Very Simple options strategy (Need Expert Views)

#1
Hey Guys!
Please let me know if this strategy can work out:

If the level of Nifty is 4500, take following actions:
1) Buy Nifty 5000 call
2) Buy Nifty 4000 put
The quantity of each option has to be the same

This way, when the market goes up, my call price increases, and I can sell it off, only to purchase call of a higher amount.
Similarly, when the market goes down, I can sell the put.
This is planned to be done over a frame of 1 month. For example, I will buy options with the expiry of August 2009, if the present date is July 29th.

I am a beginner in trading options.
I await expert views on this, and I am also open to any new strategies that may be recommended
 

AW10

Well-Known Member
#2
SG, this strategy is called as STRANGLE. so by buying 4000 put and 5000 call, u are buying a strangle. Problem with this type of strategy is that they have 1 leg is which
is guaranteed to be looser.. when another leg is guaranteed to be winner.. whichever direction market moves.

So most of the time, if mkt does move beyond the range (which is too wide), the effect of gain will be neutralised by the loss on other leg.

But there are time when this strategy helps. Will suggest to visit NR7 Setup thread of mine where I have mentioned how to use this direction neutral strategy to capture breakout and close it quickly..

otherwise time decay will keep eating part of both options everyday.

Happy Trading.
Please read more about
 
#3
Hey Guys!
Please let me know if this strategy can work out:

If the level of Nifty is 4500, take following actions:
1) Buy Nifty 5000 call
2) Buy Nifty 4000 put
The quantity of each option has to be the same

This way, when the market goes up, my call price increases, and I can sell it off, only to purchase call of a higher amount.
Similarly, when the market goes down, I can sell the put.
This is planned to be done over a frame of 1 month. For example, I will buy options with the expiry of August 2009, if the present date is July 29th.

I am a beginner in trading options.
I await expert views on this, and I am also open to any new strategies that may be recommended
Dear HM,

I am sorry to point it out to you that this strategy will be a looser because both the legs are deep out of money and the value of premium will not increase appreciably till the market goes 500 points and above in any direction .In most of the months,this strategy will have both legs expire worthless loosing the entire premium.

Unless there is a move of about 600-700 nifty points in any direction,this strategy will not make any money,,,,,,,

Sorry to have disapointed you but thought I must alert you on the pitfalls of this strategy.....

Best wishes,

Smart_trade
 
#4
But there are time when this strategy helps. Will suggest to visit NR7 Setup thread of mine where I have mentioned how to use this direction neutral strategy to capture breakout and close it quickly..
Could you please send the Link for NR7 setup thread
 

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