I'm trying to find a trading model basis follows:
1. Which is not very time intrusive.
2. Trading strategy is rather stable. No frequent changes.
3. Which is scalable.
4. Finally and importantly which gives a decent return (>=2% per month)
After trying out various options strategies I thought of Nifty covered call strategy.
1. The fundamental assumption is that India economy in bullish phase. Therefore, irrespective of temporary setbacks, nifty will grow over a period of time.
2. A huge crash - 20-30% in a month followed by recovery is ruled out as of now.
3. This is not alternative to my equity investments. I just shift some of my debt portfolio to this high risk high return strategy.
With this the model is as under:
1. Buy 500 shares of Nifty Bees representing one lot of Nifty. This will entail an investment of Rs. 2.25 lacks at the current level of Nifty.
2. The target is to increase these 500 shares to around 700 shares after one year, irrespective of Nifty levels.
3. Short next month nifty call. Depending upon the view of market the strike price can be determined. (Bullish: OTM, Bearish: ITM, Sideways: ATM)
4. The initial premium received would be around 3-5%, up to which is the protection on the downside and which limits the upside.
5. If market moves sideways, there would be time decay of around 2% which is the net return.
6. One needs to play on market volatility to protect the loss. As this model fails if there are sharp movements in the market in short span of time.
I would initiate the strategy next week by buying 500 Nifty bees and shorting one call of December series probably at strike price of Rs. 5000.
I will go slow in the initial few months refining my strategy before scaling it up.
Would sincerely appreciate the views as I'm still hazy in my mind in certain areas.
1. Which is not very time intrusive.
2. Trading strategy is rather stable. No frequent changes.
3. Which is scalable.
4. Finally and importantly which gives a decent return (>=2% per month)
After trying out various options strategies I thought of Nifty covered call strategy.
1. The fundamental assumption is that India economy in bullish phase. Therefore, irrespective of temporary setbacks, nifty will grow over a period of time.
2. A huge crash - 20-30% in a month followed by recovery is ruled out as of now.
3. This is not alternative to my equity investments. I just shift some of my debt portfolio to this high risk high return strategy.
With this the model is as under:
1. Buy 500 shares of Nifty Bees representing one lot of Nifty. This will entail an investment of Rs. 2.25 lacks at the current level of Nifty.
2. The target is to increase these 500 shares to around 700 shares after one year, irrespective of Nifty levels.
3. Short next month nifty call. Depending upon the view of market the strike price can be determined. (Bullish: OTM, Bearish: ITM, Sideways: ATM)
4. The initial premium received would be around 3-5%, up to which is the protection on the downside and which limits the upside.
5. If market moves sideways, there would be time decay of around 2% which is the net return.
6. One needs to play on market volatility to protect the loss. As this model fails if there are sharp movements in the market in short span of time.
I would initiate the strategy next week by buying 500 Nifty bees and shorting one call of December series probably at strike price of Rs. 5000.
I will go slow in the initial few months refining my strategy before scaling it up.
Would sincerely appreciate the views as I'm still hazy in my mind in certain areas.