Delta Neutral Strategy (Long Nifty @ Long Puts)

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#1
Delta Neutral Strategy (Long Nifty & Long Puts)

As per my earlier commitment I am starting a trade on the Nifty future and going long with its puts.

Action: Buy 1000 Nifty Futures (29th September, 2005) @ 2347.00 (Closing Price) = 23,47,000.00

Buy 2000 Nifty SP2340 Puts (29th September, 2005) @ 46.00 (Closing Price) = 92,000.00


Total: 24,39,000.00


Margin requirement is only 10% or 5% (Please let me know which one is correct) In case it is 10% the investment is going to be 2,43,900.00 and if it is 5% then the requirement is going to be only 1,21,950.00.

For those this trade is too large, they can reduce the numbers to 400 futures of Nifty and 800 Puts. Keep in mind that the numbers are even.

I will keep posting development on this trade for the rest of the period till expiry of the future date i.e.,
29th September 2005. I will post only on days when the action will be required, for no action days nothing will be posted.

So keep coming back and see how the adjustments are made to the delta neutral trade.

Regards to you all the TRADERS.

wastej
 
#3
Hi Wastej
My broker is seeking 30% margin? What is the minimum quantity that can be entered into in this strategy?
Thanx in advance
 
#4
Hi SSM,

I think you need to change the broker. 30% margin is need for single stock futures and not for the index futures. Please check with him again and also visit the NSE web site and check the margin requirement there for indiex futures.

You can implement this strategy with 200 future contracts and 400 put options.

Regards,

Wastej
 
#5
Hi Wastej:

Although this is a delta neutral strategy, before you commenced on this trade did you have any bias on the direction of this trade (ie. market direction)?

Thanks

Nautilus
 
#6
Hi Nautilus,

The answer is no. If one has a bias at the beginning of the trade or one develops while the trade is in progress, one can adjust it that way. The adjustment is very simple and I will be more than happy to explain it to you separately. Please tell me the day you develop your bias, bullish or bearish.

Regards,

Wastej
 
#8
Thanks for a quick response. I will revert the day I develop the bias either bullish or bearish. Another quick question do you enter the trade at any particular time of the day eg. open, close etc. I also assume that both legs of the trades are exceuted simulatneously.

Thanks and regards

Nautilus
 
#9
One can leg in the trades. I always do that. Since I was going to post this trade on this forum, in all fairness I wanted to be very apparent so that every one could see, what is going on?

In my last delta neutral trade, I would have at least 25 to 50 percent more profits, if I had traded during the day instead of using closing prices of the day.

I am not worried about the profits; all I am trying is to explain for the benefit of all traders as how this strategy is implemented.

Wastej
 
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