Delta Neutral Strategy (Long Nifty @ Long Puts)

stockfreak · #91 12th September 2005, 11:07 PM

hello,

A very complicated thread, can anyone plz tell me what can i buy in futures tommorow.

thanks

SF

stockfreak · #92 12th September 2005, 11:09 PM

or options

chheda · #93 13th September 2005, 12:38 AM

Quote:

Originally Posted by wastej@cinci.rr.com

Hi Harish,

You are getting even better than me.

I must admit mistake on my part. I meant 2480 and I typed 2380 in my last suggestion to you for the sale of 200 Nifty future Calls. Any way I wanted every one to know this fact, as this was the right way of handling the trade.

I still can steer the trade you executed, though it will make a difference of at least 5 to 8 thousand rupees of profit.

I will post the direction from here soon.

Keep coming back.

Regards,

Wastej

Hi WasteJ ,

Thanks for your complement . If we short Nifty call SP 2480 then calculation may be as follow :

Plz guide me which trade I continue from here , if u wish i can continue both the trades separately from here

Trade Today :
Sold Nifty Call 200 SP 2480 At close Rs. 33.85
(As market was looking strong from morning so i sold Nifty Call at close rather then at Nifty Fut price 2468.00)

To Day's prices (Name : open - high - low - LTP )
Nifty Fut : 2453.00 - 2474.00 - 2452.15 - 2473.10
Nifty Put SP 2340 : No Trade (prev. close 9)
Nifty Put SP 2360 : 8.05 - 10.00 - 8.05 - 10.00
Nifty Put SP 2380 : 12.50 - 13.70 - 10.00 - 13.00
Nifty Call SP 2480 : 20.00 - 36.00 - 20.00 - 33.85
Nifty Call SP 2460: 35.00 - 45.00 - 33.50 - 45.00

Profit / Loss calc.

Long Nifty Fut
Closed out profit of 32000.00
Plus open profit 400 * (2473.10 - 2347) = 50440.00
Total Profit (closed) 32000.00 + (open) 50440.00 = 82440.00

Long Nifty Put SP 2340
2000 * (9 - 46) = (Loss) 74000.00

Short Nifty Put SP 2360
200 * (26 - 10) = 3200.00

Short Nifty Put SP 2380
300 * (21 - 13.00) = 2400.00

Short Nifty call SP 2480
200 * (33.85 - 33.85) = 0.00

Short Nifty call SP 2460
200 * (29 - 45.00) = (Loss) 3200.00

Total Profit = 82440.00 - 74000.00 + 3200.00 + 2400.00 + 0.00 - 3200.00 = 10840.00

Open Positions :
Long Nifty Future : 400
Long Put SP 2340 : 2000
Short Put SP 2360 : 200
Short Put SP 2380 : 300
Short Call SP 2480: 200
Short Call sp 2460: 200

Paid / Collected Primium in options

Long Put SP 2340 : 2000 @ 46 : - 92000
Short Put SP 2360 : 200 @ 26 : + 5200
Short Put SP 2380 : 300 @ 21 : + 6300
Short Call SP 2380: 200 @ 33.85 : + 6770
Short Call sp 2460: 200 @ 29 : + 5800
Total : - 67930

Thanks & Regards ,

Harish Chheda

wastej@cinci.rr.com · #94 13th September 2005, 09:48 AM

Hi Harish,

Thanks for the offer, since this trade is all about adjustment therefore, it will be lot more fun to carry on with both the trades, this way we will be able to learn as how to steer the trade even when major mistakes have been made along the way.

At this point, all we can do is to play with the put side of the trade as we are completely sold out on the call side because we are fully committed on the nifty futures and have collected the premium.

While the Nifty is still in the bullish mode, it does not offer us much opportunity to do much on the put side, as the puts are not offering good premium. The best, at this stage is to wait until Nifty is ready to correct and once this process starts, we will be able to collect premium on the put side of the trade and we will start selling puts to the extent of 1500.

