GOOD PROFIT: Hedged nifty positions with straddle...

[linkon7]

I thought of starting paper trade on this strategy... Infact started doing some work on it...but I think I need to understand it little better before I can play around with it... Primarily I am not well versed doing too many NF trades to ensure that we go along with direction of NF...

Cheers,

Heems

Heemz,
I think all the modifications has got you very confused. Think of it this way. I sold 4500 call aug and 4500 put put aug for a total premuim of 395 Rs. Now i leave it the way it is, and concentrate only on nifty futures only. The only decision that i have to make is to sell nifty below 4500 and hold on to it. and if nifty futures trades above 4500 then i have to buy it.

buy nifty above 4500 and sell below 4500. Nothing more.

If everything goes smooth, end of the August series, you should have 395 points in your pocket.

Paper trade this for a month and then we can take note of the progress.

 

[amolkulkarni]

Amol,
First thing that we need is a keen sense of direction on where the market is going. For that we track the OI of the various options. The previous day's high and low is tracked by many traders and that acts as support and resistance.

Trading in options can wipe out your capital in few months. You wont get a chance to recover, if you misjudged the direction and the strength of the direction. Its your hard earned money, dont waste it on experimentation.

In your case, i think you need to follow a system. Your entry / exit / stop loss is has to be well defined. If u make a judgmental call on the nifty, most of the time you'll end up booking profit early and let your losses run. All i can suggest is that you stop trading and evaluate where you are going wrong. write down your own rules and stick to it. If possible post your rules here. we can evaluate and work on them.

Thanks sir your advice
but I get the direction of market well in advance from nishikant sir's post but I want want assistace & guidenance in option segment hopefully awating from same

Thanking You

Amol Kulkarni

 

[linkon7]

Thanks sir your advice
but I get the direction of market well in advance from nishikant sir's post but I want want assistace & guidenance in option segment hopefully awating from same

Thanking You

Amol Kulkarni

How do you play that direction. If, Nishi-bhai takes a leave for 2 weeks, then what do you do. His levels are there as a guide. I follow them too but I do not make a buying / selling decision based on that.

Unless your sense of direction is strong and confident, you will find options very difficult to trade. And vice versa.

Options is a bet on the direction. Its supposed to compliment your trade. minimise the risk of the position you have on the market. I'll give you an example, If I have shorted Nifty at closing at 4470 with a stop loss of 4520. Now to minimise the risk of this trade, i can sell a 4500 put July for 104 points. Now if the market falls then i make 74 points. incase i am wrong and market decides to rally.... then i am protected upto 4574. This is called a covered put. What this has done is provide me protection but to get this protection, i had to sacrifice potential profit.

 

[ag_fx]

Linkon,
Thanks for the mention of Options oracle. I downloaded it to use. Can you tell me what is the symbol code for NIFTY option chain? I had selcted my markets as Indian NSE while setting it up.

Happy Trading

 

[Mangafreakz]

Deleted...

 

[linkon7]

Linkon,
Thanks for the mention of Options oracle. I downloaded it to use. Can you tell me what is the symbol code for NIFTY option chain? I had selcted my markets as Indian NSE while setting it up.

Happy Trading

Just select "Dynamic Server NSE-India 1" in the config panel. Type nifty in the symbol and press enter. there after iuts a simple matter of drag and drop...

 

[Xaero]

In the pic below i was able to figure out the Premium inflow but not able to calculate the Max profit. Can you tell me how did they get that?

How is the margin reqd calculated? In the above spread it is mentioned as Rs.20k but I think someone mentioned that selling a put requires as much margin as selling a future that would be 32k+ (since we are net sellers).

Coming to think of it the broker must be mad so suggest a net seller strategy. It is not like nifty is going to sit and look around like a broiler chicken after making a new 52-wk high, is it? Or am I missing something?

 

[linkon7]

How is the margin reqd calculated? In the above spread it is mentioned as Rs.20k but I think someone mentioned that selling a put requires as much margin as selling a future that would be 32k+ (since we are net sellers).

Coming to think of it the broker must be mad so suggest a net seller strategy. It is not like nifty is going to sit and look around like a broiler chicken after making a new 52-wk high, is it? Or am I missing something?

the margin requirement varies from broker to broker....

Never think brokers are mad to suggest a strategy, they do their research very well. At least the big brokers do... They look for data for a living. We look it as a hobby. Their interpretation is mostly right. They take protection as well, so its not one sided directional call.

paper trade them for a few months and see the result.

I trade with R K global and they charge 32 K for every lot option shorted in options.... and incase its a hedged position, then a signle nifty lot is blocked. When i shorted 4500 call and put for a total premium of 395, the margin required was about 29 K per lot...

 

[Xaero]

the margin requirement varies from broker to broker....

Never think brokers are mad to suggest a strategy, they do their research very well. At least the big brokers do... They look for data for a living. We look it as a hobby. Their interpretation is mostly right. They take protection as well, so its not one sided directional call.

paper trade them for a few months and see the result.

I trade with R K global and they charge 32 K for every lot option shorted in options.... and incase its a hedged position, then a signle nifty lot is blocked. When i shorted 4500 call and put for a total premium of 395, the margin required was about 29 K per lot...

We'll so far their strategy is working.

29k per lot or per spread/straddle/strangle (or whatever it is called)?

 

[linkon7]

scrip cost present diff profit/loss
4500 CE (Aug) 190.00 152.00 38.00 3,800.00
4500 PE (Aug) 205.00 236.00 (31.00) (3,100.00)
Nifty Futures 4,518.75 4,413.00 105.75 10,575.00
4400 call (july) as hedge 86.00 88.00 2.00 200.00

Total = 11,475.00


The position of the nifty straddle as of end of 22th July2009

Script
4500 CE (Aug) shorted at 190 has a current price of Rs. 152 is at a profit of Rs.3800
4500 PE (Aug) shorted at 205 has a current price of Rs. 236 is at a loss of Rs.-3100
Nifty Futures short Innitiated at the averaged price of 4518.75 has a current price of Rs. 4413 is at a loss of Rs.10575

Total = profit of Rs. 11475


Statistics

Cost of the straddle = 395.00
present price of the straddle = 388.00
Actual value of the straddle = 87.00
profit on straddle = 7.00
Profit on nifty = 105.75
profit on Hedge = 2.00

total profit = 114.75