nifty straddle : Target :- the whole premium....!

what'll be the profit / loss i'll make by this strategy on 30th April ?


  • Total voters
    20
  • Poll closed .

linkon7

Well-Known Member
#1
Based on the closing as on Friday 27th' March i had planned to do the following :

sell 2 lots of 3100 call april at 145
and
sell 2 lots of 3100 put april at 117

total premium collected = 262

our lower break even point is 2838
and
our upper break even point is 3362

strategy :
buy 2 lot of nifty futures above 3100 and keep it till nifty falls below 3100, where i intend to reverse my position. i.e. I hold on to 2 lots of nifty long above 3100 and 2 lots of nifty shorts below 3100.

whichever direction nifty closes above or below 3100 till the expiry.... i get to keep the net premium collected.

total investment :
1,25,000 /- assuming 16% margin is charged the broker for holding nifty positions

target profit : 26,000 /-

time frame : till end of expiry of April series.

how it works :
on expiry above 3100, the profit i make by going long on nifty will be nullified by the loss i make on selling the 3100 call.
on expiry below 3100, the profit i make on going short on nifty will be nullified by the loss i make on selling the 3100 put.

Shortcomings of this strategy :
1. if the nifty becomes directionless at 3100 and continues to trade plus minus 20 or 30 points pivoting 3100.

then,
we just let the premium decay and watch out for a break down or break out.... above or below 3100.

2. if there is a massive gap down or gap up around 3100.

then we have to cut some amount of net targeted profit we intend to collect. and continue to hold nifty position in the desired direction.

3. worst case scenario : nifty gaps down or up 200 points from above 3100 to below 3100
then,
we order a pizza and curse the dilevery boy for our misfortunes. :



happy trading...
linkon7

ps : no plan is too good to be true.... there has to be a catch and i want to find out what the catch is by experience. I intend to trade this strategy and will post on how the strategy played out ....
 

SriVijay

Active Member
#2
Based on the closing as on Friday 27th' March i had planned to do the following :

sell 2 lots of 3100 call april at 145
and
sell 2 lots of 3100 put april at 117

total premium collected = 262

our lower break even point is 2838
and
our upper break even point is 3362

strategy :
buy 2 lot of nifty futures above 3100 and keep it till nifty falls below 3100, where i intend to reverse my position. i.e. I hold on to 2 lots of nifty long above 3100 and 2 lots of nifty shorts below 3100.

whichever direction nifty closes above or below 3100 till the expiry.... i get to keep the net premium collected.

total investment :
1,25,000 /- assuming 16% margin is charged the broker for holding nifty positions

target profit : 26,000 /-

time frame : till end of expiry of April series.

how it works :
on expiry above 3100, the profit i make by going long on nifty will be nullified by the loss i make on selling the 3100 call.
on expiry below 3100, the profit i make on going short on nifty will be nullified by the loss i make on selling the 3100 put.

Shortcomings of this strategy :
1. if the nifty becomes directionless at 3100 and continues to trade plus minus 20 or 30 points pivoting 3100.

then,
we just let the premium decay and watch out for a break down or break out.... above or below 3100.

2. if there is a massive gap down or gap up around 3100.

then we have to cut some amount of net targeted profit we intend to collect. and continue to hold nifty position in the desired direction.

3. worst case scenario : nifty gaps down or up 200 points from above 3100 to below 3100
then,
we order a pizza and curse the dilevery boy for our misfortunes. :



happy trading...
linkon7

ps : no plan is too good to be true.... there has to be a catch and i want to find out what the catch is by experience. I intend to trade this strategy and will post on how the strategy played out ....
i am subscribing your thread to know the progress.......rocking last line man....
 

linkon7

Well-Known Member
#3
On Monday morning :
nifty opened gap down. shorted nifty at 3060.
sold 3100 call April at 110.

waited the whole day for a good position to short 3100 put, finally shorted it at 185.

status of the short straddle on Monday


sold 3100 put 2 lots @ 185 current price : 187, loss : Rs. -200
sold 3100 call 2 lots @ 110 Current price : 81, Profit : Rs. 2900
sold nifty futures 2 lots @ 3060 current price : 2995, Profit : Rs. 6500

Net position so far : profit : Rs. 9200

revised target
the actual value of the straddle as of now is 3100- closing of spot (2978) = 122
The profit earned so far in nifty is 92
premium on the straddle = cost of straddle (295) - actual value (122) = 173

so my profit target stands revised at 173+92 = 265
 

MurAtt

Well-Known Member
#4
Now if 2morrow u hv a gap up opening or during trading hours the nifty moves to say 3110, and then 3155 and eventually at 3195 on expiry, your net position will be minus coz u have shorted 2 Nifty at 3060.

