Options help

#1
I need some help regarding straddle strategy.

Tata motors:

buy Tata motors 190 Dec 2011 PE: 7.5
buy Tata motors 190 Dec 2011 CE: 9

What should happen so that this strategy will be successful? I have not traded options b4 so read up a lot on it. However nothing beats practical experience. How much additional transaction based money will I have to pay besides brokerage in terms of mandatory taxes etc. Also read NCFM module on options trading however it has no information on how much money needed as margin money or the taxes and other charges to be paid on options

Please also suggest a good broker since my current broker charges 95 rs flat per lot as brokerage.
 

trader.trends

Well-Known Member
#2
I need some help regarding straddle strategy.

Tata motors:

buy Tata motors 190 Dec 2011 PE: 7.5
buy Tata motors 190 Dec 2011 CE: 9

What should happen so that this strategy will be successful? I have not traded options b4 so read up a lot on it. However nothing beats practical experience. How much additional transaction based money will I have to pay besides brokerage in terms of mandatory taxes etc. Also read NCFM module on options trading however it has no information on how much money needed as margin money or the taxes and other charges to be paid on options

Please also suggest a good broker since my current broker charges 95 rs flat per lot as brokerage.
The cost of the Straddle is 16.5. So your break even point is 206.5 on the upside and 173.5 on the downside. You will make profit only if it move beyond these BEP.
For Brokerage try Zerodha. They charge Rs 20/- per trade.
You need to pay the cost of all options upfront when buying them. No broker gives margins on that (lot size x option premium)
For trying of various option strategy payoff use free software Options Oracle from here:

http://www.samoasky.com/
 
#3
Thank you for the reply and the amazing software recommended. I had one more small query please. As I can see for this strategy to be profitable it requires a move of almost 9 to 10% in either up or down direction. Is it possible to search for straddle strategies where this swing % could be reduced as much as possible so as to enable a greater chance of profit. I do not know if this is possible and I am new to options so please forgive me if i have written something wrong.

I have also heard of R K Global charging 9 Rs per lot. But are they reliable and trustworthy.

Thanks again for the earlier reply.:thumb:
 
#4
Thank you for the reply and the amazing software recommended. I had one more small query please. As I can see for this strategy to be profitable it requires a move of almost 9 to 10% in either up or down direction. Is it possible to search for straddle strategies where this swing % could be reduced as much as possible so as to enable a greater chance of profit. I do not know if this is possible and I am new to options so please forgive me if i have written something wrong.

I have also heard of R K Global charging 9 Rs per lot. But are they reliable and trustworthy.

Thanks again for the earlier reply.:thumb:

go through this book 'The Bible of Options Strategies' by guy cohen for detailed description of different strategies...google it..you get pdf..
 

trader.trends

Well-Known Member
#6
Cani average my option price by buying the same option again????
You can always do it. But you should have a very sound reason for doing that. Averaging just for the sake of bringing the cost price down makes no sense as you will be throwing good money after bad.

One place you can average is when it comes near your SL. Suppose you bought an option say at 100/- and your stoploss is at 90. The price comes near 92 and seems to be holding, then averaging it there with the SL for the complete portion still at 90, may be worth it at times as the risk on the new buy is very small compared to the possible returns. Don't average it beyond the SL point you had in mind. SL is hit get out and look for the next trade.
 
#7
Hello,

Thanks for the great help. This is a great forum. I had another small question. For example I buy a Tata motors call option for strike price 220 for expiry of 23 Feb 2012. Now since the strike price is high, assume that the price just reaches 218 or so never reaching the strike price. But on 15 Feb it breaks out and reaches 235.

So now the option is in the money. Now since I have only 8 days to expiry, how do i square off or sell this option. Since close to expiry few people will buy it. Also if I wait till expiry there are high chances the stock may again go below 220 thus making the option out of the money.

This is a hypothetical case but I just want to understand the exit strategy in any case. Thanks for the help.
 
#8
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So now the option is in the money. Now since I have only 8 days to expiry, how do i square off or sell this option. Since close to expiry few people will buy it. Also if I wait till expiry there are high chances the stock may again go below 220 thus making the option out of the money.
This is a hypothetical case but I just want to understand the exit strategy in any case. Thanks for the help.
visit:

Code:
http://www.traderji.c0m/options/65309-option-types-nse-bse.html#post630008
I'm not sure (I've the same doubt), but I think there ain't no ''square off or sell this option or exit" while trading European style options (PE & CE).

You wait till day of final judgment - 23 Feb 2012
 

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