There is one strategy to make good profits- buy nifty futures and do call write of next month. in this way one can be safe till nifty goes 140-150 points down also. and if it goes up then options premium is profit and if nifty keeps coming down. buy that call at lesser price and again do call write at current nifty levels.
if nifty is at 5500. next month 5500 ka call option will be at 150 RS. and you will get a premium of 150*50=7500. and this can be your profit if nifty is at 5500 or above. and if nifty comes to 5350 also on expiry. you will not have any loss. and to avoid any serious loss, buy put of 5200 also at 20RS.
Yes it looks good, and have seen a few friends do it, but they are 'professions"!! It is not as easy at it seems here. They switch their positions at the drop of a hat... they are too versatile, not an easy job for a normal trader (like me atleast)
With my limited knowledge of Options my views are prone to error so please read accordingly. My common sense tells me that the strategy needs to have some "time" mechanism to give good profit!! That is "when" during a derivative month we take this action of Buying Nifty Futures and selling a in the money call!!! To me it looks like this "when" is important.
Are you suggesting that we always do this irrespective of the direction of the Market... and
OR
do we also consider selling Nifty futures and Selling a Next Month Put?
I was looking at the June month data. On 1st June we bought Nifty futures, say at close, i.e. ~5590 and sold July 5600 Call at 139 (Again taking closing price)
Yesterday Nifty closed around 5276 and Nifty 5600 Call for July closed ~25
We seem to have lost 314 in Nifty futures and gained 114 in Nifty Call, a net outgo of 200 points!!
Yes overlloked you added the insurance of Buying a deep out of money Put. If we bought 5300 Put for July on 1st June, we would get it at ~53 and the same is today at 138, giving us a profit of 85 points.
We still have a deficit of ~115 points!!
I may be erring so please point out and do suggest some simpler method in this strategy to make it profitable.