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

[linkon7]

How about buying lower puts and higher calls from part of the premium, say 3300 call and 2900 put? It will reduce premium in th bag but if the mkt moves one way, u do not have to worry abt eroding points since u r covered.

Also one point which comes to mind is that this strategy would work best on Pivots, major resis/supp levels etc and not any other points as then there would be huge moves and would defeat our main piurpose of eating the premium ...

you suggestion would be the ideal way to play, by buying 2900 put and 3300 call.
the straddle gives a lower BEP at 2805 and 3395 on the upper side. 3200 ce is trading at 35 right now and 2900 pe at 85. thats the best way to ensure a profit no matter where the series ends.
if the market crashes or rallies higher.... or stays stagnant at 3100 i stand to make money....

but i want to see if i can retain the whole premium. thats over 250 plus points. lets see how it plays...

 

[praveen taneja]

you suggestion would be the ideal way to play, by buying 2900 put and 3300 call.
the straddle gives a lower BEP at 2805 and 3395 on the upper side. 3200 ce is trading at 35 right now and 2900 pe at 85. thats the best way to ensure a profit no matter where the series ends.
if the market crashes or rallies higher.... or stays stagnant at 3100 i stand to make money....

but i want to see if i can retain the whole premium. thats over 250 plus points. lets see how it plays...

For options the thing to b taken care of is time decay then profit
best of luck

 

[linkon7]

Position status at the end of the day :



Scrip: cost: curr. price: difference: profit
3100 CE: 110: 96 : 14: 1,400.00
3100 PE: 185: 128: 57: 5,700.00
nifty: 3060: 3068: -8: (800.00)
Total = 6,300.00

statistics

Current value of the straddle: 224
Actual value of the straddle: 32
Premium on the straddle: 263
Profit on nifty: -8
profit on the straddle: 71
total profit: 63

observation

When the market was at the lowest point at 10:07 am, the net profit had soared to 13,600. The main reason for the rise in profit was that the straddle decay was way slower than NF profit when nifty fell.

When nifty finally broke the 3050 resistance and looked all set to test the 3100 supply zone, i was in 2 minds about closing the short initiated at 3060 since the actual value of the straddle has reduced to below 50 and the movement of nifty between 3060 to 3100 wont be covered by corresponding drop in straddle value. (Ideally I should have shorted NF when 3100 was broken on the down side. But a gap down made me loose 40 points. ).
I have decided to not to cover the short and take a hit in profit target by 40 points.

Now if there is a gap up tomorrow to above 3100 mark then Ill reverse my positions. Things might get very tricky if 3100 acts as the pivot and nifty whipsaws around that.

This strategy is reaching its weakest point now and looks like things will become very interesting tomorrow.
The net profit might drop to 2000 levels thanks to the 40 points in NF but the bright side is the actual value of the straddle will be below 10 as well.

Looking forward to the market tomorrow.
If there is a gap up, Im ordering a pizza.

 

[munde_77]

How about buying lower puts and higher calls from part of the premium, say 3300 call and 2900 put? It will reduce premium in th bag but if the mkt moves one way, u do not have to worry abt eroding points since u r covered.

Also one point which comes to mind is that this strategy would work best on Pivots, major resis/supp levels etc and not any other points as then there would be huge moves and would defeat our main piurpose of eating the premium ...

If market close around 2900 or 3300 you would not gain anything
The premium collected is 260 and the premium payable for 3300 and 2900 call comes to around 80 for both so if market stays at 3300 u will lose 200 points in call of 2900 and 80 points we bought 3300 call and 2900 i.e 200 +80 = 280-260=20
Loss of 20 points .It will be same for put if nifty closes at 2900. you will lose 200 points in put of 3100+80 we paid for 3300 call and 2900 call,
any correction or suggestion welcome

 

