Low Risk Options Trading Strategy - Option Spreads

[sandy26jan]

which is the good brokerage for selling call spreads in terms of low margin requirements. icicidirect treats both legs as independent and demands margin on both.. thts ridiculous, not good for my ROI. please suggest if there is any house which allows trading both legs of spread as one entity not two different trades. thanks !!

 

[sumeetsj]

I bought Feb242011 6000 call at Rs 48 approx on last session. Though I know market may go further down, but just took a contra call on IIFL recommendation. Is the strategy good? Or Should i exit on Monday or change the strategy? Any recommendations will be cordially accepted, still not good in options trading. I do not like selling options especially in this such a volatile market and unlimited risk.

Hold on to it as of now. But hence forth..
Always ask yourself twice for a rationale before entering into any options position.
Hold on to it as your max loss will be only 2400+brokerages if it expires worthless.

 

[sumeetsj]

which is the good brokerage for selling call spreads in terms of low margin requirements. icicidirect treats both legs as independent and demands margin on both.. thts ridiculous, not good for my ROI. please suggest if there is any house which allows trading both legs of spread as one entity not two different trades. thanks !!

This you will have to call their sales guys and discuss. Mostly this depends upon a personal relationship with the broker/sub-broker also. Try IndiaInfoline or ShareKhan.

 

[AW10]

I bought Feb242011 6000 call at Rs 48 approx on last session. Though I know market may go further down, but just took a contra call on IIFL recommendation. Is the strategy good? Or Should i exit on Monday or change the strategy? Any recommendations will be cordially accepted, still not good in options trading. I do not like selling options especially in this such a volatile market and unlimited risk.

My opinion differs from what sumeetsj has mentioned.

IMO, market has strong supply zone or resistance zone between 5970 to 6030levels and hence it is going to be difficult to cross that in before feb. But if we see budget rally then, it is not impossible too. Even then, 6050 is 300 points from current level and any bull will be happy to book profit on 300 points move without taking any fight with bulls. If my views hold then, most likely this option will expire worthless and you will loose whole of 2700.

My suggestion will be to use this money in learning some basics of chart reading so that u can take the decision on your own - not depend to iifl or anyone on traderji to tell u what to do cause none of them loose anything but only you.

And don't forget the opportunity cost. By blocking you money on loosing trade, you will be missing chances to deploy 2700 on other opportunities for next 45 days.

IMO, you are not deadbrain. For that matter no living person is deadbrain as long as they are not in coma. So please think again.

Happy trading

 

[sumeetsj]

@ AW10

IMO

What you are saying is absolutely correct.
I have my own reasons for suggesting him to be in the trade.
The movement of Nifty for next few days will help him understand how far OTM options premia move.
2700 is too less a capital (although thats subjective) but it could have been much more, thank god its less.

Please comment.

 

[deadbrain]

My opinion differs from what sumeetsj has mentioned.

IMO, market has strong supply zone or resistance zone between 5970 to 6030levels and hence it is going to be difficult to cross that in before feb. But if we see budget rally then, it is not impossible too. Even then, 6050 is 300 points from current level and any bull will be happy to book profit on 300 points move without taking any fight with bulls. If my views hold then, most likely this option will expire worthless and you will loose whole of 2700.

My suggestion will be to use this money in learning some basics of chart reading so that u can take the decision on your own - not depend to iifl or anyone on traderji to tell u what to do cause none of them loose anything but only you.

And don't forget the opportunity cost. By blocking you money on loosing trade, you will be missing chances to deploy 2700 on other opportunities for next 45 days.

IMO, you are not deadbrain. For that matter no living person is deadbrain as long as they are not in coma. So please think again.

Happy trading

Thanx for suggestion. There are two lots taken. IMHO, I am not waiting for 6000 level though. I bought the calls at Rs 48 and I expect it to be around 5800+ this month or at least in first week of February. If that happens, i am sure it will reach around Rs 100 level. That is where I want to sell them. Today, I sold them at 52 and bought by the end of day at 44. If market turns positive, i will let my calls run and if turns flat to bearish I will sell them in the morning and maybe i will buy them again in evening if get some profit.

Hope the strategy is not that bad. Respect your opinion on it, if any?

BTW, I still like my ID and that is not my name. Hope AW is not your name as well, could not be!!

 

[rkkarnani]

Thanx for suggestion. There are two lots taken. IMHO, I am not waiting for 6000 level though. I bought the calls at Rs 48 and I expect it to be around 5800+ this month or at least in first week of February. If that happens, i am sure it will reach around Rs 100 level. That is where I want to sell them. Today, I sold them at 52 and bought by the end of day at 44. If market turns positive, i will let my calls run and if turns flat to bearish I will sell them in the morning and maybe i will buy them again in evening if get some profit.

Hope the strategy is not that bad. Respect your opinion on it, if any?

BTW, I still like my ID and that is not my name. Hope AW is not your name as well, could not be!!

Hi DB, My opinion, the 6000 Feb call will NOT reach 100 if Nifty reaches 5800 by Feb first week... even today when Nifty is at ~5725,the 5800 Feb call is just 122.00 and though with 75 points move in our direction from here the rate of the call will go up but Time value will erode (depreciate)...., the 6000 Feb call trading at 46 today cannot more than double or gain Rs.54 to reach ~100 and that too after 15 days... Options are still very tricky here in India, and do not follow the Text Book rules..
Warning : Me a newbie too in Options and prone to error.!!!

 

[deadbrain]

Hi DB, My opinion, the 6000 Feb call will NOT reach 100 if Nifty reaches 5800 by Feb first week... even today when Nifty is at ~5725,the 5800 Feb call is just 122.00 and though with 75 points move in our direction from here the rate of the call will go up but Time value will erode (depreciate)...., the 6000 Feb call trading at 46 today cannot more than double or gain Rs.54 to reach ~100 and that too after 15 days... Options are still very tricky here in India, and do not follow the Text Book rules..
Warning : Me a newbie too in Options and prone to error.!!!

Thanks, I sold calls at 52 again and exited the position. I am planning to play intraday on 5700 call if market goes bullish and 5700 put if market goes bearish and will exit position same day. I know of several intraday strategies for stock trading, will see if any suits here in options as I am still unable to find any pairing strategy that may work best. If ever, will surely discuss with members here.

 

[sumeetsj]

Here is the opportunity cost DB. You must calculate how much was your drawdown in form of brokerages, and what have you earned in this trade.
I am sure even if much earning was not there much of Learning should be there.
Because you are lucky to have your capital protected in this trade.
Now is the time to heed to the advice given by AW10 in the earlier post.

 

[deadbrain]

Here is the opportunity cost DB. You must calculate how much was your drawdown in form of brokerages, and what have you earned in this trade.
I am sure even if much earning was not there much of Learning should be there.
Because you are lucky to have your capital protected in this trade.
Now is the time to heed to the advice given by AW10 in the earlier post.

Ys, your suggestion is already taken and already working on that as well. My brokerage is around Rs 50 per lot.

Bought at avg 44 x 2 lots (2 times) = 8800 + 400 = 9200

Sold at avg 52 x 2 lots (2 times) = 10400-400 = 10,000

so, even if not in profit, I think not in loss as well.