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

[kingkrunal]

Gain 159 cf.

Buy 7 lots NF Feb @ 10970
Buy 14 lots FEB PE 10900 @ 225
Buy 3 lots NF Feb @ 10895 (spot 10818)
Buy 6 lots Feb PE 10800 @ 205

Sell NF Feb @ 10905 (loss 65 pts
Sell 2 lots FEB PE 10900 @ 270 (gain 270-225=90 pts)
Gain: 25 points

total gain so far: 159+25 = 184 pts

Balance stock
Buy 6 lots NF Feb @ 10970
Buy 12 lots FEB PE 10900 @ 225
Buy 3 lots NF Feb @ 10895 (spot 10818)
Buy 6 lots Feb PE 10800 @ 205

Buy 3 lots NF Feb @ 10907 (Rs.63 lower than initial purchase)
Buy 6 lots Feb PE 10900 @ 218 (Rs.7 lower than initial purchase) (total Rs.70 lower than initial purchase)

Looks like this month is going to be slugish

jamit bhai ... tried a lot to understand how the trades are taken ? if u mind if i ask basic questions and carry a sample trade along with it ..

 

[jamit_05]

jamit bhai ... tried a lot to understand how the trades are taken ? if u mind if i ask basic questions and carry a sample trade along with it ..

This is a delta neutral setup. Theta, time decay, is our challenge. All of this exercise is to beat it.

Do you see why we started with
10 lots NF long
20 lots ATM PE long

Better still, we could set a 30 min session where i would answer the questions. Are you online now?

 

[kingkrunal]

This is a delta neutral setup. Theta, time decay, is our challenge. All of this exercise is to beat it.

Do you see why we started with
10 lots NF long
20 lots ATM PE long

Better still, we could set a 30 min session where i would answer the questions. Are you online now?

yup.. so we try to keep it delta neutral but the main query is when all the adjustment are needed and what tool to use .. like to calculate delta neutral ?
so in above trade the ratio is 1:2
nifty at 10855 spot

10 nf buy at 10873
20 10850pe buy at 160

Next day :
scenario1: nifty goes up -
question - what tool to use and what to do with what?


scenario2: nifty goes down -
question - what tool to use and what to do with what?


scenario3: nifty stays flat -
question - what tool to use and what to do with what?

 

[jamit_05]

Lets start with what our objective is.... what you think we intend to accomplish with this trade?

 

[jamit_05]

My objective is to gain 25 points from each set... 1 NF * 2 PEs... to be manipulated such that we get 25 points in profit when we liquidate them

 

[kingkrunal]

My objective is to gain 25 points from each set... 1 NF * 2 PEs... to be manipulated such that we get 25 points in profit when we liquidate them

ok so that sets the target for sure.. got it ..

 

[angira]

Jamitbhai,
I've bought NF 1 Lot of NF@10840 and bought 2 Lot of 10800pe @ 145
so breakeven point will be 10695-10985?

As far if we stay up to near expiry then this PE will be risky or not bcoz of time decay ?
or this strategy required any repairable leg suppose if market act bullish then exit 1 lot of 10800pe ?
How to protect both trade i mean what Stoploss have to use?

Angira.

 

[jamit_05]

total gain so far: 159+25 = 184 pts

Balance stock
Buy 6 lots NF Feb @ 10970
Buy 12 lots FEB PE 10900 @ 225
Buy 3 lots NF Feb @ 10895 (spot 10818)
Buy 6 lots Feb PE 10800 @ 205

Buy 3 lots NF Feb @ 10907
Buy 6 lots Feb PE 10900 @ 218

Sell 10900 PE 240
Sell 10900 PE 230

Sell Feb PE 10800 192
Sell Feb PE 10800 192

 

[jamit_05]

Thanks

Jamitbhai,
I've bought NF 1 Lot of NF@10840 and bought 2 Lot of 10800pe @ 145
so breakeven point will be 10695-10985?

As far if we stay up to near expiry then this PE will be risky or not bcoz of time decay ?
or this strategy required any repairable leg suppose if market act bullish then exit 1 lot of 10800pe ?
How to protect both trade i mean what Stoploss have to use?

Angira.

In back testing, I have seen back to back three months closing at same rate, means no movement. This is 100% loss three times, irrecoverable. Therefore holding till expiry is not advisable.

I will therefore sell one leg, and buyback other leg at a difference.

If difference becomes large due to time decay, will wait a few days after sale.
If not, then buyback intraday.

 

[jamit_05]

@angira
@kingkrunal

Strategy I am convinced with is this:

We start out with a designing a matrix.... designed to ensure that you sell your NFs at such intervals that you get back the cost of your investment which is cost of PEs. Say your total cost is 225+225+50 (exp and profit) = 500 per set.

And if you set first NF lot to sell at +100, next at +200, +300, +400.... all the way till +900, such that your average is 500, our initial cost.

First sale is at +100. So set to buy it back at 25 pts lower. Keep doing that: sell NF at every resistance, and set order to buy it back at 25 pts lower. However, if price does not correct, and reaches the next level which is +200, then sell one more NF, and set to buy it back 25 pts lower.

As an option, you could also sell a PE pair instead of buying back NF at 25 pts correction, then cost of the whole matrix will come down. Which is what I am doing now.

Moreover, what I intend to do going forward is this:

My PE pairs have lost noticeable value in time decay due to which 25 or even 50 pt fluctuations are not giving profit. Yet, I will go ahead and sell the PEs at 25 pt fluctuation, collect premium and substract this collection from the matrix. Hence signigicantly reducing the cieling of the matrix. Each successful trade will pull down the heigh of matrix by almost 50 points.

And for the loss due to time decay, I will add it to the matrix. This will bring the overall ceiling of the matrix much lower. Which is an important victory, as I will not have to wait for big months to see net profit.

I am very sure that I am not as clear in writing as I am in my mind. Ask questions, and I will try to answer them.