GOOD PROFIT: Hedged nifty positions with straddle...

[linkon7]

Xaero,
I guess, you are looking for a career in capital market and research. You can try this site for further guidance. They conduct a 1 and 2 yr course and claim to provide 100% placement.

http://www.icofp.org/test/lendingpage/lendingpage.html?gclid=CJyxgej9vpsCFcIvpAodZm5-Aw

 

[AW10]

Xaero,

While linkon07 is giving u many good guidence, Let me put my 2 cents here.

I saw few words coming in your discussion. Here is how I will arrange them in proper hierarchy. With each level, u can keep exploding it further and get down to the details.
You can visualise as if house of MBA contains many rooms, when u enter finance room, you see few more smaller rooms and so on and so forth..

1) MBA - Finance / Marketing / HR / Sales / Economics / Statistics etc
2) Finance - Corproate Finance / Banking / Accountancy/ Investment / Company Analysis / Insurance etc
3) Banking - corporate banking / retail banking / wealth mgmt or HNI banking / Loan / Deposits etc
4) Investment - Capital Market / Fundamental analysis / Tech analysis / risk mgmt/ Trading / Investment instuments like stock, derivatives, forex, commodities etc

Hope this helps in getting bigger picture and taking right decisions.. Don't try to master everything. We got to choose our focus area and master that. It always helps to know the surrounding areas to get an edge.

(Above are some of the thoughts that came on top my head in 5 mins.. the list is not exhaustive but hope u get the idea of how to see the bigger picture and find your way out in this jungle).

All the best..

 

[amitroy75]

I am not very comfortable buying options unless it is only for intraday or when i am expecting a big move in one direction. simple logic here is that even if nifty is not moving against your desired direction, value of the option decreases with time and that's not good for profits.

lets do a case study, I am feel markets are overpriced and ahead of valuations. I expect a correction soon. so there are 2 ways i can play this, I can buy 4400 put at 85 or sell a 4800 call at 75. there are three scenario here, markets can rally to 4800 and beyond..., markets can correct below 4400 or market consolidates here in the range 4400 to 4700...

4400 put bought :
Unless 4315 is broken, i make no profit at all. my loss is fixed at 85 points
above 4400. Between 4315 to 4400, i make a lower loss.
Exit stratagy : none


4800 call sold :
I get to keep the premium i.e. 75 Rs, if 4800 isnt breached on the upside.
exit stratagy :In case it is violated, i can buy a nifty futures of the same lot at 4800 and ride it upwards, so my net profit remains at 75.

unlimited loss, maximum risk strategy of selling calls keeps me in control of situations all the time.
limited loss unlimited profit strategy of buying puts leaves me at the mercy of the market forces.

Remember that, market will do exactly the opposite of what you expect it to do... its got a mind of its own.don't take a position unless you have a plan to counter it in case it goes against you.

Hi Linkon

Was reading your explanation of selling call. In this case have understood the idea of selling call, however in case of violation, the idea of buying future is not clear. If you can kindly elaborate on the same....when do you buy the future? is it only after violation and in this case what happens to the call already sold as in this case the price of call goes up

regards

 

[Xaero]

Thanks much to both of you.

Financial Planning and Investment Banking are the two that I feel I need to get more info on. I'm happy that now I atleast know what to look for.

Thanks a lot.

 

[sibumajumdar]

Hi Linkon

Was reading your explanation of selling call. In this case have understood the idea of selling call, however in case of violation, the idea of buying future is not clear. If you can kindly elaborate on the same....when do you buy the future? is it only after violation and in this case what happens to the call already sold as in this case the price of call goes up

Dear Amit, I wish 2 clear ur douts in favour of Linkon07. Its always safe 2 buy
CA/PA reason being limited loss but unlimited profit. But if it does not move in our direction the time value makes the option unprofitable. On the other side sell of CA/PA though makes us to face prospect of unlimited LOSS and limited profit but we r benefited in 2 ways---(a) more wait gives us better value bcz of time value & (b) we receive the prem in advance. Now our job is to retain the prem received in adv. We can do it either by Long (if sold CA) & Short (if PA sold) of NIFTY Lot when our zone of loss starts. Hope i could make u understand. But 1 thing we should know that we need the amt equivalent to a nifty lot to short ca/pa as a margin money. I feel its always beneficial to short ca/pa if we can efford margin for nifty lot part of which will serviced by the prem recd in adv. Thanks 2 u. Dear Linkon plz correct/elaborate it further for the convenience of Amit. Happy trade---
PS-- when violets nifty gives us protection bcz on violation prem loss is compensated by move of nifty. We can always sq. off nifty when it channged its direction by making profit on it.
SM

