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

[jamit_05]

Jan 24
spot 10837
Buy 20 Lots Feb NF @ 10885
Buy 50 lots FEB PE 10800 @ 190

Jan 25th gained 133 points
Jan 29th gained 84 points

sell 3 lots feb pe 10800 @ 205 spot 10793
sell 1 lot feb pe 10800 @ spot 10765 218
sell 1 lot feb pe 10800 @ spot 10761 215
sell 1 lot feb pe 10800 @ spot 10767 221
Sell 2 lot Feb PE 10800 @ spot 10713 244
sell 3 lot feb pe 10800 @ spot 10705 244
sell 2 lots feb pe 10800 @ spot 10655 257
sell 2 lots feb pe 10800 @ spot 10655 266
sell 2 lots feb pe 10800 @ spot 10655 276

Jan 30th total gain : +59 points (missed selling at 288 at LOD, else profit would be double)
sell 1 lot feb pe 10800 @ spot 10628 280-268 = +12
sell 1 lot feb pe 10800 @ spot 10638 270-256 = +14
sell 1 lot feb pe 10800 @ spot 10645 265 - 256 = +9
sell 1 lot feb pe 10800 @ spot 10677 248 - 239 = +9
sell 1 lot feb pe 10800 @ spot 10663 254 - 239 = +15

 

[jamit_05]

Jan 24
spot 10837
Buy 20 Lots Feb NF @ 10885
Buy 50 lots FEB PE 10800 @ 190

Jan 25th gained 133 points
Jan 29th gained 84 points
Jan 30th total gained 59 points

Jan 31st total gain 382 pts

sell 3 lots feb pe 10800 @ spot 10793 205-177=28...54pts
sell 1 lot feb pe 10800 @ spot 10765 218-187=31
sell 1 lot feb pe 10800 @ spot 10761 215-187=28
sell 1 lot feb pe 10800 @ spot 10767 221-187=34
Sell2 lot Feb PE 10800 @ spot 10713 244-197= 47..94pts
sell 3 lot feb pe 10800 @ spot 10705 244 - 197= 47..141pts
sell 2 lots feb pe 10800 @ spot 10655 257-225= 32..64pts
sell 2 lots feb pe 10800 @ spot 10655 266 -228= 38..76pts
sell 2 lots feb pe 10800 @ 276 - 228= 48..96pts

 

[angira]

Jamitbhai,
In the beginning of the month max_oi at 10500pe-11000ce.
Now, OI moved to 10700pe from 10500pe.

we have to weeks for JAN expiry.
Now anyone can go for short FEB expiry ATM pair or OTM pair.
what risk include if we sell and play strangle for FEB strike like 300 point up-down.
short 10600ce-11200pe with premium near 834.

Angira...

Jamitbhai,
Now FEB ITM 10600ce-11200pe trading near 770 which sold near 834, gain 64points.
But today is expiry so and nifty trading near 10695. If in this month NF ranging
in 10600-11200 then only it's safe?
But If NF breaks 10600 in this month-week then this 11200pe leg can't be handle?
So how to exit?
or today i've to exit becoz NF if near support, 64 point gain but my TGT is
minimum 100points.
Mostly we short OTM or ATM pair, First time I've tracked ITM pair. So there is confusion. May be it'll risky.
Angira...

 

[jamit_05]

Jamitbhai,
Now FEB ITM 10600ce-11200pe trading near 770 which sold near 834, gain 64points.
But today is expiry so and nifty trading near 10695. If in this month NF ranging
in 10600-11200 then only it's safe?
But If NF breaks 10600 in this month-week then this 11200pe leg can't be handle?
So how to exit?
or today i've to exit becoz NF if near support, 64 point gain but my TGT is
minimum 100points.
Mostly we short OTM or ATM pair, First time I've tracked ITM pair. So there is confusion. May be it'll risky.
Angira...

Angira,

Our job is to make sure that we are getting returns commensurate to the risk we are taking. Else, it is a loss making business. It doesn't matter whether you sell itm, otm, atm... Any combination will have a certain risk, and returns should be according.

In this case, if itms are being sold, I would first eliminate chances of "unlimited risk", as returns are not unlimited, but very limited. So, If FEB ITM 10600ce-11200pe are being shorted, I would cap this risk by buying 200otms in the direction of the trend. So Max risk is now 200 pts.

Let us not buy both side wings, as it can be expensive. Therefore, buy only one side wing, depending on the daily trend. Now the trend looks up, so buy a top side wing above the long held resistance of 11000

Current trade
Short: FEB ITM 10600ce-11200pe 348+394 = 742
Also Buy wings: 11000CE 112
net credit 630

If this trade went against you, and FEB closed > 11000, then your max loss will be 11000-10600 = 500 points add the credit of 630, net credit 130 this is your worst case. Time decay on 630 is your benefit as well.

As soon as the trend turns, you could sell 11000CE, and buy 400 OTM PE.

In summary, I strongly suggest you always buy wings. This world is now becoming an increasingly volatile place. You will be wiped shorting naked options.

