Check the link , for those interested in writing Options...
http://www.equis.com/events/webinars/?t=SEMWEB-MSSO&p=35712
http://www.equis.com/events/webinars/?t=SEMWEB-MSSO&p=35712
Make money in risk less option positional trade
- Thread starter soumyaranjanin
- Start date
- Tags nifty option nifty option trading option trading method option trading tricks option writing
Dear Friends!
Due to the higher volatility in the USD/INR pair the hybrid strategy which comes in my mind is
a. Buy future USD/INR at 56.75 one lot delta 1
b. Sell 57 ce at 0.37 delta 0.5748 and 56.50 pe at 0.35 delta -0.3394 each one lot
c. Buy 56 pe 4 lots at 0.20 delta -0.22
The combination of this strategy is known as the short strangle with future long and multiple put long to keep the delta below -0.20.
Why this strategy? Due to the high volatility in the instrument most of the options IVs are higher as compared to the underlying asset volatility. This fact informs us that the current option premium holds higher component of time value which is sure to decay in the days to come. Same time it gives the view that any fall in the underlying asset price at this junction may increase the volatility of the underlying asset.
To balance both the contradicting views as discussed above a short strangle with future long and multiple put long is recommended. The log normal property of the underlying asset says in the coming 5 days period the instrument may oscillate in the price band of 57.75 to 55.85. In both these price points the strategy can yield Rs350 to Rs600 profit. Theoretical loss works out to Rs1350 approximate if the strategy hold till expiry and USD/INR expires at 56.
Same strategy may be replicated in the index or stock which has annual volatility above 35% and shown the up move in price above 5% based on their weekly closing.
Wish you happy learning and trading
soumya Ranjan panda
CEO
Smartfinancein.com
Due to the higher volatility in the USD/INR pair the hybrid strategy which comes in my mind is
a. Buy future USD/INR at 56.75 one lot delta 1
b. Sell 57 ce at 0.37 delta 0.5748 and 56.50 pe at 0.35 delta -0.3394 each one lot
c. Buy 56 pe 4 lots at 0.20 delta -0.22
The combination of this strategy is known as the short strangle with future long and multiple put long to keep the delta below -0.20.
Why this strategy? Due to the high volatility in the instrument most of the options IVs are higher as compared to the underlying asset volatility. This fact informs us that the current option premium holds higher component of time value which is sure to decay in the days to come. Same time it gives the view that any fall in the underlying asset price at this junction may increase the volatility of the underlying asset.
To balance both the contradicting views as discussed above a short strangle with future long and multiple put long is recommended. The log normal property of the underlying asset says in the coming 5 days period the instrument may oscillate in the price band of 57.75 to 55.85. In both these price points the strategy can yield Rs350 to Rs600 profit. Theoretical loss works out to Rs1350 approximate if the strategy hold till expiry and USD/INR expires at 56.
Same strategy may be replicated in the index or stock which has annual volatility above 35% and shown the up move in price above 5% based on their weekly closing.
Wish you happy learning and trading
soumya Ranjan panda
CEO
Smartfinancein.com
Pair trade analysis of syndicate bank and dena bank for june 2013
Dear Friends!
Below analysis of syndicate bank and Dena bank suggests that buying the Dena bank at current price below 80 and selling syndicate bank above 123 is well recommended. Based on the uptrend and downtrend price parameter it is advisable to hedge dena bank with 75 pe at Rs 2 and 125 ce at Rs 3.50buy. The beta decoupling suggest profit of 22000 in strategy with projected loss at 10000 if the position is hold for 7 trading days.
