Low Risk Options Trading Strategy - Option Spreads

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AW10


Yesterday I have bought 4700CE 26 Nov @84 and sold 4700 CE @115 bought 2 lot ut 4600 @108 and 1lot put 4500 @ 70 . I could not buy call 4700 as market was up. Now I am in naket position. today if market go up how can I reduce my loss? Please tell me what should I do? I am new in option maeket.
 

arnav_rulz

Well-Known Member
Thanks Terminator for bringing in new dimension of naked short position..

Vijay - that gives me another idea.. if you are planning to trail with SL, and lets say tomorrow yr SL is not hit.. then at 3.15 pm u might be wondering what to do.
Generally, I hedge my open position between 3.15 / 3.30 by selling options. Assuming u have sufficient margin, u can near 3.15 u can sell say 4700 Call.
Currently u are holding bullish position with Short Put.. so to hedge u need to create bearish position which u can do by selling calls.
Advantage is that the time decay works for you. If mkt gaps down.. then whatever extra that you might loose on Put position by this sudden drop, will be recovered (atleast partially) by gain in short call position.

Once market stabilises, then u can decide on next action i.e. close call position, and trail put SL. Atleast with this approach you will lock your loss till the limit of premium that u get for short call position. I call this as hedging with market's money.

Happy Trading
I totally second this strategy.. In your situation i think it one of the best options that you have !!

and the more bullish you feel about the markets.. the further you can take away the strike price of your call sold.. The advantage of selling far otm call say of 5000 will be that you wont have to close the position everyday.. but you can take it till expiry.. The disadvantage is that you wont be actually hedging your put and thus you wont be protected from downward risk.. (your just eating small small premium to bring your cost down..)

Obviously things depend upon where you feel the market is heading in the coming days..
 

AW10

Well-Known Member
AW10


Yesterday I have bought 4700CE 26 Nov @84 and sold 4700 CE @115 bought 2 lot ut 4600 @108 and 1lot put 4500 @ 70 . I could not buy call 4700 as market was up. Now I am in naket position. today if market go up how can I reduce my loss? Please tell me what should I do? I am new in option maeket.
If you are new in options trading then first thing u shd do is to get the foundation right.
Plz chk out this post at the start of this thread where I have mentioned about the basic foundation that one needs to start in option trading. If you have covered that and planned your trade properly, then this question might not come. Once trade is planned, then it is just matter of executing the plan.

http://www.traderji.com/options/305...ading-strategy-option-spreads.html#post333547

Coming back to your trade where u are Long Put options. This strategy (Long Option) will hurt if market doesn't go in your direction.. so you need to define the points when u would cut your losses (you might very well say that I am ready to loose whole premium and that is right cause it is your money). So decide those loss-exit points for you open trade and execute it.

And if you are in profit, keep trailing your stops.

If you are interested in limiting losses, then plz read the initial posts of this thread where I have explained SPREAD strategy.

Happy Trading
 

sk9

New Member
If u can teach me in more detail of how to make profit always with option or u can i contact u in person or through phone
 

rajsumi121

Well-Known Member
My option strategy
strat from 1st day of new series .
1st step -- assume nifty price is 5000 .
2nd step-- i sell 4800 put and 5200 call .

Nifty assume close at or above 5100 in any of next trading sessions .
My 3rd step exit from 5200 call and sell 5300 call and 4900 put .

Assume nifty close at or above 5200 in next trading sessions .
My 4th step exit from 5300 call and sell 5400 call and 5000 put .

Assume nifty close at or below 5100 in next trading sessions .
My 5th step exit from 5000 put and sell 5300 call and 4900 put .

Do same till expiry with movment of every 100 points .

My diffrence is 200 up n 200 down safe traders can trade with 300 points diffrence .

According to me no loss in this strategy but i am not sure about it .

Please share your views about risk or about your experience .
 

