At 7550 when i plan to do the trade, i will sell 7500 call around 135-139 .
So, if Nifty closes at 7700 , i lose only 60-65 points on call.
Where the loss will be great is in the put . It will expire worthless. About 180-190 down the hole. So, in net say 190+60 = 250 points loss if it expires at 7700.
Now what if it expires at 7000, my 190 put will get sold 700 i.e. 500 points there plus 135 on the call. It nets 635 . That's the potential profit.
One of my friends advised me to buy a 7800 call at 18 or 7700 call at 33 or whatever the prevailing price is at that point in time.
Now the question is if it has to expire at 7700 only , i will lose the call money also.
Now what if the expiry is at 7500 or below , there i make some good money.Suppose it expires at 7500 , i keep the call premium and make some 20 points on the put.So, at 7500 expiry , my profit is 150-160.
At 7700 expiry my loss is around 250.
Here the main question is about the direction of the market. Now i think the direction will be down .Now what is the best option strategy for me to lose the minimum and reap the maximum.
Lets say what i plan to do is foolhardy like selling 7500 call and buying 7700 put.So, keeping my bias in mind what would be the best strategy for me.
buy a simple OTM put and sit tight . That's why i came here to the guys who understand options well for advice.
Looking at the monthly range of Nifty , it has been around 400-600 points.
We are already at the top of the range at around 650 points. Now unless something drastic happens , we find a trillion barrel of crude under somewhere or suddenly all the defaulters have change of heart and pay back all their dues to the banks in general.
China has been downgraded by Moodys to negative . Their exports are down by 25%. that's the official figure . Only GOD knows the real figure. I believe it was a furious typical bear market rally on back of short covering. The futures are back to premium indicates short covering is over. The entire previous week the way market traded looks like distribution to me.