Analysis parameter:
Jensen Alpha( SYNDIBANK-DENABANK ) : 0.3881 --- ( DENABANK-SYNDIBANK ) : -0.6487
Treynor Ratio( SYNDIBANK-DENABANK ) : -0.2558 --- ( DENABANK-SYNDIBANK ) : -1.0571
Sharp Ratio SYNDIBANK: -0.4401 --- DENABANK : -1.8778
Correlation ( SYNDIBANK-DENABANK ) : 0.7387
Net Beta Decoupling ( SYNDIBANK-DENABANK ) : -11.6451
Volatility SYNDIBANK: 42.403 --- DENABANK : 41.954
Up Trend SYNDIBANK: 126.4146 --- DENABANK: 81.4135 (calculated based on weekly volatility )
Down Trend SYNDIBANK: 117.7396 --- DENABANK: 75.8837(calculated based on weekly volatility )
*Jensen Alpha Recommended: BUY - DENABANK --- SELL - SYNDIBANK
*Sharp Ratio Recommended: BUY - DENABANK --- SELL - SYNDIBANK
* Treynor Ratio Recommended: BUY - DENABANK --- SELL - SYNDIBANK
*Beta Decoupling Recommended: BUY - DENABANK --- SELL - SYNDIBANK
*Correlations Recommended: Trade - Without Option Hedging
Wish you happy learning and trading
Ranjan
CEO
Smartfinancein.com
Dear Friends!
Below analysis of syndicate bank and Dena bank suggests that buying the Dena bank at current price below 80 and selling syndicate bank above 123 is well recommended. Based on the uptrend and downtrend price parameter it is advisable to hedge dena bank with 75 pe at Rs 2 and 125 ce at Rs 3.50buy. The beta decoupling suggest profit of 22000 in strategy with projected loss at 10000 if the position is hold for 7 trading days.
Analysis parameter:
Jensen Alpha( SYNDIBANK-DENABANK ) : 0.3881 --- ( DENABANK-SYNDIBANK ) : -0.6487
Treynor Ratio( SYNDIBANK-DENABANK ) : -0.2558 --- ( DENABANK-SYNDIBANK ) : -1.0571
Sharp Ratio SYNDIBANK: -0.4401 --- DENABANK : -1.8778
Correlation ( SYNDIBANK-DENABANK ) : 0.7387
Net Beta Decoupling ( SYNDIBANK-DENABANK ) : -11.6451
Volatility SYNDIBANK: 42.403 --- DENABANK : 41.954
Up Trend SYNDIBANK: 126.4146 --- DENABANK: 81.4135 (calculated based on weekly volatility )
Down Trend SYNDIBANK: 117.7396 --- DENABANK: 75.8837(calculated based on weekly volatility )
*Jensen Alpha Recommended: BUY - DENABANK --- SELL - SYNDIBANK
*Sharp Ratio Recommended: BUY - DENABANK --- SELL - SYNDIBANK
* Treynor Ratio Recommended: BUY - DENABANK --- SELL - SYNDIBANK
*Beta Decoupling Recommended: BUY - DENABANK --- SELL - SYNDIBANK
*Correlations Recommended: Trade - Without Option Hedging
Wish you happy learning and trading
Ranjan
CEO
Smartfinancein.com
Hi and thanks to post your idea.
It is a bit exotic, but so far no comments from me on that. My only question to you: You say: Long the future?
Nothing more on that or just: Long the future beside all the other legs? Would that mean, according to your idea, that you then would let the idea expire the way you mentioned or do you have any plans in between to adjust your trade according to this idea?
I may made a mistake, but to me it looks like a bearish idea. Please correct me if I am wrong. What will you do when market jumps up?
Take care and all the best / DanPickUp
It is a bit exotic, but so far no comments from me on that. My only question to you: You say: Long the future?
Nothing more on that or just: Long the future beside all the other legs? Would that mean, according to your idea, that you then would let the idea expire the way you mentioned or do you have any plans in between to adjust your trade according to this idea?
I may made a mistake, but to me it looks like a bearish idea. Please correct me if I am wrong. What will you do when market jumps up?
Take care and all the best / DanPickUp
I am not much in option greeks, but looks like you want to execute the short strangle first, then wait till the price reaches 56.75 to go long on the futures.
if it expires at 56 then,
1) 57 ce = zero i.e. loss of 37 paisa + expenses
2) 56.50 pe = 0.50 i.e. profit of 15 paisa & expenses
3) 56 pe = zero + expenses
4) futures = loss of 75 paisa + expenses
so, a total loss of 97 paisa + expenses if it expires at 56.
