Low Risk Options Trading Strategy - Option Spreads

[trader_man]

If you flip, you buy back the sold one and you sell the bought one.

If I do this, won't this square off both positions?

Bear Call Spread:
----------------
50 Short Call 5900 28-Oct 158
50 Long Call 6000 28-Oct 91

So, if I flip this by doing the following:

50 Long Call 5900 28-Oct...
50 Short Call 6000 28-Oct...

then, won't both positions in Bear Call Spread be closed??

 

[nac]

If I do this, won't this square off both positions?

Bear Call Spread:
----------------
50 Short Call 5900 28-Oct 158
50 Long Call 6000 28-Oct 91

So, if I flip this by doing the following:

50 Long Call 5900 28-Oct...
50 Short Call 6000 28-Oct...

then, won't both positions in Bear Call Spread be closed??

He asked to close your existing position and initiate a new one (reverse your position). Obviously, you need to do it twice to reverse your position.

 

[trader_man]

Thanks to the experts for helping us newbies out. :thumb:

 

[DanPickUp]

He asked to close your existing position and initiate a new one (reverse your position). Obviously, you need to do it twice to reverse your position.

Hi trader_man

Thanks nac for his your input. . As he mentioned, you would close the first spread and open a new spread.

Trader_man, check with your broker about the : To open and to close position; information in your platform.

In my platform I give the information to the broker : TO OPEN, when I go in to a trade and I give the information : TO CLOSE, when I want to leave this positions or trade. As long as he not would have the information : TO CLOSE, this spread would stay in my trading account.

No to an other idea, which I practice :

An other way would be to keep the position and lock in any profit by initiating an other spread with other strike prices.

As you have now a bearish spread, you then would initiate a bullish spread.

The positions of the bullish spread would then be one strike higher than the ones of the bearish spread.

Long 5910 call and short 6010 call. With this positions, you log in the profit you have in your pocket and you are placed for the up move of the market.

As I do not trade your market, I do not know, which strike prices you can trade in Nifty. The idea even then remains the same and you may test, if it is possible to trade this way in your home market.

In the market I trade, this way of trading is no problem.

DanPickUp

 

[munde_77]

Hi trader_man

Have not seen AW10 for weeks.

Your bear call spread is itm and atm. So, every move Nifty makes will have a significant impact on your spread.

As the life of the chosen options is very short, time value is very strong.

Sounds fine to me till a certain point. This point is : What is your adjustment plan when market goes against you ?

Do you have such an adjustment plan, which is part of every option trade or you just calculate your loss and say, that is it ?

DanPickUp

--------------------------------------------------------------------------------

Quote:
Originally Posted by munde_77
Could you please give me your e-mail address or phone number if you don`t mind

you can write to me on ***************
Phone is issue as I am based in London.. but u can give me your number..will try to contact u if possible. I will be in India in Oct.. so will try to get in touch with you.

Regards,
Anup
__________________
---------------------------------------------------------------
Making money in trading is not the hard part, KEEPING it is !

NR7 Trading Setup
Low Risk Options Trading Strategy
Come into our Trader's Den
Trading Holiday 2010 - India, US, UK, HK


AW10
View Public Profile
Send a private message to AW10
Find all posts by AW10
Add AW10 to Your Contacts


Quick Reply
Message:

Could you please give me your e-mail address or phone number if you don`t mind

you can write to me on *********
Phone is issue as I am based in London.. but u can give me your number..will try to contact u if possible. I will be in India in Oct.. so will try to get in touch with you.

Regards,
Anup

 

[DanPickUp]

Hi munde

I am not sure, if you should post this here, as this is a private message from Anup to you.

Keep it private and if AW10 wants to give his e-mail to other ones, he will do by his own will.

Imagine, you would give me your private e-mail with even more information for private purpose and I then would publish it in an open forum, with out asking you.

Would you like that ?

My friend, I would suggest to you, to delete the above post, because of the reasons I mentioned here.

DanPickUp

 

[trader_man]

As you have now a bearish spread, you then would initiate a bullish spread.

The positions of the bullish spread would then be one strike higher than the ones of the bearish spread.

Long 5910 call and short 6010 call. With this positions, you log in the profit you have in your pocket and you are placed for the up move of the market.