I will suggest you to start selling put on every dip nifty faces, starting from SP2350, 2360,2370,2380 and so on. At each strike price we should sell no more than 200 puts. Please try to get the best premium you can on every dip of the Nifty. If nifty keeps going up than no action should be taken at today's trading.

Regards,

Wastej

chheda · #95 13th September 2005, 11:36 AM

Quote:

Originally Posted by wastej@cinci.rr.com

Hi Harish,

Thanks for the offer, since this trade is all about adjustment therefore, it will be lot more fun to carry on with both the trades, this way we will be able to learn as how to steer the trade even when major mistakes have been made along the way.

At this point, all we can do is to play with the put side of the trade as we are completely sold out on the call side because we are fully committed on the nifty futures and have collected the premium.

While the Nifty is still in the bullish mode, it does not offer us much opportunity to do much on the put side, as the puts are not offering good premium. The best, at this stage is to wait until Nifty is ready to correct and once this process starts, we will be able to collect premium on the put side of the trade and we will start selling puts to the extent of 1500.

I will suggest you to start selling put on every dip nifty faces, starting from SP2350, 2360,2370,2380 and so on. At each strike price we should sell no more than 200 puts. Please try to get the best premium you can on every dip of the Nifty. If nifty keeps going up than no action should be taken at today's trading.

Regards,

Wastej

Hi WasteJ ,

U mean
To sell 200 put SP 2350 when Nifty Fut price 2453 (prev. close 2473 - 20)
To sell 200 put SP 2360 when Nifty Fut price 2433 (prev. close 2473 - 40)
To sell 200 Put SP 2370 when Nifty Fut price 2413 (prev. close 2473 - 60).....
................

Plz explain

Regards ,

Harish Chheda

wastej@cinci.rr.com · #96 13th September 2005, 05:45 PM

Hi Harish,

I am sorry I couldn’t reply you earlier.

The whole idea of the remaining trade is now to make money on the put side of the trade, as we can't do any thing on the call side (without assuming risk). More over Nifty has been having a bull run for past ten days or so. It is about time that it will correct. Markets do surprising things, as it has done in this Bull Run, which seems not getting even pause what to talk about the correction.

You have 1500 put options, which are non- committed in your hand, all of these will become zero on the expiry day, which is few days away. Our attempt should be to either sell these fifteen hundred put options at what ever price we can sell, by doing this it will add to our profits and we can consider that the trade is over. (On the call side long future positions will take care of the short call options and if nifty corrects than the short calls will expire worthless thus adding to our profits.)

On the other hand we can be more aggressive and start selling puts which are two to six strikes about the puts, which we hold in our hands i.e., 2340. By doing this we will still remain below 100 points from where the nifty is now. No doubt we will be taking extra risk but at the same time we will have more potential of making extra profits. Every trader has different risk tolerance, so I leave it up to you how you generate profits from here. One more option we have is to wait for the market to correct and then sell the put options, we have to keep in mind the time being lost is going to reduce the value of our puts further. What ever action you take, please do post for others to see. I will keep offering my comments. If you feel that you have some more questions, please do not hesitate to post them here and I will be glad to answer the same. This is true for all readers as well.

Good Luck,

Wastej

chheda · #97 13th September 2005, 07:50 PM

Quote:

Originally Posted by wastej@cinci.rr.com

Hi Harish,

I am sorry I couldn’t reply you earlier.

The whole idea of the remaining trade is now to make money on the put side of the trade, as we can't do any thing on the call side (without assuming risk). More over Nifty has been having a bull run for past ten days or so. It is about time that it will correct. Markets do surprising things, as it has done in this Bull Run, which seems not getting even pause what to talk about the correction.

