Two way option trade on volatile stokcs: good or bad

yoogi · #21 14th August 2007, 09:36 AM

I depend on volatility of "Nifty Spot price", so that it moves favorable towards one side (put/call) without much loss in time.

ranj_2k · #22 14th August 2007, 09:49 AM

Dear Yoog,

As expected market should open with steep high. I would like to know outcome of your position.

Regards

Ranjeet

yoogi · #23 14th August 2007, 11:57 AM

I would have preferred a longer period, but lack of liquidity is upsetting the theory. So a lesson learned well in paper trading.

Given that the market remains flat since the trade started, I must have lost some money as of today. But so far no transaction happened on both those October options. Let us go to September options. 44 days left to expiry. Let us try to make profit before 40 days to expiry. (ie, within next 4 or 5 days).

OPT-NIFTY-27-Sep-2007-4400-CE for 138.45 (6922.50 rs)
OPT-NIFTY-27-Sep-2007-4200-PE for 141.10 (7055.00 rs)
As of 11:49:23 14-Aug-2007 and spot price for nifty is 4,368.70

Investment is 13977.50 without brokerage expenses.
we will earn only when a big move happens as early as possible.

yoogi · #24 14th August 2007, 03:42 PM

End of day last traded prices for the options.

OPT-NIFTY-27-Sep-2007-4200-PE 134.00
OPT-NIFTY-27-Sep-2007-4400-CE 150.00

Nifty spot: 4,375.00

We have a slight gain. Tomorrow one more day lapses and we will see both prices drop a little bit. But we have to see a big move which has not happened so far.

yoogi · #25 16th August 2007, 09:11 AM

Today market is expected to open deep in red, and my guess is below 4300, we can exit with profit.

yoogi · #26 16th August 2007, 10:54 AM

Let us close the positions now,

OPT-NIFTY-27-Sep-2007-4400-CE 90.50
OPT-NIFTY-27-Sep-2007-4200-PE 225.00

Nifty at 4,200.45 around 10:50

Profit 31.5 rs per nifty. or about 1575 rs.

Keeping the existing position for another day is unlikely to earn more profit as it could lead us closer to equilibrium level of 4300, with loss of valuable time.

if we want to continue to earn, we need to buy a 4100 put and 4300 call and wait for a bounce back or a cascading fall tomorrow. Either we can have some profit.

yoogi · #27 21st August 2007, 02:53 PM

Looks like mine is not an intresting strategy for people to track. No problem. Confident from my paper trade I am moving to actual trade. Today nifty falling by 100+ points.

I bought 4100 put and 4100 call when nifty is at 4080.

Entry prices.
OPT-NIFTY-27-Sep-2007-4100-CE 164.
OPT-NIFTY-27-Sep-2007-4100-PE 220.

when nifty breaks out of 4050-4150 range, I might gain some profit. Sooner the better.

We'll see.

loosingstreak · #28 22nd August 2007, 01:52 PM

I would definitely be interested in watching how you manage that straddle. Do keep posting how it progresses.

srikanth_kandalam · #29 22nd August 2007, 09:47 PM

Not sure how you can say anything- unless we know about what premiums were paid and what volatilites these were bought at ( IV's - I mean)

In general stradlles sound good- but it takes a whole lot of movement to make money. And the problem is if the market knows there is going to be a whole lot of movement- the IV will rocket- which basically increases the break even- when things return to normal ( let us say the put is the winning side) the puts will not be worth as much as IV will settle- and you will be lucky to eke out a profit with the transaction costs they charge!

xuketo · #30 25th August 2007, 02:50 PM

interesting thread.
Any pointers for further reading ?

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