Advanced Nifty Option Strategies

[Smart_trade]

http://i46.tinypic.com/f9nq4z.png

At the moment we are still in profit. Just check the 5600 put and the 5900 call, add the value from both together and discount the entry price and you will have the actual profit.

Until now, the trade was easy to handle. But it will not be all the times like that. It will be like that as long as market stays between our break even points. They are around 5600 and 5900. Check it with your option Oracle software.

At the moment one options get's itm, we have to act. If market moves further down, the 5600 put could get in the money and then we are in danger.

Over the weekend, time decay will be again in our favor.

As there was never any comment about any stop loss in this trade in this thread: How would you set any stop loss (put side and call side) for this strategy. I do not ask for the exact levels, just for ideas how you would do it?

Good trading

DanPickUp

When one leg goes in the money, we can scale down in the strike price of the other leg. So suppose the market goes down and 5600 put becomes ITM, we can cover 5900 call for say 15 points and sell 5800 call or even 5700 call to make the position delta neutral. But this mending has its own linitations in my view.

For weekends, instead of keeping the nacked position open, do you suggest buying deep Out of the money puts ? Just to save us from sudden crash due to some bad news ?

Smart_trade

 

[DanPickUp]

Dear ST

I am unclear about certain rules in India.

Can you buy and sell futures and options on Saturday?

This is not possible in the USA.

I can trade Globex market, but I not can trade when market is closed and market is closed over the weekend.

DanPickUp

 

[Smart_trade]

Dear ST

I am unclear about certain rules in India.

Can you buy and sell futures and options on Saturday?

This is not possible in the USA.

I can trade Globex market, but I not can trade when market is closed and market is closed over the weekend.

DanPickUp

Saturday and Sunday Indian markets are closed so we cannot buy futures or options contracts.

ST

 

[summasumma]

http://i46.tinypic.com/f9nq4z.png

At the moment we are still in profit. Just check the 5600 put and the 5900 call, add the value from both together and discount the entry price and you will have the actual profit.

Until now, the trade was easy to handle. But it will not be all the times like that. It will be like that as long as market stays between our break even points. They are around 5600 and 5900. Check it with your option Oracle software.

At the moment one options get's itm, we have to act. If market moves further down, the 5600 put could get in the money and then we are in danger.

Over the weekend, time decay will be again in our favor.

As there was never any comment about any stop loss in this trade in this thread: How would you set any stop loss (put side and call side) for this strategy. I do not ask for the exact levels, just for ideas how you would do it?

Good trading

DanPickUp

How abt doing the following in-place of stop-loss? Please correct me if im wrong.

When one of the leg become ITM, we can shift of short strangle range the range based on the CMP of nifty at that time.(rollover)

for ex,
when 5600 become ITM(nifty@5599), we close both legs with some profit from 5900 call and loss in 5600 put. Now rollover the short-strangle to 5400put/5700call and try to collect those premium to recover loss or even end of in some profit when nifty close within this range.

Ofcourse the negative side of it is that when market goes sharply in one direction(down in this example) will result in more loss.

So this method should be considered when you expect market in rangebound.

 

[DanPickUp]

How abt doing the following in-place of stop-loss? Please correct me if im wrong.

When one of the leg become ITM, we can shift of short strangle range the range based on the CMP of nifty at that time.(rollover)

for ex,
when 5600 become ITM(nifty@5599), we close both legs with some profit from 5900 call and loss in 5600 put. Now rollover the short-strangle to 5400put/5700call and try to collect those premium to recover loss or even end of in some profit when nifty close within this range.

Ofcourse the negative side of it is that when market goes sharply in one direction(down in this example) will result in more loss.

So this method should be considered when you expect market in rangebound.

But this is a roll over and no stop loss.

 

[DanPickUp]

When one leg goes in the money, we can scale down in the strike price of the other leg. So suppose the market goes down and 5600 put becomes ITM, we can cover 5900 call for say 15 points and sell 5800 call or even 5700 call to make the position delta neutral. But this mending has its own linitations in my view.

For weekends, instead of keeping the nacked position open, do you suggest buying deep Out of the money puts ? Just to save us from sudden crash due to some bad news ?

Smart_trade

Dear ST

As you mentioned right and you are the first who mention it: Such a trade has to be hedge over the weekend. As nobody asked, I was waiting for such a comment as I was wondering why the question not comes up.

Now how to hedge? Depending on the risk we want to keep or to get ride of, there are different ways to do so.

