Advantage high vix

gmt900

Well-Known Member
#1
VIX spiked up by 8% yesterday. It may spike up further next week.

One may use high VIX for trading nifty options.

Current nifty spot level is 6700. 10 % upmove will take it to 7370. 10% downmove will take it to 6030.

If one sells May 7500 CE for 31.1 and 6000PE for 38.4, the trade would be delta neutral.

Assuming margin of 1,00,000 for two lots, inflow would be 6,900 or 6.9%.

With 19 trading sessions to go, if nifty expires between 6000 and 7500, one can make 6.9% in less than four weeks.


Upper and lower BEPs would be 7570 and 5930 respectively.

I think this would be fairly safe trade for a conservative trader.
 
#2
VIX spiked up by 8% yesterday. It may spike up further next week.

One may use high VIX for trading nifty options.

Current nifty spot level is 6700. 10 % upmove will take it to 7370. 10% downmove will take it to 6030.

If one sells May 7500 CE for 31.1 and 6000PE for 38.4, the trade would be delta neutral.

Assuming margin of 1,00,000 for two lots, inflow would be 6,900 or 6.9%.

With 19 trading sessions to go, if nifty expires between 6000 and 7500, one can make 6.9% in less than four weeks.


Upper and lower BEPs would be 7570 and 5930 respectively.

I think this would be fairly safe trade for a conservative trader.
If you think so, why don't you implement it on Monday and test it? Do you have a safety plan in your backhand in case it is not so fairly safe? Good luck and take care
 
#3
VIX spiked up by 8% yesterday. It may spike up further next week.

One may use high VIX for trading nifty options.

Current nifty spot level is 6700. 10 % upmove will take it to 7370. 10% downmove will take it to 6030.

If one sells May 7500 CE for 31.1 and 6000PE for 38.4, the trade would be delta neutral.

Assuming margin of 1,00,000 for two lots, inflow would be 6,900 or 6.9%.

With 19 trading sessions to go, if nifty expires between 6000 and 7500, one can make 6.9% in less than four weeks.



Upper and lower BEPs would be 7570 and 5930 respectively.

I think this would be fairly safe trade for a conservative trader.
:confused: :confused:

How come the inflow is 6900 for 69.5 Rs. ?? Shouldn't it be 3450 ?? Or are you assuming 2 lots each i.e. total of 4 lots ?
 

gmt900

Well-Known Member
#5
If you think so, why don't you implement it on Monday and test it? Do you have a safety plan in your backhand in case it is not so fairly safe? Good luck and take care
I might implement on Monday or wait to see how VIX is shaping up.

I may try to keep the trade delta neutral. If VIX drops sufficiently, I may buy otm call and put options to hedge.
 

TradeOptions

Well-Known Member
#6
,

Yes two lots each of call and put.
I have tried to plot the Profit and Loss graphs for this trade, please correct me if made some mistake in entering the details.

Short Call



Short Put
 
#8
VIX spiked up by 8% yesterday. It may spike up further next week.

One may use high VIX for trading nifty options.

Current nifty spot level is 6700. 10 % upmove will take it to 7370. 10% downmove will take it to 6030.

If one sells May 7500 CE for 31.1 and 6000PE for 38.4, the trade would be delta neutral.

Assuming margin of 1,00,000 for two lots, inflow would be 6,900 or 6.9%.

With 19 trading sessions to go, if nifty expires between 6000 and 7500, one can make 6.9% in less than four weeks.


Upper and lower BEPs would be 7570 and 5930 respectively.

I think this would be fairly safe trade for a conservative trader.
What if market moves 15% on either side?
 

gmt900

Well-Known Member
#9
What if market moves 15% on either side?
15 % would be 7700/5000.

If one buys 8000CE @ 7.5 and 5500PE @ 5.9, max profit would reduce to 5610.

Max loss would be about 44,000 at 5000 and 15,000 at 7700.

So the question boils down to guessing the maximum swing possible.

May be the R/R ratio is unfavorable and one should not take the trade.:confused: