover for.... So I will buy 100 units of 79CE Aug @10.

In result, I get to spend 10 points, to insure a 70 points gain till Aug Expiry.
 
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jamit_05

Well-Known Member
Re: FnO Portfolio - II

Initial Position:
NF 11*50* (7633-7570)= 34k
75PE Dec 30*50*(-184+154)= -45k;


Adjustments:

Covered Transactions:
-------------------------------

Covered @ 184;
SOLD Aug 77CE 105 100u
SOLD Aug 77PE 119 100u
----
SOLD 100 76PE SEP@135 @ 95; +4k

Total Gained: 110k


Open Lots
Initial: (15-4) lots NF and 30 lots 75PE DEC.
SOLD 150 76PE SEP@116;

SOLD 100 79CE OCT@170;
BUY 100 7850CE Aug@17; Insurance.

SOLD 100 79CE OCT@154;


-----------------------
Neutral Spread
-----------------------

300u Sell 77CE Aug 100
300u Buy 78CE Sep 120
Net -20 pts, -6k.[/QUOTE]
 
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jamit_05

Well-Known Member
NF Sep and Oct difference is 37 pts. This is notably high. I would like to see it go below 20, which is when I will roll over the 11 lots that I hold.
 

healthraj

Well-Known Member
Only when the market moves strongly in a direction, can I book profit and make fresh moves. Till then time decay goes on.
Jamit,

Last year around the same time, I almost gave up SELLing options because of the VIX going crazy. VIX jumped 100%-200% and spoiled all the profits. So hope your strategy is not built only on time decay. Hope you have a way to adjust your positions if VIX jumps..
 

jamit_05

Well-Known Member
Jamit,

Last year around the same time, I almost gave up SELLing options because of the VIX going crazy. VIX jumped 100%-200% and spoiled all the profits. So hope your strategy is not built only on time decay. Hope you have a way to adjust your positions if VIX jumps..

Yes, all set. In fact, more the VIX jumps the better.

As of now, this paper portfolio, has already booked 106k in profit.
As for the rest, I have already squared off the risky SOLD strangle at a mediocre profit. What remains is:

SOLD 100 76PE SEP@135;
SOLD 150 76PE SEP@116;

SOLD 100 79CE OCT@170; (BUY 100 7850CE Aug@17; Insurance.)
SOLD 100 79CE OCT@154;

One of these may cause pain. Will see what best I can do.
 
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