 

[linkon7]

Hi Linkon

Was reading your explanation of selling call. In this case have understood the idea of selling call, however in case of violation, the idea of buying future is not clear. If you can kindly elaborate on the same....when do you buy the future? is it only after violation and in this case what happens to the call already sold as in this case the price of call goes up

regards

lets look at todays scenario....
Nifty is at 4065 and we are expecting the 4050 level to break and possibly see 3800-3700.

we sell 4200 call, and we get a credit of 90 points as premium. now asuming market falls, we got nothing to fear. But in case we bounce back and slowly inch towards 4200 mark... we need to protect our 90 points from the 4200 short.

Here, we buy nifty futures when it crosses 4200 and hold on to it as long as it is above 4200.... so on series closing basis if we close above 4200, say at 4350, our nifty futures profit will be 150 points, the value of 4200 call will be 150 as well and this nullifies the profit of nifty long. But we get to keep the premium of Rs 90 that we recieved while shorting.

Now what if nifty goes up to 4250 and then starts falling.... then we just hold Nifty futures till 4200 and then exit. below 4200, we get to keep the 90 points we recieved by shorting the call.

 

[amitroy75]

lets look at todays scenario....
Nifty is at 4065 and we are expecting the 4050 level to break and possibly see 3800-3700.

we sell 4200 put, and we get a credit of 90 points as premium. now asuming market falls, we got nothing to fear. But in case we bounce back and slowly inch towards 4200 mark... we need to protect our 90 points from the 4200 short.

Here, we buy nifty futures when it crosses 4200 and hold on to it as long as it is above 4200.... so on series closing basis if we close above 4200, say at 4350, our nifty futures profit will be 150 points, the value of 4200 call will be 150 as well and this nullifies the profit of nifty long. But we get to keep the premium of Rs 90 that we recieved while shorting.

Now what if nifty goes up to 4250 and then starts falling.... then we just hold Nifty futures till 4200 and then exit. below 4200, we get to keep the 90 points we recieved by shorting the call.

Thanks for the lucid explanation....just a small query...what about the time decay?

 

[linkon7]

Thanks for the lucid explanation....just a small query...what about the time decay?

Time decay works for you when you short an option and works against you when you buy options. e.g. I bought 4000 put and 4200 call for a total premium of 212 on Wednesday when market looked close to break the 4050 support. Thursday, we just moved around a narrow band and closed roughly at the same place. My options value decreased to 184 as on closing of thursday. Today just before 3.00 pm when the sudden sell off occurred, the value of the pair was just 164. Thats what happens when prices remain in a narrow band and as time goes by the option erodes in value.

 

[ag_fx]

lets look at todays scenario....
Nifty is at 4065 and we are expecting the 4050 level to break and possibly see 3800-3700.

we sell 4200 put, and we get a credit of 90 points as premium. now asuming market falls, we got nothing to fear. But in case we bounce back and slowly inch towards 4200 mark... we need to protect our 90 points from the 4200 short.

Here, we buy nifty futures when it crosses 4200 and hold on to it as long as it is above 4200.... so on series closing basis if we close above 4200, say at 4350, our nifty futures profit will be 150 points, the value of 4200 call will be 150 as well and this nullifies the profit of nifty long. But we get to keep the premium of Rs 90 that we recieved while shorting.

Now what if nifty goes up to 4250 and then starts falling.... then we just hold Nifty futures till 4200 and then exit. below 4200, we get to keep the 90 points we recieved by shorting the call.

shudnt we be selling 4200 call???

 

[linkon7]

shudnt we be selling 4200 call???

its a typo...
its supposed to be 4200 call....