Now what is the expected profit ?? What is the expiry for best profit ?
Maybe, if the expiry is expected at 56 then a calendar spread in the futures would be a good choice.
if it expires at 56 then,
1) 57 ce = zero i.e. loss of 37 paisa + expenses
2) 56.50 pe = 0.50 i.e. profit of 15 paisa & expenses
3) 56 pe = zero + expenses
4) futures = loss of 75 paisa + expenses
so, a total loss of 97 paisa + expenses if it expires at 56.
Now what is the expected profit ?? What is the expiry for best profit ?
Maybe, if the expiry is expected at 56 then a calendar spread in the futures would be a good choice.
the theoretical projection given by time pass is totally wrong.
no1: 57 call sold hence profit rs0.37 if it fall to 56 and close at 56
no2: 56.50 pe will have Rs0.15 loss
no3, 56 put option will become zero, fut will have loss rs.75 ....... you can net it out
timepass also ignore the number of days i have given in the call to hold.which is not till expiry
current scenario:
the 57 call at 1.18 on 12th june 2013 loss rs 0.81 time 1:06 p.m.
fut at 58.09 profit rs 1.34 on 12th june 2013 time 1:06 p.m.
56 pe Rs0.04 loss rs -0.16 on 12th june 2013 time 1:06 p.m.
net loss in strategy Rs110
i will advice trader to book loss in this and go with the same strategy with fut buy , 58.50 ce sell and 57.75 put buy 4 lots in current situation .
Note: often trader make the mistake to project the profit and loss in option from the theoretical option price which completely ignores the time value . which is not correct according to me.
no1: 57 call sold hence profit rs0.37 if it fall to 56 and close at 56
no2: 56.50 pe will have Rs0.15 loss
no3, 56 put option will become zero, fut will have loss rs.75 ....... you can net it out
timepass also ignore the number of days i have given in the call to hold.which is not till expiry
current scenario:
the 57 call at 1.18 on 12th june 2013 loss rs 0.81 time 1:06 p.m.
fut at 58.09 profit rs 1.34 on 12th june 2013 time 1:06 p.m.
56 pe Rs0.04 loss rs -0.16 on 12th june 2013 time 1:06 p.m.
net loss in strategy Rs110
i will advice trader to book loss in this and go with the same strategy with fut buy , 58.50 ce sell and 57.75 put buy 4 lots in current situation .
Note: often trader make the mistake to project the profit and loss in option from the theoretical option price which completely ignores the time value . which is not correct according to me.
Last edited:
Covered call option strategy using 1SD formula
What is a covered call option strategy? Covered call or covered put option strategy is a method in which the trader buy the future and sell a call option.
Why covered call strategy? When the trader expect the price will move in a narrow range with very less chance of down trend at that situation trader decides the covered call option strategy. Same way when trade expect the price to move in a narrow range with very less chance to move up that time trader initiate the covered put strategy.
Covered call or covered put option strategy is a partial close end option strategy. Close end option strategy are the strategy which limited profit and limited loss. In covered strategy the loss is unlimited and profit is limited.
How successful the covered strategy? It give no success if taken without any technical understanding. It also produce huge loss if trader does not make it a close end strategy.
How to implement covered call or covered put strategy successfully? It is very simple to make this strategy successful with slight modification.
a. Form the strategy when the trend gives break out as per the 1SD rule.
b. Make it net delta zero strategy it is optional.
c. Exit the strategy in loss if the underlying cross the death zone (i.e. 0.786 retracement price) against the trend. Book profit if price cross the 0.786 retracement in the direction of the trend.
Refer the example carefully to understand how this strategy preform during the month of November 2015 with the above idea.
Example: Using 1SD level on 30th October I have recommended the following for November 1st week 2015 “Trend expectation: Uptrend conformation 8120, successful cross over above 8179 will target 8220-8274-8333. Down trend conformation 8047 successful fall below 7989 will trigger fall till 7947-7893-7834”
out come of My 1st week view for November: 2nd November downside breakout failed and 3rd November upside breakout given target till 0.5 retracement. 5th November breakout in the down side achieved till 0.888 retracement.