You have 1500 put options, which are non- committed in your hand, all of these will become zero on the expiry day, which is few days away. Our attempt should be to either sell these fifteen hundred put options at what ever price we can sell, by doing this it will add to our profits and we can consider that the trade is over. (On the call side long future positions will take care of the short call options and if nifty corrects than the short calls will expire worthless thus adding to our profits.)

On the other hand we can be more aggressive and start selling puts which are two to six strikes about the puts, which we hold in our hands i.e., 2340. By doing this we will still remain below 100 points from where the nifty is now. No doubt we will be taking extra risk but at the same time we will have more potential of making extra profits. Every trader has different risk tolerance, so I leave it up to you how you generate profits from here. One more option we have is to wait for the market to correct and then sell the put options, we have to keep in mind the time being lost is going to reduce the value of our puts further. What ever action you take, please do post for others to see. I will keep offering my comments. If you feel that you have some more questions, please do not hesitate to post them here and I will be glad to answer the same. This is true for all readers as well.

Good Luck,

Wastej

Hi WasteJ ,

Thanks for reply .

Trade 2380 (i.e Trade where we Sold Nifty call option SP 2380 on 12th Sep. )

Trade Today :
No Trade (as market is still rising we will not trade today and wait for down move to short Nifty

put)

To Day's prices (Name : open - high - low - LTP )
Nifty Fut : 2465.65 - 2489.00 - 2465.65 - 2486.30
Nifty Put SP 2340 : 4.50 - 4.50 - 4.50 - 4.50
Nifty Put SP 2360 : No Trade (prev. close 7)
Nifty Put SP 2380 : 10.00 - 10.00 - 10.00 - 10.00
Nifty Call SP 2380 : No Trade (prev. close 104.50)
Nifty Call SP 2460: 41.00 - 52.00 - 40.30 - 51.00

Profit / Loss calc.

Long Nifty Fut
Closed out profit of 32000.00
Plus open profit 400 * (2486.30 - 2347) = 55720.00
Total Profit (closed) 32000.00 + (open) 55720.00 = 87720.00

Long Nifty Put SP 2340
2000 * (4.50 - 46.00) = (Loss) 83000.00

Short Nifty Put SP 2360
200 * (26 - 7.00) = 3800.00

Short Nifty Put SP 2380
300 * (21 - 10.00) = 3300.00

Short Nifty call SP 2380
200 * (104 - 104.50) = (Loss) 100.00

Short Nifty call SP 2460
200 * (29 - 51.00) = (Loss) 4400.00

Total Profit = 87720.00 - 83000.00 + 3800.00 + 3300.00 - 100.00 - 4400.00 = 7320.00

Open Positions :
Long Nifty Future : 400
Long Put SP 2340 : 2000
Short Put SP 2360 : 200
Short Put SP 2380 : 300
Short Call SP 2380: 200
Short Call sp 2460: 200

Paid / Collected Primium in options

Long Put SP 2340 : 2000@ 46 : - 92000
Short Put SP 2360 : 200 @ 26 : + 5200
Short Put SP 2380 : 300 @ 21 : + 6300
Short Call SP 2380 : 200 @104 : + 20800
Short Call sp 2460 : 200 @29 : + 5800
Total : - 53900

chheda · #98 13th September 2005, 07:51 PM

Part 2 :

Trade 2480 (i.e Trade where we Sold Nifty call option SP 2480 on 12th Sep. )

Trade Today :
No Trade (as market is still rising we will not trade today and wait for down move to short Nifty

put)

To Day's prices (Name : open - high - low - LTP )
Nifty Fut : 2465.65 - 2489.00 - 2465.65 - 2486.30
Nifty Put SP 2340 : 4.50 - 4.50 - 4.50 - 4.50
Nifty Put SP 2360 : No Trade (prev. close 7)
Nifty Put SP 2380 : 10.00 - 10.00 - 10.00 - 10.00
Nifty Call SP 2480 : 34.00 - 38.00 - 31.00 - 37.00
Nifty Call SP 2460: 41.00 - 52.00 - 40.30 - 51.00

Profit / Loss calc.