 

[jamit_05]

Jan 24
spot 10837
Buy 20 Lots Feb NF @ 10885
Buy 50 lots FEB PE 10800 @ 190

Jan 25th gained 133 points
Jan 29th gained 84 points
Jan 30th total gained 59 points
Jan 31st total gain 382 pts
Total gained 658

Decay will be sharp on Feb, therefore shifting to march.

SOLD 50 lots FEB PE 10800 @ 190 - 176 = 14 * 50 = 700 points time decay loss.

Buy 50 lots March PE 10800 @ 242
Cost: 12100 + 700 = 12800 points to recover.
gained 658. Will keep these gains aside, will focus on recovering 12800 entirely.

 

[jamit_05]

There was a major drop in the PE prices... 32 points per lot just fell. Market is up 30 points so PE should've lost around 10 points... instead it collapsed 30 points, an extra 20 point fall. So, now we have a 1000 points more of a challenge to cover!

Stock:
Buy 20 Lots Feb NF @ 10885
Buy 50 lots March PE 10800 @ 242 spot 10825.
Cost: 12100 + 700(rollover cost) = 12800 points

Jan 25th gained 133 points
Jan 29th gained 84 points
Jan 30th total gained 59 points
Jan 31st total gain 382 pts
FEb 1st total gain 382 pts
Total gained 1040

My initial expectation was to earning 50 to 100 points per NF lot per month. Interestingly, in 5 trading days, already 1040/20 = 52 pts per lot has been achieved. However, till 12800 cost, is recovered, it will be foolish to calculate profits.

The Daily chart is likely to trend in a serious way, simply because it has been sideways for almost 3 months now. And the Way PEs fell, it appears breakout will be on the upside.


1ST FEB lots sold and bought back
Sell NF Feb 11005 - 10983 = +22
Sell NF Feb 11018 - 10983 = +35
Sell NF Feb 10980 - 10925 = +55
Sell NF Feb 10980 - 10930 = +50
Sell NF Feb 10998 - 10935 = +63
5 lots Mar PE 218 - 201 = +17.. +85
3 lots Mar PE 224 - 200 = +24 * 3 = +72
total gain = 382


--------------------------------
sell 8 lots March PE 10800 @ 192 * 8 = 1536 collected

1st Feb LOTS sold from stock
Sell NF Feb 10894 - 10885 = +9
Sell NF Feb 10960 - 10885 = +75
Sell NF Feb 10970 - 10885 = +85
gain = 169

total 169+1536 = 1705
target 13000
---------------------------------

 

[jamit_05]

If you only short FEB ITM 10600ce-11200pe 348+394 = 742

you get 742 points time decay... But unlimited risk

if you buy 400 pts otm wings: 11000CE 112 and 10800pe 90

net credit 540

Here you get time decay on 540 points, risk is now so much more comfortable.

I believe, this is the essence of options trading. Controlled risk, decent returns, nothing block buster.

 

[jamit_05]

@angira

I think, one correct way to short options is a simple butterfly....

Short the body of near month ATMs: FEB 10900 CE + PE at 175 + 160 = 335
And buy wings, of 200 points away... 77 + 97 = 174
Net credit: 161 points. On which time decay will apply.

Max loss is 39 points at expiry. But, you will never let it expire, so practically max loss will be much less. Therefore, if you set your profit target 39 points, then its a good trade. This becomes low risk, low but fixed returns kind of a trade.

 

[jamit_05]

Stock:
Buy 20 Lots Feb NF @ 10885
Buy 50 lots March PE 10800 @ 242 spot 10825.
Cost: 12100 + 700(rollover cost) = 12800 points

Feb 4th
Sell March PE 10800 @ 211 - 199 = 12 * 3 = +36
Sell March PE 10800 @ 210 - 189 = 21 * 3 = +63
Sell March PE 10800 @ 220 - 189 = 31 * 3 = +93

Jan 25th gained 133 points
Jan 29th gained 84 points
Jan 30th total gained 59 points
Jan 31st total gain 382 pts
FEb 1st total gain 382 pts
Total gained 1040

--------------------------------
sell 8 lots March PE 10800 @ 192 * 8 = 1536 collected

1st Feb LOTS sold from stock
Sell NF Feb 10894 - 10885 = +9
Sell NF Feb 10960 - 10885 = +75
Sell NF Feb 10970 - 10885 = +85
gain = 169

total 169+1536 = 1705
target 13000
---------------------------------[/QUOTE]

 

[angira]

@angira

I think, one correct way to short options is a simple butterfly....

Short the body of near month ATMs: FEB 10900 CE + PE at 175 + 160 = 335
And buy wings, of 200 points away... 77 + 97 = 174
Net credit: 161 points. On which time decay will apply.

Max loss is 39 points at expiry. But, you will never let it expire, so practically max loss will be much less. Therefore, if you set your profit target 39 points, then its a good trade. This becomes low risk, low but fixed returns kind of a trade.