Index option trading

#11
Volatility at peaks....Taken short strangles 3-4 times... Everytime one side hit SL , when try to exit the position on the other side, premiums went up... Loss...Taken long strangle of Nov 5th expiry ..it covered entire loss and position in neutral.

Taken short strangle at 2:15 for this expiry.. Good decay happend..Closed with minor profit around 3k. Lets see how much after brokerage and taxes
 

sridhga

Well-Known Member
#13
If you had taken the opposite trades, viz., going long on both CE and PE would you have gained? If so why? Try to find the answer. This kind of thinking helps.
 

sridhga

Well-Known Member
#14
Another point: If your share capital is 1.2 lacs and you are trading Bank Nifty that is 25 shares which are around 24000 each, effectively you are trading a lot that valued at Rs. 6 lacs. Now if the trade goes just 1% against you, which it can, in the case of Bank Nifty, and that is a movement of Rs. 240 per share and multiplied by 25, it is Rs. 6000. So an adverse movement of Rs. 6000 is 5% of your capital. 1% error is 5% of your capital. What if the move is 2%?

If we start thinking on these lines it could show things in a different perspective.
 
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#16
Another point: If your share capital is 1.2 lacs and you are trading Bank Nifty that is 25 shares which are around 24000 each. So you are trading a lot that valued at Rs. 6 lacs. Now if the trade goes just 1% against you, which it can, in the case of Bank Nifty, and that is a movement of Rs. 240 per share and multiplied by 25, it is Rs. 6000. So an adverse movement of Rs. 6000 is 5% of your capital. 1% error is 5% of your capital. What if the move is 2%?

If we start thinking on these lines it could show things in a different perspective.
Yeah i understand the point. But I play short on both sides based on volatility and also spreads with strict SL M.
Ofcourse as u said need to keep an eye on prices.
 

sridhga

Well-Known Member
#17
Yeah i understand the point. But I play short on both sides based on volatility and also spreads with strict SL M.
Ofcourse as u said need to keep an eye on prices.

I will put it another way. If you are selling a naked option, you know the risk. If you are selling a straddle you are selling a naked option with approximately double the premium. Is that sufficient to cover a volatile stock like Bank Nifty?
 
#18
I will put it another way. If you are selling a naked option, you know the risk. If you are selling a straddle you are selling a naked option with approximately double the premium. Is that sufficient to cover a volatile stock like Bank Nifty?
Let me keep it in my way..haha..
Say if u sell pe for 100 u dont know the max risk.
If u sell both ce and pe each with 100rs. Then ur risk can be reduced to some extent as we have 100 on other side.

But frankly speaking faced difficulties in last month and this month handing strangles and straddles
 

sridhga

Well-Known Member
#19
Let me keep it in my way..haha..
Say if u sell pe for 100 u dont know the max risk.
If u sell both ce and pe each with 100rs. Then ur risk can be reduced to some extent as we have 100 on other side.

But frankly speaking faced difficulties in last month and this month handing strangles and straddles

No, no. You do it your way.

I am just asking some questions that's all. Sometimes they may not be relevant at all.
 

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