Long Nifty Fut
Closed out profit of 32000.00
Plus open profit 400 * (2486.30 - 2347) = 55720.00
Total Profit (closed) 32000.00 + (open) 55720.00 = 87720.00

Long Nifty Put SP 2340
2000 * (4.50 - 46.00) = (Loss) 83000.00

Short Nifty Put SP 2360
200 * (26 - 7.00) = 3800.00

Short Nifty Put SP 2380
300 * (21 - 10.00) = 3300.00

Short Nifty call SP 2480
200 * (33.85 - 37.00) = (Loss) 630.00

Short Nifty call SP 2460
200 * (29 - 51.00) = (Loss) 4400.00

Total Profit = 87720.00 - 83000.00 + 3800.00 + 3300.00 - 630.00 - 4400.00 = 6790.00

Open Positions :
Long Nifty Future : 400
Long Put SP 2340 : 2000
Short Put SP 2360 : 200
Short Put SP 2380 : 300
Short Call SP 2380: 200
Short Call sp 2460: 200

Paid / Collected Primium in options

Long Put SP 2340 : 2000 @ 46 : - 92000
Short Put SP 2360 : 200 @ 26 : + 5200
Short Put SP 2380 : 300 @ 21 : + 6300
Short Call SP 2480: 200 @ 33.85 : + 6770
Short Call sp 2460: 200 @ 29 : + 5800
Total : - 67930

Thanks & Regards

Harish Chheda

nautilus · #99 13th September 2005, 09:19 PM

Quote:

Originally Posted by nautilus

Hi Wastej:

Here are the updates on new positions.

Long 200 Sep Futures @ 2455.00
Could not sell 1000 Sep puts(sp2330)

Here is the p/l summary:

Closed out profits on Sep futures = Rs 67200

Open position valuations:
Long 200 Sep Futures (2477-2455) = Rs 4420
2000 Long Sep puts (sp2340) @46 = Not traded today so no settlement price today. Based on friday (9th sep) close(Rs9) the open loss would be Rs(74000)

400 short puts (sp 2350) =(12.50-7.70)x400 = Rs(1920)
200 short calls (sp 2480) =(21.55-33.85)x200= loss (Rs 2460)

Total = (67200+4420+1920-74000-2460) = Rs (2920) Loss

Open positions:

Long 200 Sep Futures@ 2455
Long 2000 Sep puts (sp 2340) @ 46
Short 200 Sep calls (sp 2480) @ 21.55
Short 400 Sep puts (sp 2350) @ 12.50

No execution on 1000 Sep Puts(sp 2330) - not traded

Regards
Nautilus

Hi Wastej:

I have made the corrections but we had closed out the previously taken long sep futures (2347) position @ 2450 - as per your instructions. Then I was asked to reopen a new sep long futures position at 2450 or better but the best price available after the opening was 2455 so our new 200 long position in sep futures is at 2455 and not 2347 as you mention.

Yes there was a typographical error inthe puts and calls.

Thanks once again

Nautilus

nautilus · #**100** 13th September 2005, 09:36 PM

Hi Wastej:

Here are the p/l calculations for today.

Closed out Profits on Long futures = Rs 67200

200 long futures @ 2455 = (2486-2455)x200 = Rs 6200
2000 long puts (sp2340) @46 = (4.5-46)x2000 = Rs (83000) loss
400 short puts (sp2350) @12.50=(12.5-5.35)x400 = Rs 2860
200 short calls (sp2480) @21.55=(37.40-21.55)x200= Rs (3170) loss

Total p/l = 67200+6200+2860-83000-3170 = Rs (9910) loss

Open positions:

200 long futures @ 2455
2000 long puts (sp2340) @46
400 short puts (sp2350) @12.50
200 short calls (sp2480) @21.55

You would find these are the right open positions based on your previous instructions at the correct prices.

Thanks and regards

Nautilus

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