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

[jamit_05]

Sold one PE pair @ 153

Now cost is down to 135, finally after reaching a high of 165.

 

[jamit_05]

Sell one Single PE @ 160

Portfolio:

5 NF lots of cost 6038
4 Apr 6000 PEs of cost 110


Profit Extracted:

50*45 (one NF lot)
100*15 (two PEs)

Total = 3750/-

1.75% return (investment of Rs.Two Lakhs) in 12 days is not bad considering that we have been very inactive.

 

[jamit_05]

I am not taking real positions, hence the thread is in the Diary section.

Entered Long NFs 5 Lots at Feb NF 6038;
Purchased 10 Units of 6000 APR PEs @ 110

Cost incurred: Rs. 58000 inclusive of all expenses.

Currently, FEB NF is 5895, down 143
Apr PE is 166, up 56

Will have to provide for 31*50*5 = 7750/- in MtoM

Loss is of 143-112=31 pts; This is same as the premium at which NF was going. Now the premium has vanished. If NF goes in discount/premium this loss should be covered. This is the beauty of delta neutral positions: Nothing goes out of your pocket, other than what you are aware of, viz time decay and premiums/discount. Everything is accounted for; There are no surprises.

 

[jamit_05]

Sold Single Leg at 174 =

Now only 4 pairs of PEs left;

 

[jamit_05]

Flexibility is being compromised for two reasons

1) Apr PEs are not liquid, although very cheap.
2) Small quantity was taken to start with.

Therefore, am gonna make these two changes and start off a fresh deal

10 lots of Nf @ 5900
20 lots of Mar PEs @ 155

Total Investment:

3L for NF margin
20*50*155 = 1.55 L for PEs.
i.e. 4.55L + 10% for MtoM
Total comes to around 5L

Of this, 50*50*20 = 50K i.e. 10% of investment will be lost in the next 20 trading sessions due to time decay. This 50 point loss and 50 point profit, i.e. a total of 100 points will have to be extracted just to keep this method at the brink of success.

Had we stuck with APR PEs then this cost would be 25 points lesser. i.e. 75 points. But flexibility would be reduced. It is almost 10 am and only TWO contracts of APR 6000 PEs has been traded.... We'd miss out on gap moves !!

 

[jamit_05]

10 lots of Nf @ 5900
20 lots of Mar PEs @ 155

Sold one NF at EOD 19th Jan @ 5960

Bought one NF at gap down on 21st Jan Open @ 5927;

Diff: 33 pts.

 

[jamit_05]

Sold one NF at EOD 19th Jan @ 5960

Bought one NF at gap down on 21st Jan Open @ 5927;

Diff: 33 pts.

(Change Jan for Feb, error)

Noted the above gain of 50*33 = Rs.1500

Now, selling one 5800 Mar PE for Rs.87 : Gain 50*87 = Rs.4300

Selling PE because the market might go madly down... will give additional 87 points. We do not intend to buy it back.

 

[jamit_05]

Another mistake was committed while taking the positions... Futures were taken of the current month whereas they shouldve been of the same month as Options. This would save... they shouldve been taken of far month too... else the rollover becomes too expensive.

 

[jamit_05]

(Change Jan for Feb, error)

Noted the above gain of 50*33 = Rs.1500

Now, selling one 5800 Mar PE for Rs.87 : Gain 50*87 = Rs.4300

Selling PE because the market might go madly down... will give additional 87 points. We do not intend to buy it back.

Diff Gain of 50*33 = Rs.1500

Sold 5800 Mar PE : Gain 50*87 = Rs.4300

Sold on 27th Feb Open 5900 Mar PE : Gain 50*155 = Rs.7500
(Now 5900 and not 5800 because it was a big move, almost 2 atrs)

Total gain so far: around 13000

 

[jamit_05]

Diff Gain of 50*33 = Rs.1500

Sold 5800 Mar PE : Gain 50*87 = Rs.4300

Sold on 27th Feb Open 5900 Mar PE : Gain 50*155 = Rs.7500
(Now 5900 and not 5800 because it was a big move, almost 2 atrs)

Total gain so far: around 13000

SOLD one NF Lots @ 5932

LOSS: 5960-5832 = 128 pts... i.e. 128*50 = Rs.6400