VJAY

Well-Known Member
My option strategy
strat from 1st day of new series .
1st step -- assume nifty price is 5000 .
2nd step-- i sell 4800 put and 5200 call .

Nifty assume close at or above 5100 in any of next trading sessions .
My 3rd step exit from 5200 call and sell 5300 call and 4900 put .

Assume nifty close at or above 5200 in next trading sessions .
My 4th step exit from 5300 call and sell 5400 call and 5000 put .

Assume nifty close at or below 5100 in next trading sessions .
My 5th step exit from 5000 put and sell 5300 call and 4900 put .

Do same till expiry with movment of every 100 points .

My diffrence is 200 up n 200 down safe traders can trade with 300 points diffrence .

According to me no loss in this strategy but i am not sure about it .

Please share your views about risk or about your experience .
Dear rajsumi,
Interesting strategy......AW10 sir,sm may put their views...
 

lazytrader

Well-Known Member
Dear rajsumi,
Interesting strategy......AW10 sir,sm may put their views...
I do have a question about execution:

If you have to do this step 5 times in a month (after initial short stangle, [buy + sell + sell] * 5, assuming both expire OTM) what will be your expense in total? What is the max profit?
 
Hi AW10 Sir,
I am a new trader .
Yesterday I bough 5000 put at 98 and then sold it at 160.
At the end of trading day that is at around 2:45 to 3:30 I was confused as to whether keep the put or sell it.
The support was at 5000 and it was broken yesterday but still nifty managed to close around 5000.The 5000 put is at 227 today.
I thought the market will start buying at this level so we will see some green today but the market opened flat 100points down
Sometimes before it also happened that market lost 100 points and started up the next day and vice versa
My question is how to predict the market will open gap down or gap up tomorrow
I mean what all things one should consider for that whether to carry the position or book the profits
 

AW10

Well-Known Member
Hi AW10 Sir,
I am a new trader .
Yesterday I bough 5000 put at 98 and then sold it at 160.
At the end of trading day that is at around 2:45 to 3:30 I was confused as to whether keep the put or sell it.
The support was at 5000 and it was broken yesterday but still nifty managed to close around 5000.The 5000 put is at 227 today.
I thought the market will start buying at this level so we will see some green today but the market opened flat 100points down
Sometimes before it also happened that market lost 100 points and started up the next day and vice versa
My question is how to predict the market will open gap down or gap up tomorrow
I mean what all things one should consider for that whether to carry the position or book the profits
Chetan, many people have gone wrong predicting the market. We all make this mistake in start of trading life (and some keep continuing with this for long long time just to hurt their account balance). In my opinion, we are better off listening to mkt and following it.. rather then showing our smartness that we can predict what it is going to do next..

As you are new trader, it is fine.. but sooner u get over this approach of predicting the next move.. better it will be. Market throws many signals to us and a smart trader will pick up those signals and take action..knowing very well that he/she might get wrong. So when we are wrong, cut the losses and move to next trade. When we are right.. follow the rule and keep trailing our profits.

Regarding opening gaps - we see them almost everyday. On some days it is small and on other days it is big. When there is big gap, it is because on some post market event in the world which no-one can predict. So IMO, it is almost impossible to predict exact size of gap open tomorrow.

Regarding carrying position to next day - it boils down to your trading rules for this. There is no universal answer for it. For example - I look at 90-10 signal at 3.15 / 3.25 pm i.e. if market is trading in top 90% of todays range and I am long then I carry full or partial position to next day. Similarly bottom 10% for carrying short positions to next day (knowing very well that Gaps might go against me.. hence I cut the position down so that gaps don't hit me too hard). Generally 90-10 days give trend continuation in first half on next day and then might follow with reversal or atleast retracement. So, plz spend time and draw your own rules to carry position overnight.

You did well with your put trade. Now move on to next trade. Stick to proper money management and protect your account balance. Market is known to take back your profits if we don't adopt right trading practice.

All the best.
Happy Trading
 
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