Nifty Futures buy and do call write of same strike

A

agrawalsanjay29

New Member
#1
#1
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.
 
R

rajsingh

Active Member
#3
#3
agrawalsanjay29 said:
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.
Click to expand...
Covered call is a bullish to neutral market strategy. Do some backtesting pls.

Cheers
 
R

rkkarnani

Well-Known Member
#5
#5
agrawalsanjay29 said:
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.
Click to expand...
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.
 
T

trader.trends

Well-Known Member
#6
#6
Maximum Profit = 150-20 =130/- if Mkt ends above 5500.
If it ends below 5500, less profits (deduct closing from 5500). At 5400 Profit is only 30/- (130-100)
Break even = 5370
Loss below 5370.
Max Loss at 5200 = 170/-
For a max reward of 130/- max loss is 170/-. Not worth it unless you can be very sure mkt is going to close above 5500. When we are very sure, then mkt gives a a nasty surprise.
 
A

agrawalsanjay29

New Member
#7
#7
rkkarnani said:
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.
Click to expand...
yes so net deficit is 115 points here and we need to do again call write at current nifty levels and when nifty goes up we can recover this 115 points easily. if nifty again goes down. we need to repeat the process. this loss was due to nifty fall continuing.and also time is involved here. on expiry there is chance of profit if nifty recovers again.
 
A

AW10

Well-Known Member
#10
#10
rkkarnani said:
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.
Click to expand...
Nice analysis and perfect reply RKKarnani.
All option strategy work when market conditions are right. This strategy will certainly work when mkt remains between values as given by Trader.trends. But will fail in if the market falls.

In bullish market, this strategy will give limited returns.
Do not overlook the fact of increasing M2M requirement on sold call option, when nifty goes up. You will need deep account to take care of margin.

In sideway market, or mildely bullish market, this is good strategy.
bottom line, How do we assess the current market situation.. And if we can assess the market conditions, then why not use other better rewarding strategies instead of limited reward ones.

On the +ive side, I like that it is trying to sell ATM option (which has got max time value), and that too is of far month (i.e. even more time value). This gives wider breakeven points.

Sharing my views.
happy trading.
 
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