In Nifty, strike prices are available in multiples of 100. So, 5900, 6000, 6100, 6200..... In that case, would I do:

Long 6000 call and short 6100 call

If I do the above, max profit will be reduced from 3500 to 1000 and max loss will increase to Rs.3800. So, I didn't quite understand how this would lock in the profits.

 

[DanPickUp]

In Nifty, strike prices are available in multiples of 100. So, 5900, 6000, 6100, 6200..... In that case, would I do:

Long 6000 call and short 6100 call

If I do the above, max profit will be reduced from 3500 to 1000 and max loss will increase to Rs.3800. So, I didn't quite understand how this would lock in the profits.

Hi trader_man

As I wrote, test it and you tested it. So the answer is clear :

No, you would not do it.

100 point strike level prices for options, in a market where the underlying is trading on any one of this 100 points, gives not much possibility's to fine tuning any options strategy. Bad for option traders.

For example : The S&P 500 in the states gives option prices on a 5 point scale ( 1160 / 1165 / 1170 and so on ). This with put and calls and for many, many months with nice volumes and OI. With that, you can fine tune your trades in an other way.

Even then, if you sold a call with 100 and the actual price is 60 and I buy an other call on nearly the same strike level ( what in you market is a joke and not possible, as there are 100 point different ) with 60, that makes sense. Market goes up : Your sold call will be priced higher, which means you lose and your long call gets priced higher, which means you have won. So, the money is not directly in your account, as you not have cashed it, but the 40 points are locked in between the short call and long call. If you get the long call exactly with 60, that is nice and in reality not always makable. Otherwise, the different between the entry price of the long call and the short call with a win, would be what you log in in that way.

You can even make it more difficult by using here other time frames. You can buy the next month series call.

Some times confusing and that is what option trading makes more complicate then future trading.

Finally : All to complicated for your market, as this kind of option trading strategy fine tuning is not possible there., like the test you made and showed here is the proof.

DanPickUp

 

[trader_man]

So, can we say that trading options in the Indian market is more of a wait-and-watch approach?

That is why I liked these Spread strategies because they are simple to execute. Also, since it is not possible to fine-tune the strategy, loss is limited in spreads so one does not have to worry about the volatility the next day.

What other strategy would you recommend in the Indian market? Is it much better to trade at the start of the contract month or near to expiry?

 

[DanPickUp]

So, can we say that trading options in the Indian market is more of a wait-and-watch approach?

That is why I liked these Spread strategies because they are simple to execute. Also, since it is not possible to fine-tune the strategy, loss is limited in spreads so one does not have to worry about the volatility the next day.

What other strategy would you recommend in the Indian market? Is it much better to trade at the start of the contract month or near to expiry?

As I never tried it in your home market, any sure answer would not be adequate to any experience some one has, which really trades day for day options in your home market.

I only can say : Maybe.

Some more ideas for those which are new to this thread :

http://www.traderji.com/options/305...g-strategy-option-spreads-116.html#post459952

If you really want to fine tune option trading strategies in your home market, use good software, with which you can in advance test ideas. Be sure to have or know a broker, which has the best real option prices and is able to execute them in 2 till 3 seconds, when you give a market order. Keep commissions as deep as you can.

When you choose a broker, take your time first to discuss with him about options and option strategies. Test his understanding about it compare to your knowledge, so you know then, there is some body which knows at least, what I know and then you may work together with him. If he has no idea bout any strategies, beside spreads, be careful. Would not sound serious to me.

Good broker houses teach their in house stuff the basics of different option strategies like condors, back spreads, butterfly's, calendar spreads and if lucky even more.

EVEN THAN : Those people are not specialist in the subject, other wise they would do option trading and not taking orders from you. It is also not there work, to advise you, what you have to do and in some broker houses it is even forbidden, that operators should tell there customers there trading mistakes. ( Again, I only can tell about how it is in the states. Broker houses in India may work very different and use an other approach )

To your question, about when to implement the option strategy, there is no answer like : at the start of the month or near expiry.

This again belongs to what kind of possibility's you have in your home market, your personal knowledge about your traded market and options and beside that, to what kind of person you are, when it comes to realize, with what time frame are I am happy and comfortable, when may living only from trading, or even when only trading part time. ( Your personal risk profile in which you feel good )

I know strategies, which best work 10 until 2 days before expiration and I have strategies, which are traded within a time from from 6 month before expiration and left 3 months before expiration or 3 months before expiration mixed with very short time options of only a few days and so on.

DanPickUp