Low Risk Low Returns- Target 50 NF per month per NF Lot

[jamit_05]

Portfolio 1 has utterly failed. Took too long to make adjustments. It was a step in evolution.
Portfolio 2, on the other hand, has pretty much met its target for August. So, I can now afford to take lesser risk.

 

[jamit_05]

Last 5 sessions have shown that it is best to make adjustments at EOD. This is helpful information for intraday NF trading as well.

 

[jamit_05]

For this strategy, Selling 79CE OCT @170 against 76NF gives me a win-win situation.

If market goes up, NF wins on the remaining lots
If goes down, then 170 gets hammered.

Best part is, I have sufficient time to wait to see either of the two happen, while 170 decays.

 

[jamit_05]

Re: FnO Portfolio - II

This approach is all about moderation. To do this and that, but in moderation and over a period. A little everyday, enough to beat the over all time decay. Hence, there is no reason, whatsoever the situation, to sell 75% of position at one go. Therefore, will reduce the neutral spread to 100 u. What if the market were to run away 500 pts. It could destroy a career.

Adjustments:

Covered Transactions:
-------------------------------
Total Gained: 78k

Open Lots
Initial: (15-2) lots NF and 30 lots 75PE DEC.
SOLD 200 76PE SEP@116;
SOLD 100 78CE SEP@150;
SOLD 100 79CE OCT@170;

-----------------------
Neutral Spread
-----------------------

Aug premiums will start falling fast in 2nd week. By that time if there are any sharp moves, then I will use them to square off one leg at sub-20 prices. Have sold Aug, because the OTM will be very cheap in the last 15 days.

SOLD Aug 77CE 105 100u
SOLD Aug 77PE 119 100u

Bep range is 7920-7480;

For the overall portfolio:
*below 7480 won't be a problem as I hv sold 100 NF at 7724;
*above 7920, then I will be more than happy to sell more NF.

Will cover it at the first chance I get in the last week.

 

[jamit_05]

Initial Portfolio was:

Long 75PE DEC @ 184
Long NF Aug @7570

I see that NF is up by 170 points, yet 75PE Dec has lost only 50 pts.
So, i have gained 170 against a loss of 100; So the delta is skewed. If the move was reverse, then I'd hv to pay M2M on a regular basis, leading to a little more investment, which is more preferred than buying more PEs

 

[jamit_05]

Far months, 200u CE and near month 100 CE and 100u of NF sold.

Will make most of it by letting price touch 7500 before getting out.

 

[jamit_05]

Re: FnO Portfolio - II

Adjustments:

Covered Transactions:
-------------------------------
Cov 50 76PE SEP@116 @ 85; +1.5k;
Sold NF 100 @ 7725; (7725-7570=15k);
Total Gained: 95k


Open Lots
Initial: (15-4) lots NF and 30 lots 75PE DEC.
SOLD 150 76PE SEP@116;
SOLD 100 78CE SEP@150;
SOLD 100 79CE OCT@170;
SOLD 100 79CE OCT@154;

-----------------------
Neutral Spread
-----------------------

SOLD Aug 77CE 105 100u
SOLD Aug 77PE 119 100u

===

300u Sell 77CE Aug 100
300u Buy 78CE Sep 120
Net -20 pts, -6k.
Risk is controlled. After 70 pt move the spread has lost 2 pts.
Best case: Aug exp=7700; Then Sep 100OTM wud fetch 90 pts. Gain 90-20=70; 21k.
If market sustains above 78, then will exit before expiry.

 

[jamit_05]

Re: FnO Portfolio - II

Adjustments:

Covered Transactions:
-------------------------------
COV 100 78CE SEP@150 @ 77 = 7k;
Total Gained: 102k


Open Lots
Initial: (15-4) lots NF and 30 lots 75PE DEC.
SOLD 100 76PE SEP@135;
SOLD 150 76PE SEP@116;
SOLD 100 79CE OCT@170;
SOLD 100 79CE OCT@154;

-----------------------
Neutral Spread
-----------------------

SOLD Aug 77CE 105 100u
SOLD Aug 77PE 119 100u

===

300u Sell 77CE Aug 100
300u Buy 78CE Sep 120
Net -20 pts, -6k.

 

[jamit_05]

Quite clearly, when market is rangebound, like it is right now in between 7900 and 7500, this delta neutral approach is good. It could be seen as a very low risk and low return and very high on manageability. The trader is not as stressed to get things right. Even if he makes any of the non-major errors he will get plenty of opportunity to make-up.

However, what remains to be seen is, whether the trader does well when market takes off strongly in one direction.... zoom 700 points up in a month. The trader should be able to identify and stop selling the wrong direction.

It takes upwards of 15L to hold 15NF lots, 30 far month puts, buffer for M2M and selling near month options. It is a big deal. Therefore, will continue paper trading for a few more months.

 

[jamit_05]

Re: FnO Portfolio - II

Considering the possibility of a sharp down move of > 300 points, am putting the open lots in perspective:


Open Lots
Initial: (15-4) lots NF and 30 lots 75PE DEC.
SOLD 100 76PE SEP@135;
SOLD 150 76PE SEP@116;
SOLD 100 79CE OCT@170;
SOLD 100 79CE OCT@154;

* approx 160+125=285 pt prem collected. So 76PE has 300 pts of cushion. And further below I hv 75PE DEC. This is the reason why I prefer to sell near month options when spot is still within 300 pt range of entry price.

-----------------------
Neutral Spread
-----------------------

SOLD Aug 77CE 105 100u
SOLD Aug 77PE 119 100u

*This could spell trouble. 77PE has cushion of 224 pts. Around 7500; Will get out of these at the next upmove.

===

300u Sell 77CE Aug 100
300u Buy 78CE Sep 120
Net -20 pts, -6k.[/QUOTE]

*This spread bets on the fact that 77CE Aug will expire worthless and 78CE will be above 20 pts at that time. Its a safe bet. No adjustment required.

------------------------

I hv sold 4 lots NF at 7724; Because of this, in case of a fall, the portfolio will do well. As long as do not take big decisions at wrong times all should sail well.