Nifty strangle

[vijayabv]

Hi,

This is my first post !!
On 3rd November 2008, I entered a Nifty strangle by buying an OTM PUT & OTM CALL.
Here is the trade:

NIFTY 27 Nov CE 3100 bought @ Rs.172
NIFTY 27 Nov PE 2900 bought @ Rs.154

Nifty was trading at 3000 Levels when I entered the strangle.
On 7th Nov, After 5 sessions NIFTY is again trading at 3000 levels only.
Now,
CE 3100 is trading @ Rs.145
PE 2900 is trading @ Rs.142
as you can see, both the options have depreciated in value.
I am experiencing 12% loss in the overall trade.
should I exit the Strangle or Hold on until expiry ?
or is it possible to do any adjustments ?

Thankyou,

warm regards,

VIJAY

 

[coolboy007]

Hi,

This is my first post !!
On 3rd November 2008, I entered a Nifty strangle by buying an OTM PUT & OTM CALL.
Here is the trade:

NIFTY 27 Nov CE 3100 bought @ Rs.172
NIFTY 27 Nov PE 2900 bought @ Rs.154

Nifty was trading at 3000 Levels when I entered the strangle.
On 7th Nov, After 5 sessions NIFTY is again trading at 3000 levels only.
Now,
CE 3100 is trading @ Rs.145
PE 2900 is trading @ Rs.142
as you can see, both the options have depreciated in value.
I am experiencing 12% loss in the overall trade.
should I exit the Strangle or Hold on until expiry ?
or is it possible to do any adjustments ?

Thankyou,

warm regards,

VIJAY

Now the depreciation in ce and pe rates happen because of Time decay. If you buy a strangle on 1 Nov when nifty is at 3000 , and at expiry Nifty is still at 3000 , all ur money will be lost.

See , this is unfortunate that CE value decreased so fast , but u knw there is never so much depreciation of rates in 5 days.

As 3rd Nov was a bullish day , it might be that you could have bought the Ce at a higher price , ITM option prices fluctuate heavily.

Believe me u wont lose , hold on to ur positions , nifty is so volatile , but u hv to keep booking profits and move again to nearest strike prices to spot nifty.

Its unfortunate that nifty ended where it started , but it rarely happens , we usually get huge swings of 100-200 points.

My advice is Hold on , dont get afraid believe me you will profit in ur strangle.
we still have the whole month , just keep in mind and dont trade in current month options after 20th of that month

 

[vijayabv]

Hi Coolboy007,

Thanx a lot for your reply post.
I will hold on to my strangle and book partial profits asap.
I might have made a mistake of entering a strangle , when the Historic Volatility was very high, which would have already factored into the CE's price.
Is there any Tool to find the Fair Price of an Option?
Thankyou,
warm regards,
VIJAY

 

[coolboy007]

Hi Coolboy007,

Thanx a lot for your reply post.
I will hold on to my strangle and book partial profits asap.
I might have made a mistake of entering a strangle , when the Historic Volatility was very high, which would have already factored into the CE's price.
Is there any Tool to find the Fair Price of an Option?
Thankyou,
warm regards,
VIJAY

Vijay ,

I dont think there is any tool for finding FAIR price. Hold on to ur positions and am sure u wont make losses atleast.

 

[arvindhbadri]

i too have experimented earlier with this with almost similar experience...I would second coolboy's advise...hold on to it and try to break even at the first instance

 

[AW10]

Hi,

This is my first post !!
On 3rd November 2008, I entered a Nifty strangle by buying an OTM PUT & OTM CALL.
Here is the trade:

NIFTY 27 Nov CE 3100 bought @ Rs.172
NIFTY 27 Nov PE 2900 bought @ Rs.154

Nifty was trading at 3000 Levels when I entered the strangle.
On 7th Nov, After 5 sessions NIFTY is again trading at 3000 levels only.
Now,
CE 3100 is trading @ Rs.145
PE 2900 is trading @ Rs.142
as you can see, both the options have depreciated in value.
I am experiencing 12% loss in the overall trade.
should I exit the Strangle or Hold on until expiry ?
or is it possible to do any adjustments ?

Thankyou,

warm regards,

VIJAY

Vijay,
You have paid 172+154 = 326 for this strangle. So your breakeven points are at
3100+326 = 3426, and 2900-326 = 2674.
That means nifty has to go above 3426 or fall below 2674 for this position by expiry or before to come in profit. If Nifty remains between this range, this position will be loosing its value everyday. Thats what exactly happend that in last 5 days it lost 39 rs of value.

Whenever creating an option position, one has to pay attention to the breakeven point and the chances of that point getting hit before the expiry. If your current reading of market says that nifty can cross your breakeven, then please hold on.. and if not then cut losses asap.. and learn the lesson.

If I have to take this trade, I would have been better off selling this strangle... i.e. taking opposit side of your trade .because as per my reading, it is difficult for NIFTY to cross these levels.. and even if it corsses the levels, I would have seen 39 rs of profit by today, and everyday, I will see more of the profit due to timedecay. Don't jump into selling options immediately.. please understand the risks involved.

I would infact share some of the premium to mitigate the risk..

You can find option price calculator from borkers site.. I know sharekhan has one..and there are many cacluatior available on the net.. That will help you in deciding fair value of option (ofcouse, they are hardly traded at fair value).. but it helps in analysis.

Happy Trading.

 

[praveen taneja]

Vijay ,

I dont think there is any tool for finding FAIR price. Hold on to ur positions and am sure u wont make losses atleast.

Coolman can i surf google for any software like Fair price for options like fair price shops in grocery Pls help me if u can

 

[praveen taneja]

Vijay,
You have paid 172+154 = 326 for this strangle. So your breakeven points are at
3100+326 = 3426, and 2900-326 = 2674.
That means nifty has to go above 3426 or fall below 2674 for this position by expiry or before to come in profit. If Nifty remains between this range, this position will be loosing its value everyday. Thats what exactly happend that in last 5 days it lost 39 rs of value.

Whenever creating an option position, one has to pay attention to the breakeven point and the chances of that point getting hit before the expiry. If your current reading of market says that nifty can cross your breakeven, then please hold on.. and if not then cut losses asap.. and learn the lesson.

If I have to take this trade, I would have been better off selling this strangle... i.e. taking opposit side of your trade .because as per my reading, it is difficult for NIFTY to cross these levels.. and even if it corsses the levels, I would have seen 39 rs of profit by today, and everyday, I will see more of the profit due to timedecay. Don't jump into selling options immediately.. please understand the risks involved.

I would infact share some of the premium to mitigate the risk..

You can find option price calculator from borkers site.. I know sharekhan has one..and there are many cacluatior available on the net.. That will help you in deciding fair value of option (ofcouse, they are hardly traded at fair value).. but it helps in analysis.

Happy Trading.

very good bro just as good as it would had been from u always
on finding software u can download option oracle from google n check daily where is ur break even point as due to time decay ur point will change too

 

[ratan jain]

HA!

Almost half the Indian Investing population has entered into a strangle with the Nifty.
And my, the Nifty stranglehold is firm!

Never could understand options........

 

[Cactus]

Aisa laddoo hai bhaiya.....

jo khabe.......so pachchtabe
Jo naa khabe.....woh bhi pachtabe......

Almost half the Indian Investing population has entered into a strangle with the Nifty.
And my, the Nifty stranglehold is firm!

Never could understand options........