Options Trading

[Satyen]

Hi asish some more basic questions

on friday Nifty put of strike 4900 was trading around premium 53 .. if i sell nifty 4900 put then i am expecting market to flat to bullish ...
My loss wil be if nifty goes below 4900-53=4847
but if nifty dnt go below 4900 is there any chance that put premium wil trade above 53 like today it was trading 56 around 1 pm

if i square off my position today at that time then my loss would be 3 rs ?

again if in case nifty goes below 4900 then should we hedge our position or use any kind of stop loss method?
if we want to hedge then what should we do should i sell nifty 4900 future as after 4900 nifty put and future wil act as same

waiting your comment


Regards
Satya

 

[aca_trader]

Question for Aca.

Do we have any option friendly brokers in India at all?

For eg. If we write straddles/strangles we are asked to put up 2 margins. Why/

Only one can end up ITM.

Help

To be frank, the brokers are not applying even SPAN which is a major problem but ICICI Direct is still the best. The charge SPAN margin and a small exposure margin. I doubt if other brokers even understand the concept of SPAN/Options. However, you can explain the risk to your neighbourhood brokers and he may be willing to accomodate you on the basis of SPAN margin as even NSE allows use of SPAN margin.

Regards,
--Ashish

 

[aca_trader]

Hi asish some more basic questions

on friday Nifty put of strike 4900 was trading around premium 53 .. if i sell nifty 4900 put then i am expecting market to flat to bullish ...
My loss wil be if nifty goes below 4900-53=4847
but if nifty dnt go below 4900 is there any chance that put premium wil trade above 53 like today it was trading 56 around 1 pm. if i square off my position today at that time then my loss would be 3 rs ?

If IV increases after one has written options and Delta is not able to set-off the losses from IV increment (vega), then such kind of scenario is likely.

again if in case nifty goes below 4900 then should we hedge our position or use any kind of stop loss method?
if we want to hedge then what should we do should i sell nifty 4900 future as after 4900 nifty put and future wil act as same

waiting your comment

Regards
Satya

Well! It's a tricky question as to whether to follow a Stop-Loss or to Follow a hedging method. There can be several alternatives depending upon future market outlook.

One as you suggested will be to short Futures. The Delta of Futures is 1 while that of Put will be 0.6 when it crosses 4900 and will keep on increasing if market continuing its slide. It will be very near to 1 if the put goes deep ITM. Thus, if the fall is marginal, you can even gain from this position. However, this position will be risky if market reverses its course as you will start loosing money on your short futures.

Another way is to roll-over the puts to a lower strike and move your time-stamp in future. However, this strategy still has unlimited risk. It's advisable to roll-over only when the direction of major trend is up and one is playing the minor-trend.

Still Another way is to flip. Flipping is closing your written puts and writing calls to cover losses as well as to earn some return. This strategy should be adopted only when the trend has reversed.

You can use even other options to hedge your option positions.Depending upon the scenario, there may be several permutations and combinations which can be applied. I would suggest reading Chapter -7 of "Trading Options to Win - Profitable Strategies and Tactics for Any Trader" by "S A Jonston" and published by Wiley for a better understanding of defensive techniques.

Best Regards,
--Ashish

 

[Satyen]

thank you very much Asish

regards
Satya

 

[rajsingh]

To be frank, the brokers are not applying even SPAN which is a major problem but ICICI Direct is still the best. The charge SPAN margin and a small exposure margin. I doubt if other brokers even understand the concept of SPAN/Options. However, you can explain the risk to your neighbourhood brokers and he may be willing to accomodate you on the basis of SPAN margin as even NSE allows use of SPAN margin.

Regards,
--Ashish

Just as i thought. Thanks Ashish.

 

[Satyen]

hi asish , raj and others .... before some day i shorted nifty 50 put of strike 4800
and today shorted nifty future mini contract so i am partially hedge but if we brake 4800 before expiry or just remain above 4800 then what will be my profit and loss

Now what should i do should i wait for 4800 to be broken to hedge my short nifty put ?

waiting your comments

regards
Satya

 

[aca_trader]

hi asish , raj and others .... before some day i shorted nifty 50 put of strike 4800
and today shorted nifty future mini contract so i am partially hedge but if we brake 4800 before expiry or just remain above 4800 then what will be my profit and loss

Now what should i do should i wait for 4800 to be broken to hedge my short nifty put ?

waiting your comments

regards
Satya

Well! Technically speaking, the risk to 4800 Short put is low at the current levels. The market may be in the process of making a triangle. Hence, if market completes the triangle & breaks-down thereafter or else breaks out the small trendline adjoining recent lows, you may have to start worrying about short puts. Till the time it happens, you are already 40% hedged in addition to Rs. 56 you collected as premium.

Best Regards,
--Ashish

 

[aca_trader]

Just as i thought. Thanks Ashish.

My pleasure Buddy!

 

[aca_trader]

thank you very much Asish

regards
Satya

You are always welcome friend!

 

[Satyen]

Well! Technically speaking, the risk to 4800 Short put is low at the current levels. The market may be in the process of making a triangle. Hence, if market completes the triangle & breaks-down thereafter or else breaks out the small trendline adjoining recent lows, you may have to start worrying about short puts. Till the time it happens, you are already 40% hedged in addition to Rs. 56 you collected as premium.

Best Regards,
--Ashish

Thank you very much

Regards
Satya