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

jamit_05

Well-Known Member
Sell 2lots 11700 11APR = +240
Sell 2lots 11700 11APR = +210
Sell lots 11650 11APR = 60
Sell lots 11650 11APR = 66
Sell lots 11600 11APR = 61
Sell lots 11600 11APR = 61
These sold PEs are net profit. If 11th Apr closes above 11700, I gain around 700 free points. Therefore, I think these weekly expiry options are gold, shorting them is great profit. But adjusting the risk is very important, else all profit will get wiped out in one trade.
 

jamit_05

Well-Known Member
How to take advantage of weekly expiry options:

There used to be large participation in the expiry week, for monthly expiry options. Seeing this demand NSE has introduced Options expiring each week. Now every week crores of rupees expire in options. One way to benefit from this boon, all year around, is to short them. As a rule, I never short naked options, they must be covered

So, the idea is to short near term, and go long on far. This takes advantage of the principle that theta for near term is high, and long term is low; as long as beta is unchanged.

An example of One such trade in the current scenario is:

Trade 3:
Short PE 11600 18th Apr; collect 51 premium
Long PE 11500 25th Apr: Pay 53 premium.

If 18th 11600 PE expires worthless, you get entire 51 points, and whatever remains of 11500 25th Apr is your profit, and that depends on how much the market goes up. Therefore beta should not change much.

The only other principle you must bear in mind is, the short term option must not go ITM, that will be bad for business. That will require us to close the trade as is.

Another very good example is this:

Trade 4:
Short PE 11600 30May; collect 300
Buy PE 11500 26Dec; pay 440
Buy CE 12000 25Apr; pay 27

Net Paid: 170;
Max Profit: around 250 points.

Time decay is very low on OTM Dec options, around 25 points a month. However, the May options will completely become zero on 30May, rate of decay is 200 points a month; However, if market makes big moves, and value of Dec PE falls we start losing on the max gain of 250 points.

Therefore, our job is to manage this trade such that you are shielded from large moves. One way to do that is to buy OTM options in the direction of the trend, which is currently up.

So add a third leg... buy OTMs: 12000 CE 25Apr at 27 points. Hence, we will have to re-adjust this set after 25Apr.
 

jamit_05

Well-Known Member
Summary:

Trade 1
Price will jump a 100 points before 18th
Buy oTM CE 11800 18th April 28.00

CMP: 37... gain 9 points

Trade 2
Support 11550 will maintain till 18th
Sell OTM 11500PE 50 18Apr
Buy OTM 11400PE 5 11Apr

CMP: 28... gain of 17 points.


Trade 3:

Short PE 11600 18th Apr; collect 51 premium
Long PE 11500 25th Apr: Pay 53 premium.

Assumption: Trend is sideways, atleast not strong up or down. Will end this trade on 18th Apr.

Trade 4:
Short PE 11600 30May; collect 300
Buy PE 11500 26Dec; pay 440
Buy CE 12000 25Apr; pay 27

Net Paid: 170;
Max Profit: around 250 points.

Assumption: Trend is sideways, atleast not strong up or down. Will end this trade on 30th May. Election month, May, is likely to be volatile, will learn to manage the trade.
 

jamit_05

Well-Known Member
After 70 point fall.

Trade 1: Lost all gains
Trade 2: Still 14 point gain
Trade 3: shorted PE has gone ITM, yet the losses are within limit.
Trade 4: Unchanged
Trade 5: like Trade 2, a play on price jump not time decay.

Short 25th Apr 11600 PE 96
Buy 18th Apr 11500 PE 36

Collected 60
Expectation is that on 18th, 11600PE will be worth less than 60. Which translates to: for profitability price must go up more than 100 points before 18th.
 

jamit_05

Well-Known Member
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Sell 2lots 11700 11APR = +240
Sell NF 11830 - 10915 = +925

Sell 2lots 11700 11APR = +210
Sell lots 11650 11APR = 60
Sell lots 11650 11APR = 66
Sell lots 11600 11APR = 61
Sell lots 11600 11APR = 61
Sell 2lots 11700 11APR = +210... 206
Sell lots 11650 11APR = 60...56
Sell lots 11600 11APR = 61...28

I noticed how these PEs are still doing OK, considering they are all ITM.... with the power of timedecay on our side.
 

jamit_05

Well-Known Member
20 lots NF Mar 10915 : Decay 1000
40 lots 10900 Apr PE 214 : Cost 8600 (cost 428 per set -> target 480)
Loss Carried Forward: 3000
---------------------------------
Total Target 13000

SELL NF 10972 @ 10934 - 10915 = 20
sell 2 lots PEs @ 11000 @ 175 = 350 (instead of 10900)
-----------
+410


