Sure Shot Futures & Options Calls

[Dev Mookerji]

DEV BAYYA I AM ASKING SOME DOUBTS ...
BUY FUTURE + SELLING CALL (MOSTLY UPPER STRIKE ) = CALLED COVERED CALL AND NOT HEDGE..

Definitional u er correct and I am wrong. But I could not have found better word to describe in short form of Covered Call in general to novice traders other than "hedge". It may be noted that this thread is not for the people like u who have idea what is called covered call ? People should have confused in the term covered call.

By the way "Hedge" means to reduce the risk in open trade positions due to uncertainty in the market. Which I did. I was not having idea in my mind to ate premium of the call but to hedge my long positions up to a certain level and when stocks would have moved in our direction should have exited from the options, but unfortunately that didn't happened. Basically I love to play wild moves in the stocks & futures, U must be remembering from our early days. But market is such a range bound simply we have no other option.

SECOND DOUBT CAME IN MY MIND WHY U SOLD CALL AT SAME STRIKE

No, strike prices are different. Earlier it was 210 & this time it is 220.

THIRD DOUBT IN MY MIND...
IN ABOVE EXAMPLE U PURCHASED SAIL FUT AND U SOLD CALL AT SAME STRIKE..
MEANS YOU TOOK TWO TRADES...
INSTEAD OF THAT WHY DONT YOU SELL A PUT AT SAME STRIKE (IT WILL GIVE U LESS MARGIN AND GOOD PROFITS THAN COVERED CALL)

Long positions and simultaneously put writing means both er equivalent to long positions, have u imagined if market moves in opposite direction what would be the results ? It will be unlimited loss.
___________________


Happy Holi to u also.

By the way how is your job going on? Bangalore is a nice city to have fun. Still working there or have u shifted somewhere ? And most importantly, let me know With whom u gonna play Holi this time .

take care
dev baiyya

 

[kindman]

Originally Posted by Dev Mookerji View Post
Buy SAIL Future @ Market rate 213 . T- 229/244 . SL - 199 (By closing)

Originally Posted by Dev Mookerji View Post
Hedge position by selling 210 call @ 8.5

MY QUE IS SO SIMPLE....
ABOVE EXAMPLE U TOOK TWO TRADES ON SAIL....
1> BUY SAIL FUTURE + SELL CALL = TWO TRADES IT NEEDS MORE MARGIN THAN SINGLE TRADE IS IT??

NOW MY DOUBTS
----------------------
1>I WONDER WHY U SOLD AT SAME STRIKE??
2> WHY DID NT U PURCHASE A PUT AT STRIKE 200
--------------------------------------------------
THIS 3D DOUBT IS FOR NEW COMERS AND I EXPECT SOME REPLAY
3> BUY FUTURE +SELL CALL = TWO TRADES ...
INSTEAD OF THAT JUST SELL A NAKED PUT = SINGLE TRADE AND LESS RISKIER THAN COVERED CALL..

 

[Dev Mookerji]

MY QUE IS SO SIMPLE....
ABOVE EXAMPLE U TOOK TWO TRADES ON SAIL....
1> BUY SAIL FUTURE + SELL CALL = TWO TRADES IT NEEDS MORE MARGIN THAN SINGLE TRADE IS IT??

NOW MY DOUBTS
----------------------
1>I WONDER WHY U SOLD AT SAME STRIKE??
2> WHY DID NT U PURCHASE A PUT AT STRIKE 200
--------------------------------------------------
THIS 3D DOUBT IS FOR NEW COMERS AND I EXPECT SOME REPLAY
3> BUY FUTURE +SELL CALL = TWO TRADES ...
INSTEAD OF THAT JUST SELL A NAKED PUT = SINGLE TRADE AND LESS RISKIER THAN COVERED CALL..

Kindman,

Read my post again. already replied ur queries.

Naked put writing means limited profit and unlimited losses.

But I am wondering about ur silliness. The kindman I was knowing its not u. Tell me frankly whether some other person is using ur id? may be ur friend brite or ur little sister ?

hmmm

 

[kindman]

May be i am wrong...
I said earlier i am just sharing my views...
And its fully based on trading....

This time i will make my que small

covered call vs selling naked puts which is profitable?

I ask always silly ques ...

 

[kindman]

1>covered call = buy future + sell call

2> naked put sell = simply sell put

mr dev is saying selling naked put = unlimited loss ... That all knows

my que was
covred call vs selling naked put
-----------------------------------------
which is more profitable and why?
This que is for all....

Anyone can answer.....

 

[pkusingh]

Kindman,

Read my post again. already replied ur queries.

Naked put writing means limited profit and unlimited losses.

But I am wondering about ur silliness. The kindman I was knowing its not u. Tell me frankly whether some other person is using ur id? may be ur friend brite or ur little sister ?

hmmm

Naked put writing means limited profit and unlimited losses.

