Modified Strategy to earn 15%-20% a month (Strategy inspired by Linkon7's strategy)

[TraderJunkie]

Re: Modified Strategy to earn 15%-20% a month (Strategy inspired by Linkon7's strateg

As I have said - writing the straddle gives you a good 300 points room to do NF trades as well as options trades without losing money if you mange those well.

I am not saying this strategy and method of functioning is for everyone

 

[TraderJunkie]

Re: Modified Strategy to earn 15%-20% a month (Strategy inspired by Linkon7's strateg

Can you please provide detailed strategy to earn 6% to 8% net per month in which daily option trading strategy is not involved & maximum you have to do shifting in strike price twice in a trade.

Regards
karanm

For 6% - just write a strangle and manage it on the boundary conditions witha NF leg !

 

[true_promote]

Re: Modified Strategy to earn 15%-20% a month (Strategy inspired by Linkon7's strateg

The strategy is not very clear to me. I did read Linkon's thread but still confused. Could you plz help me out?
Here's what I understood till now:

for nifty spot 8808 here's the setup
1)Buy a short ATM straddle CE 8800 and PE8800
2)Go long NF since its currently 8808(>8800)
3)if nifty falls below 8800 then go short NF

And as per my understanding we are supposed to go long/short on NF(i.e manage the trade) as per market till the option expiry and book our profits on expiry day

Now plz explain whats the
1) profit booking intraday that you were telling
2)management to reduce brokerage and gap openings

Thanks

 

[suri112000]

Re: Modified Strategy to earn 15%-20% a month (Strategy inspired by Linkon7's strateg

The trade as it stands currently. The grey row is the option that I closed , rest all legs are open. Notice the new PE addition as a hedge for the NF leg.

Strike Instrument Date Trade Quantity Buy/Sell price premium received CMP (NF) CMP Closing Value P&L
8600 CE 29/08/2016 Sep sell 75 131 9825 8843 -275 -20625 -10800
8600 PE 29/08/2016 Sep sell 75 110 8250 8843 38.25 2868.75 5381.25
8700 CE 29/08/2016 Sep buy 300 87.5 0 8843 196.6 26250 32730
8600 NF 29/08/2016 Sep buy 75 8610 0 8843 8843 645750 17475
8500 PE 02/08/2016 Sep buy 300 28.5 0 8843 25.5 8550 -900
53711.25
Margin used 125500 M2M 42.80%

Writing of straddle understood. You might have written it when nifty around 8600 levels.

when did you open Nifty futures trade? I mean what was Nifty level when you opened Nifty futures trade.
Did you hedge Nifty futures trade with PE immediately at prevailing levels.
Again for 75 qty of Nifty futures your hedge of PE is of 300 qty. The gain in Nifty futures is offset by loss in PE because of delta netral. Then where is the protection for threating side of straddle.

Secondly what is the need of opening new CE trade, when the threatening side is protected by Nifty futures trade? Or is it a directional bet not being a part of protecting the threatened side. My idea here is....had the Nifty reversed, Nifty futures is somewhat protected by PE bought. But the 300 qty CE buy seems unprotected unless you lean on natural protection given by CEs ie maximum premium loss.

My argument is that.... you could have opted for one of them.

1. One lot Nifty futures with 2 lots PE hedge instead of 4 lots.
2. 2 lots CE buy instead of 4 lots CE buy.

Now the market moved in favour of heavy quantity but had the market moved to down, this heavy qty trades could have resulted in overall loss though original straddle is proved right.

Please explain your way of taking the trade.

 

[Reyansh]

Re: Modified Strategy to earn 15%-20% a month (Strategy inspired by Linkon7's strateg

- Short straddle not good for not day traders, as only limited profit and very high risk. Long Nifty future as hedge must be managed according to what is defined as rules in the technical analyzing part and break even points from the options side. Again a difficult game, specific when playing around with the amount of positions to take at what moment, level and conditions. So this strategie only good for very educated traders in options and technical analyzes and money managment.

- Good question about what if market would have moved down. As his assumption may have been it must go up, so buying calls. If his assumption would have been market goes down, so I guess buying puts instead of calls would be what he would have done. Just my two cents.

