Low Risk Options Trading Strategy - Option Spreads

[mmca2006]

Each strike has its own delta and as a result, there is net delta for spread position.
If underlying goes to say 280/290 level, then delta of both the strike will reach very close to 1.00 (maybe 1 and 0.98) giving net delta very close to 0. In such case you might be able to see max profit early. If underlying just goes to 252 / 255, then net delta of spread will be away from 0 and hence you will not see max profit.

To assess the impact of various variable on price, plz use the tool like optionoracle.
Keep in mind that tool will just give u some theoratical result and in reality, it might be different. So be prepared for deviation from actual result shown by tool.

Happy Trading.

AW10 thanks lot for this strategy , :thumb:
much better than to buy nacked put/call on the basis of direction of the market,however i have a very basic question, can I apply this strategy for stocks i.e other than nifty ? Will it be proper to use this strategy for shares like REC, PFC etc where difference between ask and bid price relating to strike price is noticable . I have applied it for IFCI and got profit but I need your view before it's further application for stocks.

 

[DanPickUp]

AW10

Hope you are well as I not have seen you here for a long time.

 

[AW10]

AW10 thanks lot for this strategy , :thumb:
much better than to buy nacked put/call on the basis of direction of the market,however i have a very basic question, can I apply this strategy for stocks i.e other than nifty ? Will it be proper to use this strategy for shares like REC, PFC etc where difference between ask and bid price relating to strike price is noticable . I have applied it for IFCI and got profit but I need your view before it's further application for stocks.

Due to wider spread on stock options, your net cost of spread goes against your trade (i.e. u end up more during buying and get less during sell). Due to low volume, market maker, or other professional trader who are trading against you, give poorer price to you.

Hence IMO, better to stick to counters with high trade volume on option (chk the contract traded not the trading volume).

Hope this helps.
Happy trading.

 

[msri]

Dear Mr. AW10,
I am very much impressed with your option spread strategy and continuously trading as per your guidelines. Kindly tell me how many spread trades I can initiate and close in a month i.e. during a contract period. when ever i reached my target profit I close my trade and initiate a fresh one in the same month. Is there any guidelines till what time I can take a spread in a month. Pl. clarify

 

[comm4300]

came across Ajay Jain's ratio trading option strategy [not to be confused with ratio spread that comes up in google search result] which is claimed to be "highly successful and safe" strategy;

the strategy basically deals with premium difference [ratio] on put side/call side...5400 put at 60 and 5500 put at 65 means the ratio comes to 0.923 ....and the strategy involves getting in at a ratio and getting out when the ratio changes.....to be done intraday...

i haven't invested xxxx rupees on the book yet....not before i get some reviews from option experts here...

Experts : your opinion on this strategy? and could we implement it on swing basis instead of intraday?

 

[jain.er]

please explain more

 

[AW10]

came across Ajay Jain's ratio trading option strategy [not to be confused with ratio spread that comes up in google search result] which is claimed to be "highly successful and safe" strategy;

the strategy basically deals with premium difference [ratio] on put side/call side...5400 put at 60 and 5500 put at 65 means the ratio comes to 0.923 ....and the strategy involves getting in at a ratio and getting out when the ratio changes.....to be done intraday...

i haven't invested xxxx rupees on the book yet....not before i get some reviews from option experts here...

Experts : your opinion on this strategy? and could we implement it on swing basis instead of intraday?

I don't have any experience with such strategy. There is concept of put-call parity in option pricing that helps in determining fair value of put or call option. Due to market condition, this equation is not in balance at times and hence gives opportunity to arbitrage and make money by price imperfection.

Would like to share my view on this (and on our mindset to search for holy grail trading strategy)

- Market is full of lot smarter people then me. They have much better tools at their disposal to benefit from such arbitrage situations. Before I can identify such opportunitys, probably they are already closing their position cause such imperfection can't last for long. Hence, considering my Trading Situation, tools in my trading my arsenal - does it make sense to consider this strategy ?

- If I google, I find 100 options strategies to trade. If I spend another xxxx Rs., I get 1 more, i.e 101 strategies with me. If can't make money with 100 strategies, then will 101 make any difference?

- Am I trading to make money or to answer "how mayny strategies I know and tried " or "I want to diversify my trading by adding one more profitable strategy"? IMO, strategies alone don't make money in trading success. They are important point, but trading success needs many more inputs that just a strategy. Most important of that is "YOU AS A TRADER" and "YOUR TRADING BELIEFs".

Hope this helps the reader.
(PS - nothing personal against comm4300 or ajay jain but just sharing my thoughts cause I have seen many traders (and I have also done that), always looking for new trading strategy).

Happy Trading

 

[tnsn2345]

..... IMO, strategies alone don't make money in trading success. They are important point, but trading success needs many more inputs that just a strategy.....

......I have seen many traders (and I have also done that), always looking for new trading strategy).....

A perfect 10 on 10 !!!!!

Regards,

 

[NTrader42]

I have seen many traders always looking for new trading strategy.
If can't make money with 100 strategies, then will 101 make any difference?

:clapping: :clap: :clapping:

 

[DanPickUp]

came across Ajay Jain's ratio trading option strategy [not to be confused with ratio spread that comes up in google search result] which is claimed to be "highly successful and safe" strategy;

the strategy basically deals with premium difference [ratio] on put side/call side...5400 put at 60 and 5500 put at 65 means the ratio comes to 0.923 ....and the strategy involves getting in at a ratio and getting out when the ratio changes.....to be done intraday...

i haven't invested xxxx rupees on the book yet....not before i get some reviews from option experts here...

Experts : your opinion on this strategy? and could we implement it on swing basis instead of intraday?

Hi comm4300

Depending on how fine tuned the strategy is as a final one, you will need a very accurate option data feed provider for your trading platform or option strategy software.

If the ratio is very fine tuned, you then also have to be able to program this software or platform with the measurements for the ratios you want to see and trade, as you have to be quick in taking the trade as a whole.

One software you can use is OptionVue6 ( http://www.optionvue.com/software.html ) and as a platform you can use CQG ( http://www.cqg.com/Technical-Analysis/Options-Analysis.aspx )

If you not have or not can afford such software or such a platform, you can widen the ratio to a level which is makable for you. You will have less signals when using a wider ratio.

On the other hand: Doing just a simple credit spread with out having to know about all that software and platform and ratio is surely not the worst idea. Or what do you think ?

DanPickUp