[munde_77]

you suggestion would be the ideal way to play, by buying 2900 put and 3300 call.
the straddle gives a lower BEP at 2805 and 3395 on the upper side. 3200 ce is trading at 35 right now and 2900 pe at 85. thats the best way to ensure a profit no matter where the series ends.
if the market crashes or rallies higher.... or stays stagnant at 3100 i stand to make money....

but i want to see if i can retain the whole premium. thats over 250 plus points. lets see how it plays...

calculate how much you will gain if nifty closes at 2900 or 3300
you will lose 20 points i.e 200 on either side and 80 points paid for the 3300 call and 2900 put. Net premium collected 260, Possible loss 280 if nifty stays at 2900 or 3100 260-280= -20 points. any suggestions and corrections welcome

 

[munde_77]

How about buying lower puts and higher calls from part of the premium, say 3300 call and 2900 put? It will reduce premium in th bag but if the mkt moves one way, u do not have to worry abt eroding points since u r covered.

Also one point which comes to mind is that this strategy would work best on Pivots, major resis/supp levels etc and not any other points as then there would be huge moves and would defeat our main piurpose of eating the premium ...

calculate what will be position if nifty closes at 2900 or 3300 on expiry

 

[munde_77]

you suggestion would be the ideal way to play, by buying 2900 put and 3300 call.
the straddle gives a lower BEP at 2805 and 3395 on the upper side. 3200 ce is trading at 35 right now and 2900 pe at 85. thats the best way to ensure a profit no matter where the series ends.
if the market crashes or rallies higher.... or stays stagnant at 3100 i stand to make money....

but i want to see if i can retain the whole premium. thats over 250 plus points. lets see how it plays...

calculate what will be your position if nifty closes around 2900 or 3300
you have earned 265 points less paid 35 for call 85 for put 35+85 = 120
260-120 = 140 . as per this strategy one will loss 200-140 =60 points on either side if nifty closes at 2900 or 3300. suggestion, corrections welcome

 

[munde_77]

you suggestion would be the ideal way to play, by buying 2900 put and 3300 call.
the straddle gives a lower BEP at 2805 and 3395 on the upper side. 3200 ce is trading at 35 right now and 2900 pe at 85. thats the best way to ensure a profit no matter where the series ends.
if the market crashes or rallies higher.... or stays stagnant at 3100 i stand to make money....

but i want to see if i can retain the whole premium. thats over 250 plus points. lets see how it plays...

does it ensure profits if nifty ends at 2900 or 3300
comment

 

[linkon7]

calculate what will be your position if nifty closes around 2900 or 3300
you have earned 265 points less paid 35 for call 85 for put 35+85 = 120
260-120 = 140 . as per this strategy one will loss 200-140 =60 points on either side if nifty closes at 2900 or 3300. suggestion, corrections welcome

hypothesis

if i bought 2900 put at 85 and bought 3200 call at 35 as hedge against the straddle.

the total premium collected from straddle = 295
the cost of the hedge = 85+35 = 120
effective cost of straddle = 295-120 = 175

effective BEP on the lower side = 3100-175 = 2925
effective BEP on the upper side = 3100+175 = 3275

since i bought 3200 call and 2900 put, the upper side is BEP is in a no risk zone since any close above 3200 is a profit (max 7500). and any close below 2900 is loss of 2500 (max),

if market close between 2900 and 2925, then every point below 2925 is a 100 Rs loss upto a max of 2500 Rs at 2900. beyond 2900, its a steady loss of 2500.

so effectively, we have a situation where the if nifty closes anywhere above 2925, i make a profit extendable to a max profit of 17500. and a max loss of 2500 that too at a very small range. Its an excellent risk reward ratio.

line of action would be to job the straddle for a 25 points gain so that i can reduce the gap.



linkon7

 

[pasha]

The straddle has been turned into a directional play by selling futures at 3100. The downside risk has been eliminated, but the upside risk has been doubled since a gap against the futures position doubles the loss.
Theoretically, a 100 point gap would shoot up the option prices with the volatility spike and price movement. Maybe better to hedge the position with May options instead.