So do you plan to reverse your NF if it goes above 3100?
 

linkon7

Well-Known Member
#5
on Tuesday, nifty opened gap up, and had a steady rise to 3050, profit booking at the end of the year dragged it down to 3017 levels.

status on Tuesday (of the short straddle initiated on Monday, 30th' March'09)

scrip: cost: present: diff: profit/loss

3100 CE: 110: 83: 27: 2,700.00
3100 PE: 185: 165: 20: 2,000.00
nifty: 3060: 3017: 43: 4,300.00

Total : profit = 9,000.00

statistics
Actual value of the straddle : 3100 - 3017 = 83
current value of the straddle : 248
profit from the straddle : 295-248 = 47
premium on the straddle : 295-83 = 212
profit lost on nifty : 65-43 = -22


Observation:

1. i should've sold 3000 put instead 3100 put on Monday. targeting a smaller net premium. The actual value of the of the straddle would be just Rs 5. (instead of Rs. 122 /-). i could keep the profit earned from nifty short at 3060 as short was required to be initiated at 3000 nifty only.

2. when the market rallied to 3050 levels, my profit had reduced to 5500 /-. The money lost in nifty futures was not compensated by the straddle.

3. on hindsight, by shorting 3100, i can safely remain short below 3100 with having to worry about whipsaws at that 3000 level.

Note : i dont want to job the nifty position for a few points as the whole system should ideally work out without requiring any action from my end other that reversing position if nifty breaks 3100 on the upside.

lets hope for the best for tomorrow...!

:)
linkon7
 

linkon7

Well-Known Member
#6
Now if 2morrow u hv a gap up opening or during trading hours the nifty moves to say 3110, and then 3155 and eventually at 3195 on expiry, your net position will be minus coz u have shorted 2 Nifty at 3060.

So do you plan to reverse your NF if it goes above 3100?
yes, that's the intention. 3100 is my pivot, and i reverse my position and go long on 3100.

i got 295 points in the bag. so lets see how many points i can retain till the expiry....
 

MurAtt

Well-Known Member
#7
Cannot the short be called a naked short since the sell of the call and the put nullify each other?
Then u may as well keep 3100 a Pivot and buy/sell on SAR basis on 3100, you may end up paying a hefty amount to the market every time the mkt chooses to whipsaw.

Your whipsaws are taken care of with the straddle, but then thats eating away the premium bit by bit.
 
#8
Based on the closing as on Friday 27th' March i had planned to do the following :

sell 2 lots of 3100 call april at 145
and
sell 2 lots of 3100 put april at 117

total premium collected = 262

our lower break even point is 2838
and
our upper break even point is 3362

strategy :
buy 2 lot of nifty futures above 3100 and keep it till nifty falls below 3100, where i intend to reverse my position. i.e. I hold on to 2 lots of nifty long above 3100 and 2 lots of nifty shorts below 3100.

whichever direction nifty closes above or below 3100 till the expiry.... i get to keep the net premium collected.

total investment :
1,25,000 /- assuming 16% margin is charged the broker for holding nifty positions

target profit : 26,000 /-

time frame : till end of expiry of April series.

how it works :
on expiry above 3100, the profit i make by going long on nifty will be nullified by the loss i make on selling the 3100 call.
on expiry below 3100, the profit i make on going short on nifty will be nullified by the loss i make on selling the 3100 put.

Shortcomings of this strategy :
1. if the nifty becomes directionless at 3100 and continues to trade plus minus 20 or 30 points pivoting 3100.

then,
we just let the premium decay and watch out for a break down or break out.... above or below 3100.

2. if there is a massive gap down or gap up around 3100.

then we have to cut some amount of net targeted profit we intend to collect. and continue to hold nifty position in the desired direction.

3. worst case scenario : nifty gaps down or up 200 points from above 3100 to below 3100
then,
we order a pizza and curse the dilevery boy for our misfortunes. :



happy trading...
linkon7

ps : no plan is too good to be true.... there has to be a catch and i want to find out what the catch is by experience. I intend to trade this strategy and will post on how the strategy played out ....
It is not easy dear as it appears cause if nifty moves up and down of 3100 three or four times, market turns volatile and swings below 3050 and again 3150 and again 3050 and again 3150, tell me how many times you will go long and short and again short and long , how many times you reverse the position
 

myvineet

Well-Known Member
#9
looking good trades linkon 7.....

but just one query.....what will be ur plan if nifty whipsaws around 3100..means goes upto 3120 ..back to 3080..again upto 3122..back to 3175....will you reversing everytime with market or you give 3100 some room to move ?

vineet
 

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