SELL NF 11080 @ 11050-10915=+135
Sell 2 lots PEs @ 145 = 290
------
+425

SELL NF 11080 - 10915 = +165
sell 2 lots PEs @ 145 = +290
---------------------
+460

SELL NF 11020 - 10915 = +105
Sell NF 11160 - 10915 = +245
Sell NF 11220 - 10915 = +295
Sell NF 11315 - 10915 = +400
Sell NF 11315 - 10915 = +400
Sell NF 11365 - 10915 = +450
Sell NF 11430 - 10915 = +515
Sell NF 11515 - 10915 = +600
Sell 2 lots 11000 May 215 = +430
Sell NF 11555 - 10915 = +640
SELL 2 LOTS 11300 Apr 145 = +290
SELL 2 LOTS 11300 Apr 130 = +260
Sell NF 11575 - 10915 = +660

---------
sell 2 lots 11500 apr 176 = +350
sell 2 lots 11400 apr 145=+290
sell 2 lots 11400 apr 185 = +370
sell 2 lots 11400 apr 190 = +380
sell 2 lots 11400 apr 200 = +400

It was a great decision selling these 10 lots of PEs
---------
sell 2 lots 11500 apr 155 = + 310
sell 2 lots 11400 apr 155 = + 310
sell NF 11675 - 10915 = +760

Sell 2lots 11700 11APR = +240
Sell NF 11830 - 10915 = +925

Sell 2lots 11700 11APR = +210
Sell lots 11650 11APR = 60
Sell lots 11650 11APR = 66
Sell lots 11600 11APR = 61
Sell lots 11600 11APR = 61

All 11Apr PE nullified at some profit. Spot 11595.


Sell 2lots 11600 18Apr 68*2=136
Sell 2lots 11550 18Apr 62*2=124
 
Last edited:

angira

Well-Known Member
How to take advantage of weekly expiry options:

There used to be large participation in the expiry week, for monthly expiry options. Seeing this demand NSE has introduced Options expiring each week. Now every week crores of rupees expire in options. One way to benefit from this boon, all year around, is to short them. As a rule, I never short naked options, they must be covered

So, the idea is to short near term, and go long on far. This takes advantage of the principle that theta for near term is high, and long term is low; as long as beta is unchanged.

An example of One such trade in the current scenario is:

Trade 3:
Short PE 11600 18th Apr; collect 51 premium
Long PE 11500 25th Apr: Pay 53 premium.

If 18th 11600 PE expires worthless, you get entire 51 points, and whatever remains of 11500 25th Apr is your profit, and that depends on how much the market goes up. Therefore beta should not change much.

The only other principle you must bear in mind is, the short term option must not go ITM, that will be bad for business. That will require us to close the trade as is.

Another very good example is this:

Trade 4:
Short PE 11600 30May; collect 300
Buy PE 11500 26Dec; pay 440
Buy CE 12000 25Apr; pay 27

Net Paid: 170;
Max Profit: around 250 points.

Time decay is very low on OTM Dec options, around 25 points a month. However, the May options will completely become zero on 30May, rate of decay is 200 points a month; However, if market makes big moves, and value of Dec PE falls we start losing on the max gain of 250 points.

Therefore, our job is to manage this trade such that you are shielded from large moves. One way to do that is to buy OTM options in the direction of the trend, which is currently up.

So add a third leg... buy OTMs: 12000 CE 25Apr at 27 points. Hence, we will have to re-adjust this set after 25Apr.
Thankx for some new ideas & strategies on weekly expiry.
 

jamit_05

Well-Known Member
I wish to focus on the big opportunity. Selling ATM weekly options gives 60 points, I want to see if it is manageable, whether one can set a favourable Risk reward ration. Therefore, scratching the earlier trades... consider the following:

The core idea is to go with the trend, and let ATM premium decay for a week. The last experience in Delta Neutral showed that it is manageable. Now will be watching more closely.

Trade 1:
Short ATM PE 11600 18th APR 52
Buy PE 11500 25th APR 52

Expect to make around 15 points at end of the week.

Trade 2:
Short PE 11600 30May; collect 300
Buy PE 11500 26Dec; pay 440
Buy CE 12000 25Apr; pay 27


Trade 3:
Since I am bullish on the trend:

Buy 25apr week 11600 CE 150 (will lose 60 points in timedecay)
Sell 25apr week 11700 CE 95 (will lose 54 points in timedecay)

The RR is very favourable... I will give it a week to get set... else will take the loss of around 10 points.

So Risk is 10 points... and if it works out... on 25th Apr I get 50 points... 1:5 !!

Let see.
 
Last edited:

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