Hi AW10
Can you please mention Strategies which does not have shorting/writing Call and Put options. I have Demat accounts with 2 brokers. In one they wont allow shorting and in other one they allow but I need to deposit huge amount for shorting one lot of nifty. So can you please mention few Strategies for Nifty with out Short in it. Can I use the same strategy to Stock Options with good Liquidity?
Thank you
Hi nayarock
I misinterpreted your question the first time and I edited the post because of that reason.
If you go one leg long and an other leg short ( like a credit spread ), this should not be a problem to a broker and the margin ( deposit for the trade ) will come down.
If your broker does not accept such trades, you may have to clearly inform him, that this two legs ( one long option and one short option ) belong to the same trade and that you will trade them always as one strategy. You may even have to tell him the name of the strategy you trade. This may helps to get a lower margin for the trade and you strictly have to trade it the way you told your broker.
If he is a pro, then he has a matrix and he will see each leg which belongs to the other leg. This comes into play, when you have a lot of trades on with different legs and the broker starts to lose control over your legs. Also you have to be careful when trading many strategies at once. If you make a mistake, you shot down your own legs and then you can get in trouble with your margin account.
I do not like to tell or to show the broker, what I am planing. But this may is not possible in option trading in India.
If you sell both legs ( like you do in a short straddle ) then it is clear, that they take a higher margin like they do in other countries.
If you only buy your legs, then the broker has the money and he no more has to care about that until expiration or until you buy the option back.
If you only want to use buying strategies it is your decision.
The strategies also work for stocks, at least in the states.
Here a few only buying strategies :
- Long call ( buy one call otm, atm or itm )
- Long put ( buy one put otm, atm or itm )
- Long straddle ( buy put and buy call with the same strike price ).
- Long strangle ( Buy lower strike puts and buy higher strike calls )
- Strip ( Buy two puts and one call with same strike and expiration )
- Strap ( Buy one put and two calls with same strike and expiration )
- Long synthetic Straddle ( Buy one stock and two atm puts )
- Guts ( Buy lower strike calls and higher strike puts )
Each one of this strategies has his own risk and the use of them must be under clear, in advanced defined market conditions.
AW10 trades in India and he surely has to give you some more ideas or answers to your question.
Take care
DanPickUp