Say on 2nd November we have initiated covered put - sell future at 8047, sell 8000 pe @ 132 (i.e. close near to 7989) buy 8200 ce @78 (i.e. near to 8179) each one lot.
We will close the strategy in loss if price moves above 8220 or book profit if price falls below 7947. Considering the 6th November low as 7947 if I will project the profit and loss then future profit is 100, 8200 ce days low at 42.5 hence loss 35.5 point,8000 pe days high 166 loss 34 point. Hence net profit is 23.5X75=1762.5.
Using 1SD level on 6th November I have recommended the following for November 2nd t week 2015 “Trend expectation: Uptrend conformation 8029, successful cross over above 8102 will target 8133-8217-8289. Down trend confirmation 7940. Successful fall below 7869 will trigger fall till 7837-7752-7680.”
out come of My 2ND week view for November: 9TH November downside breakout given target till 1.236 retracement ACHIVED till 13th November 2015.
On 9th November 2015 if I will sell future at 7940, sell 7900 pe @83 (i.e. close near to 7869) and buy 8100 ce one lot at 33.80. we will close the strategy if the nifty move above 8133 we will book profit if the nifty fall below 7752.
13th November 2015 7900 pe @187.50 loss 104.5, profit in future 7742.50 is 197.50, 8100 ce at 6.30 loss, net profit 65.50X75=4912.50
Using 1SD level on 14th November I have recommend the following for November 3rd week 2015 “Trend expectation: Uptrend conformation 7803, successful cross over above 7855 will target 7893-7941-7994. Down trend conformation 7737 successful fall below 7684 will trigger fall till 7847-7598-7546. “
My 3rd week view for November: 16th November opening downtrend breakout given fail and uptrend achieved till 0.618, 17th November uptrend achieved till 0.786, 18th November downtrend breakout given and failed on 19th and achieved till 0.618 retracement. 20th uptrend achieved till 0.888 retracement. Though uptrend targets achieved 4 times during the week but 2 times the down trend failed. We may classify this week to be a volatile week.
16th November sell future at open price 7738, sell 7700 pe, at open price 63 , buy 7850 ce open price at 38 each one lot. 17th November it has touched 7880.65 high this is my exit with loss point which is 2point above the 0.786 retracement level also days high . Taking this price point as reference point I will calculate profit and loss. Loss in future is 142.65, profit in 7850 ce at day’s high 85.50 is 47.80, profit in 7700 pe at day’s low 18.25 is 44.75, net loss -3757.60, if you swing in this same strategy based on the 4times uptrend achievement and 2 times down trend fail you will get net profit around 3000 .
Conclusion: The objective of protecting the capital by 95% and achieving a monthly consistent return of 3 to 4% post expenditure can be achieved by this strategy if used along with the 1SD levels.
Other strategy which you can use successfully with 1SD formula:
1. Cross calendar option strategy on 1SD trend cross over
2. 10 bull or bear spread along with the future long or short on 1SD trend cross over
More on 22 option strategy for Indian market you can find on my book on ‘Master Key to future and option’
how to calculate 1SD levels you will get from the other threads in this forum? http://www.traderji.com/derivatives/99763-nifty-future-trend-per-1sd-formula.html
What is a covered call option strategy? Covered call or covered put option strategy is a method in which the trader buy the future and sell a call option.
Why covered call strategy? When the trader expect the price will move in a narrow range with very less chance of down trend at that situation trader decides the covered call option strategy. Same way when trade expect the price to move in a narrow range with very less chance to move up that time trader initiate the covered put strategy.
Covered call or covered put option strategy is a partial close end option strategy. Close end option strategy are the strategy which limited profit and limited loss. In covered strategy the loss is unlimited and profit is limited.
How successful the covered strategy? It give no success if taken without any technical understanding. It also produce huge loss if trader does not make it a close end strategy.
