Buy FUT Sell CALL

#1
From last two weeks I have been doing this... not a new idea really but here it is....

What I am doing is ... Select one /two Nifty stocks which are likely to go up at least moderately during the week (preferably from top 10 of Nifty). On Mon buy FUT and sell ITM call and then Square up on Thu/Fri.

Last two weeks I had good success with ITC and ONGC. Investment in each case on Zerodha is Rs. 1.25 lacs in such pair. Made a profit of about 4 k in a week in each counter. Huge RoI of 3 % per week. (I was amazed to see the erosion in CA values so early in the month).

Here is a live example from this week. On Mon 09 OCT around 9:50 am bought HDFC Ltd FUT at 1743 and sold 1740 CA at 25. (ITM call sold so as max risk cover although it means limited upside). Today (Tue) this CA has closed at same price but FUT is already in profit of Rs. 5/-. Investment in HDFC is 1.6 lacs so my target is 5 k .... lot size is 500 so profit of Rs 10 expected (already in profit of Rs 5). Hoping to SQ up on Thu.

Before I start jumping in joy, I want to know two things --

1. To boost my confidence I want to know if any trader here is already doing this from one year or so. If yes, then what is the RoI ?

2. How to handle the risk scene (case where underlying goes down sharply in a day).

Thanks in advance
pos_trader
 

Nikhil Dogra

Well-Known Member
#2
Why not write a Put option instead of trading two legs of a position ? It will
  • Save on brokerage , exchange fee costs & it will be more efficient use of capital
  • +Future-Call is the same position as -Put (Short Put)

+Future synthetically is = +Call-Put SO +Future-Call --> +Call-Put-Call ---> -Put or Short Put :)


What you are trading is "synthetic put" or Buy Write/Covered Call Slightly Modified i.e use of stock futures instead of cash equity.
 
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SarangSood

Well-Known Member
#3
Why not write a Put option instead of trading two legs of a position ? It will
  • Save on brokerage , exchange fee costs & it will be more efficient use of capital
  • +Future-Call is the same position as -Put (Short Put)

+Future synthetically is = +Call-Put SO +Future-Call --> +Call-Put-Call ---> -Put or Short Put :)


What you are trading is "synthetic put" or Buy Write/Covered Call Slightly Modified i.e use of stock futures instead of cash equity.
By just writing a put option his delta will be open ie he will be playing only one side and that is up or total dullness. By buying future and selling cal he has his delta covered (not 100%) in both upside and downside. And of course if the stock doesn't go anywhere the cal will lose it's premium.

I do that in nifty futures but you have to be an active trader to follow this strategy as you have to work continuously to cover your delta. For eg if the future falls you might have to sell more cals.

Sent from my SM-N920G using Tapatalk
 
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#4
By just writing a put option his delta will be open ie he will be playing only one side and that is up or total dullness. By buying future and selling cal he has his delta covered (not 100%) in both upside and downside. And of course if the stock doesn't go anywhere the cal will lose it's premium.

I do that in nifty futures but you have to be an active trader to follow this strategy as you have to work continuously to cover your delta. For eg if the future falls you might have to sell more cals.

Sent from my SM-N920G using Tapatalk
@SarangSood - I have this question ...lets say I sold a stock call option 2 week before expiry and against my view ..stock is going up and up ...and it looks like it will be above my strike price on expiry ...so can I buy future just a day before or on expiry day (because I don't have that stock in demat ) ...and will it net off the position ? what will be my loss if I am doing that? what I am missing here?