Naked put:
Maximum loss = (Strike Price - Premium Value) x Number of Contracts. But Its too high so u can say unlimited loss.
Maximum profit =Premium Value x Number of Contracts
But this is exactly the same case with covered call.

covered call
Maximum loss=(CMP - Premium Value of the call you sold ) x Number of Contracts
Maximum profit=(Strike Price-CMP+Premium Value of the call you sold )x Number of Contracts

Yor were wondering about Kindman silliness...Now I am wondering ur silliness.
The covered call and the naked put are basically the same thing.These two strategies share the same shape of risk profile,the danger with both these strategies is if the stock plummets.
The bottom line is that short put is very much a high-maintenance but cheaper trade compared to an equivalent covered call.
But I trade covered call compare to naked put because the simple reason that I actually own the stock in the covered call case.

 

[trader.trends]

1>covered call = buy future + sell call

2> naked put sell = simply sell put

mr dev is saying selling naked put = unlimited loss ... That all knows

my que was
covred call vs selling naked put
-----------------------------------------
which is more profitable and why?
This que is for all....

Anyone can answer.....

The question of which is more profitable can only be decided when we square it off at a particular point of time or at expiry.

The more important part that Dev addressed is the risk factor. Let me illustrate that with an example.

Nifty is trading at 4900 and the 4900CE and 4900PE are trading at 145 each. If we buy NF at 4900 and sell 4900CE on the downside we are protected till 4755. If NF ends anywhere between 4755 and 4900 we do not suffer a loss. On the upside our profits are limited to 145 no matter where Nifty ends above 4900 at expiry. This strategy also gives time for you to change depending on the mkt conditions. You have time till 4755 is reached to alter your setup.

Whereas suppose you sell 4900PE what is your protection? Your max profit like in the previous case is 145 is NF ends above 4900. Whereas you have no protection on the downside. If NF drops to 4755 within the next couple of days you are already staring at a loss as the 4900PE will be worth at least 200 or more. The loss begins if NF starts dropping below 4900 after your purchase. The risk also varies depending on how far we are from expiry. The upside in both case is 145.

While selling futures and options as stand-alone or in combination, keeping an eye on profits is important, keeping both the eyes on risk is critical to survival.

 

[pkusingh]

1>covered call = buy future + sell call

2> naked put sell = simply sell put

mr dev is saying selling naked put = unlimited loss ... That all knows

my que was
covred call vs selling naked put
-----------------------------------------
which is more profitable and why?
This que is for all....

Anyone can answer.....

Naked put = trade with leverage
Covered call =trade without leverage.

so what do you think leverage is good or bad? Otherwise they same.

I don't like leverage so I vote and trade covered call.

 

[pkusingh]

The question of which is more profitable can only be decided when we square it off at a particular point of time or at expiry.

The more important part that Dev addressed is the risk factor. Let me illustrate that with an example.

Nifty is trading at 4900 and the 4900CE and 4900PE are trading at 145 each. If we buy NF at 4900 and sell 4900CE on the downside we are protected till 4755. If NF ends anywhere between 4755 and 4900 we do not suffer a loss. On the upside our profits are limited to 145 no matter where Nifty ends above 4900 at expiry. This strategy also gives time for you to change depending on the mkt conditions. You have time till 4755 is reached to alter your setup.

Whereas suppose you sell 4900PE what is your protection? Your max profit like in the previous case is 145 is NF ends above 4900. Whereas you have no protection on the downside. If NF drops to 4755 within the next couple of days you are already staring at a loss as the 4900PE will be worth at least 200 or more. The loss begins if NF starts dropping below 4900 after your purchase.

While selling futures and options as stand-alone or in combination, keeping an eye on profits is important, keeping both the eyes on risk is critical to survival.

If NF drops to 4755 within the next couple of days you are already staring at a loss as the 4900PE will be worth at least 200 or more. .

I should say it’s very funny and completely bullshit. I recommend you to learn basic option pricing.

if nifty drops 145 pt in 2 days, your loss will be around 90-100.
Almost same with covered call.

 

[kindman]

Nifty is trading at 4900 and the 4900CE and 4900PE are trading at 145 each.

1 we buy NF at 4900 and sell 4900CE on the downside we are protected till 4755 =
YOU ARE CORRECT AND PROFIT AT 4755 = ZERO DONT FORGET IT
(BEZ UR LOSING AT FUTURE SIDE)

BUT WHAT ABOUT BELOW 4755 LEVEL??? UNLIMITED LOSS ON FUTURE IS IT?? WHY U FORGOT THAT???
---------------------------------------------------------

Whereas suppose you sell 4900PE @ 145 what is your protection? =PREMIUM IT SELF IS PROTECTION....

AND MAX PROFIT = 145 AND TRADE IS SAFE TILL 4755

BELOW 4755 BOTH COVRED CALL AND NAKED PUT LOSES ....

BOTH ARE SAME// BUT IN COVERED CALL WE TAKE TWO TRADES ..AND EATING BROKERS..... AND NEEDS MORE MONEY (NOVICE DO THIS STRATEGY)

SELLING PUT = SINGLE TRADE AND LESS PREMIUM AND BETTER COMPARED TO COVERED CALL///