How to implement covered call or covered put strategy successfully? It is very simple to make this strategy successful with slight modification.
a. Form the strategy when the trend gives break out as per the 1SD rule.
b. Make it net delta zero strategy it is optional.
c. Exit the strategy in loss if the underlying cross the death zone (i.e. 0.786 retracement price) against the trend. Book profit if price cross the 0.786 retracement in the direction of the trend.
Refer the example carefully to understand how this strategy preform during the month of November 2015 with the above idea.
Example: Using 1SD level on 30th October I have recommended the following for November 1st week 2015 “Trend expectation: Uptrend conformation 8120, successful cross over above 8179 will target 8220-8274-8333. Down trend conformation 8047 successful fall below 7989 will trigger fall till 7947-7893-7834”
out come of My 1st week view for November: 2nd November downside breakout failed and 3rd November upside breakout given target till 0.5 retracement. 5th November breakout in the down side achieved till 0.888 retracement.
Say on 2nd November we have initiated covered put - sell future at 8047, sell 8000 pe @ 132 (i.e. close near to 7989) buy 8200 ce @78 (i.e. near to 8179) each one lot.
We will close the strategy in loss if price moves above 8220 or book profit if price falls below 7947. Considering the 6th November low as 7947 if I will project the profit and loss then future profit is 100, 8200 ce days low at 42.5 hence loss 35.5 point,8000 pe days high 166 loss 34 point. Hence net profit is 23.5X75=1762.5.
Using 1SD level on 6th November I have recommended the following for November 2nd t week 2015 “Trend expectation: Uptrend conformation 8029, successful cross over above 8102 will target 8133-8217-8289. Down trend confirmation 7940. Successful fall below 7869 will trigger fall till 7837-7752-7680.”
out come of My 2ND week view for November: 9TH November downside breakout given target till 1.236 retracement ACHIVED till 13th November 2015.
On 9th November 2015 if I will sell future at 7940, sell 7900 pe @83 (i.e. close near to 7869) and buy 8100 ce one lot at 33.80. we will close the strategy if the nifty move above 8133 we will book profit if the nifty fall below 7752.
13th November 2015 7900 pe @187.50 loss 104.5, profit in future 7742.50 is 197.50, 8100 ce at 6.30 loss, net profit 65.50X75=4912.50
Using 1SD level on 14th November I have recommend the following for November 3rd week 2015 “Trend expectation: Uptrend conformation 7803, successful cross over above 7855 will target 7893-7941-7994. Down trend conformation 7737 successful fall below 7684 will trigger fall till 7847-7598-7546. “
My 3rd week view for November: 16th November opening downtrend breakout given fail and uptrend achieved till 0.618, 17th November uptrend achieved till 0.786, 18th November downtrend breakout given and failed on 19th and achieved till 0.618 retracement. 20th uptrend achieved till 0.888 retracement. Though uptrend targets achieved 4 times during the week but 2 times the down trend failed. We may classify this week to be a volatile week.
16th November sell future at open price 7738, sell 7700 pe, at open price 63 , buy 7850 ce open price at 38 each one lot. 17th November it has touched 7880.65 high this is my exit with loss point which is 2point above the 0.786 retracement level also days high . Taking this price point as reference point I will calculate profit and loss. Loss in future is 142.65, profit in 7850 ce at day’s high 85.50 is 47.80, profit in 7700 pe at day’s low 18.25 is 44.75, net loss -3757.60, if you swing in this same strategy based on the 4times uptrend achievement and 2 times down trend fail you will get net profit around 3000 .
Conclusion: The objective of protecting the capital by 95% and achieving a monthly consistent return of 3 to 4% post expenditure can be achieved by this strategy if used along with the 1SD levels.
Other strategy which you can use successfully with 1SD formula:
1. Cross calendar option strategy on 1SD trend cross over
2. 10 bull or bear spread along with the future long or short on 1SD trend cross over
More on 22 option strategy for Indian market you can find on my book on ‘Master Key to future and option’
how to calculate 1SD levels you will get from the other threads in this forum? http://www.traderji.com/derivatives/99763-nifty-future-trend-per-1sd-formula.html
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