 

[TraderJunkie]

Re: Modified Strategy to earn 15%-20% a month (Strategy inspired by Linkon7's strateg

Writing of straddle understood. You might have written it when nifty around 8600 levels.

when did you open Nifty futures trade? I mean what was Nifty level when you opened Nifty futures trade.
Did you hedge Nifty futures trade with PE immediately at prevailing levels.
Again for 75 qty of Nifty futures your hedge of PE is of 300 qty. The gain in Nifty futures is offset by loss in PE because of delta netral. Then where is the protection for threating side of straddle.

Secondly what is the need of opening new CE trade, when the threatening side is protected by Nifty futures trade? Or is it a directional bet not being a part of protecting the threatened side. My idea here is....had the Nifty reversed, Nifty futures is somewhat protected by PE bought. But the 300 qty CE buy seems unprotected unless you lean on natural protection given by CEs ie maximum premium loss.

My argument is that.... you could have opted for one of them.

1. One lot Nifty futures with 2 lots PE hedge instead of 4 lots.
2. 2 lots CE buy instead of 4 lots CE buy.

Now the market moved in favour of heavy quantity but had the market moved to down, this heavy qty trades could have resulted in overall loss though original straddle is proved right.

Please explain your way of taking the trade.

Thanks for the detailed post ! I will explain my thinking behind the mix of so many trades !

So the basic setup is just writing the straddle AND taking the NF trade that day itself (of-course depending on what side NF moves). In this case , I did the following.

1. Wrote the straddle at 8580 and once market was above 8600 I took the NF long as well.

2. I knew I had a broad range of +- 300 points to play with for the initial trade of NF.

Once Nifty opened gap up of 20-30 points and was holding - this is where I got aggressive and also bought 300 CE (This trade is not needed, but that was what I did for that intra-day). Since we got a huge move the CE zoomed and that is when I decided to hold it for a day more since there was 100 points on CE to play with along with NF having zoomed as well. The PEs were taken as a hedge to NF. The CE were naked knowing that I had a good 100 points on the CE to play.

Now ideally - you don't need to play the CE leg the legs to be played should be

1. Writing the straddle and taking the NF using the straddle strike as a pivot is all you need.

2. When the NF moves substantially you need to manage that trade with a PE.

Hope this explains my thinking.

 

[TraderJunkie]

Re: Modified Strategy to earn 15%-20% a month (Strategy inspired by Linkon7's strateg

If market would have moved down, I would have gone short on NF below 8600. This is the real time management needed.

Guys - writing a straddle NEEDS real time management else you are guranteed a loss. It all depends on how it affects your psychology.

For me , I love the game of defending a profit as opposed to going after a profit - hope this clarifies my thoughts

So yes, in a sideways market you might have to take multiple trades on NF it market jumps around the pivot - like down 30 , up 50, down 30 , up 30 etc. I am okay with that as I know that the NF trades need just 2 points profit to cover the cost on each trade. And it I do lose few points , those get deducted from the straddle points.

The hedge of PE on NF long or CE on NF short is only relevant if you are in a decent profit on NF and need to hold overnight.

 

[Reyansh]

Re: Modified Strategy to earn 15%-20% a month (Strategy inspired by Linkon7's strateg

Built on your way of doing it (TraderJunkie) with puts and calls and the future as underlying, the same can be done with only calls or puts and the share as the following shows:

http://www.optionsuniversity.com/blog/the-butterfly-and-synthetic-positions/

Did you ever try your synthetic iron butterfly with the share as underlying or do you only do it with the nifty future as underlying?

By the way: Did you ever try delta 100 with calls or puts on one side and on the other side 100 delta with the underlying?

 

[TraderJunkie]

Re: Modified Strategy to earn 15%-20% a month (Strategy inspired by Linkon7's strateg

Built on your way of doing it (TraderJunkie) with puts and calls and the future as underlying, the same can be done with only calls or puts and the share as the following shows:

http://www.optionsuniversity.com/blog/the-butterfly-and-synthetic-positions/

Did you ever try your synthetic iron butterfly with the share as underlying or do you only do it with the nifty future as underlying?

By the way: Did you ever try delta 100 with calls or puts on one side and on the other side 100 delta with the underlying?

I trade the Nifty only for the primary reason that options are not very liquid on stocks. Even for the best Nifty stocks you will see that the options are illiquid and the difference between ask and buy is huge !

 

[msa5678]

Re: Modified Strategy to earn 15%-20% a month (Strategy inspired by Linkon7's strateg

For 6% - just write a strangle and manage it on the boundary conditions witha NF leg !

Sir, pls give an example for the same. Making 6% per month is a lot for many traders here. And it will be helpful with an example trade.

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