Expert Advice Needed - Naked Option Selling

Hi,

I need advice on how I can protect naked option selling in extreme conditions.

1. I tend to sell deep out of the money options on second last Thursday or day before that to give only 6 7 days till expiry.

2. I look for stocks that have rallied the month and are touching the resistance levels second or 3rd time. For eg. I sold Apollo tyres 245 calls at 1.5 only 1 lot. It was 230 when I sold.

3. Most of the times the option expires worthless. But sometimes like in todays case, apollo tyres is testing new heights. It can continue to gain or it can fall. That's a chance that I don't want to take.

Is there anything creative I can do at the moment with options right now so that I can be in profit on Thursday in whatever scenario.

I thought of purchasing 240 Call 1 lot. But it turned out that if the stock closes below 240, I will be in loss. If it closes above 245, I will be in profit. So that's my confusion. Open Interest on Apollo tyres 240 call suggests that it wont go beyond it.

But is there anyway, I can take this situation more in my control.

Simply Put, What could an expert option trader might have done as there can be gap up tomorrow because of the buildup today. How would an option trader turned this into a profitable trade.

You mean the position is trading at 6.45 and you originally sold it for 1.5?
So ur taking a loss of Inr 5 ?
and expiry is for 27-APR?

You mean the position is trading at 6.45 and you originally sold it for 1.5?
So ur taking a loss of Inr 5 ?
and expiry is for 27-APR?

I don't track Apollo Tyres so I can't give you a fix-it-all glue type answer.
Do you expect the price to go up and till what strike until Expiry?

Its at 3.4

But i dont want it to control me...

Point is how to control this situation

Buy deep in the money call

It has already rallied from 180 to 240...thats 30 percent this month...How can everyone say that huge upmovie. My expiry is April.

Max OI buildup is on 240 CE for now.

I am considering squaring off 243 CE at 3.5 and Selling 240 PE.

if I buy CE of 240 at CMP then also I will be having max pain if price remains at 245. Anywhere above 245 will be beneficial.

Selling 240 is high risk, hardly any OI and so close.
Then u be stuck making sure it expired above 240 , if stock retraces, u'd be in soup.

I'd rather sell two lots of 230.
IT has 2nd highest OI, but selling puts is risky, and using 2 lots which increases down side risk more but given the OI i'd bet on that.


I was going to suggest you buy a Future at say 243,
and hold it as long as its trading above it.
SL would be 243+overheads.
This has a Delta of 1 so u'd make money any which way.

Da's idea is cooler, bcos u'd need a bit less margin but it also has a delta of 1.

So a 5-10pt gap down etc could hurt u in both the Delta 1 hedge.

I think all depends on how it opens tomorrow.

Initially I had thought off a stoploss at 241. 241 got hit at 3:29. So now tomorrows opening will matter. I will square off if it drags further.

Its only 1 of my 10 trades. Rest are good. But since it happens to all 1 out of 10 trades, I wanted to know if it can be saved or turned around into profit somehow.

Please explain how everybody is seeing it getting more higher. I am not seeing it go more than 241 or 245 max.

1. 245 is huge resistance.
2. Already upmove is more than 30 35%. there has to ver short covering in last few days.
3. OI is max buildup on 240 CE.

So of all the 3 enlighten me where I am wrong and can realign.