Most conservative way to hedge: We can initiate on each side a credit spread by buying the Nov 6000 CE and buy buying the Nov 5500 PE. In that way, our loss will be limited what ever market does over the weekend.

An other way to hedge is to buy the Nov 5500 PE and to buy the 6100 CE or even further out of the money. Why this way? Risk on the downside is quit high at the moment. By buying the Nov 5500 PE, this risk on that side is perfectly managed. As the risk on the upper side is not as big as on the down side, a cheap insurance can do the job.

A more risky approach is to buy only the Nov 5500 put to be hedged on the downside, as the risk at the moment is higher there, and to keep the Noc 5900 CE naked open.

An other way to hedge the position on the down side is to initiate a calendar spread by buying the Dec 5300 PE. That would expand our range on the down side.

Just a few ideas how to hedge such a position over the weekend.

Good trading

DanPickUp

Edit: Stop loss question is still open

 

[DanPickUp]

How abt doing the following in-place of stop-loss? Please correct me if im wrong.

When one of the leg become ITM, we can shift of short strangle range the range based on the CMP of nifty at that time.(rollover)

for ex,
when 5600 become ITM(nifty@5599), we close both legs with some profit from 5900 call and loss in 5600 put. Now rollover the short-strangle to 5400put/5700call and try to collect those premium to recover loss or even end of in some profit when nifty close within this range.

Ofcourse the negative side of it is that when market goes sharply in one direction(down in this example) will result in more loss.

So this method should be considered when you expect market in rangebound.

Dear Summasumma

A good way to be in control of the trade.

What is not necessary needed is to close the call side. You could keep that and expand the range on the downside by just rolling that leg more down.

You even can use ideas from the above post to be in control of the situation.

Good trading

DanPickUp

 

[summasumma]

Stop loss question is still open

ST suggested one way to keep SL in previous page and im just reprinting it here for reference:
"We have collected 42.45 + 42.00 = 82.45 points as premium. The moment the market trends and the premium of any one leg goes to 82.45, that is our stoploss. So suppose the market goes down and at some point 5600 put starts quoting 82.45 or say 83 , we liquidate both the legs and 5900 call that time may be quoting 20 points...that plus brokerage and taxes is our loss."

Other way for keeping SL can be @ following Nifty value:
(strike price - collected premium) for 5600PE short side = 5516
(strike price + collected premium) for 5900CE short side = 5984

Little conservative SL can be:
(strike price - collected premium for 5600PE leg alone) = 5558
(strike price + collected premium for 5900CE leg alone) = 5942

 

[Option.Trader]

Dear ST

As you mentioned right and you are the first who mention it: Such a trade has to be hedge over the weekend. As nobody asked, I was waiting for such a comment as I was wondering why the question not comes up.

Now how to hedge? Depending on the risk we want to keep or to get ride of, there are different ways to do so.

Most conservative way to hedge: We can initiate on each side a credit spread by buying the Nov 6000 CE and buy buying the Nov 5500 PE. In that way, our loss will be limited what ever market does over the weekend.

An other way to hedge is to buy the Nov 5500 PE and to buy the 6100 CE or even further out of the money. Why this way? Risk on the downside is quit high at the moment. By buying the Nov 5500 PE, this risk on that side is perfectly managed. As the risk on the upper side is not as big as on the down side, a cheap insurance can do the job.

A more risky approach is to buy only the Nov 5500 put to be hedged on the downside, as the risk at the moment is higher there, and to keep the Noc 5900 CE naked open.

An other way to hedge the position on the down side is to initiate a calendar spread by buying the Dec 5300 PE. That would expand our range on the down side.

Just a few ideas how to hedge such a position over the weekend.

Good trading

DanPickUp

Edit: Stop loss question is still open

I wonder after doing so many manipulations, is our end goal still to make some profits or is the real meaning of Delta neutral to mean no profit/no loss
I know these complex spreads have some value in them.. but when it becomes too complex to trade, it looses its value... I still believe in KISS .. Keep it Simple Sir.. but thats my 2 cents... condors, butterflies, strangles, straddles are still exotic terms for me

 

[DanPickUp]

I wonder after doing so many manipulations, is our end goal still to make some profits or is the real meaning of Delta neutral to mean no profit/no loss
I know these complex spreads have some value in them.. but when it becomes too complex to trade, it looses its value... I still believe in KISS .. Keep it Simple Sir.. but thats my 2 cents... condors, butterflies, strangles, straddles are still exotic terms for me

Did you ever hear about: The road less traveled? (By Paul Forchone)