Non-directional Option Strategies for Stocks and Indexes

#1
Could not find a thread dedicated exclusively to non-directional strategies.

The objective of this thread is to discuss only non-directional option strategies for stocks and indexes. In my view, stock and index options need to be treated differently. While index options will be significantly affected by macro and global outlook, stock options will be more prone to trends, earnings etc .

Following trends is essential,but the point of the thread is not to figure where market will move but how to manage your position when the market moves. You can thinking of trading options as an insurance business and insurance companies do make money.

It must be noted that while non-directional strategies generally do not generate spectacular returns, they can deliver consistent profitability. These strategies might not work in strongly trending markets, but can give decent returns in choppy or weakly trending markets.

Welcome basic and advanced concepts. Further, it would be helpful if strategies are posted with risk reward ratio and probability of success. A statistical orientation towards the strategies would be great as this will result in confident decision making. Please refrain from making comments as: suppose Nifty will go max till 6500. Risk management is critical.

Will post more detail along with strategies.

I will also try to back test index option strategies. Please feel free to let me know if you would like any of your strategies to be back tested.
 
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#2
bhai please dont mind but in your earlier thread u were asking about trend and when smart trade post some informational post about trend and trend reversal u deleted the thread ,here also u had written ( Identification of trends is essential ) , let me know how u can do that without charts , as u were using only odin for analysis .
 
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#3
Btw , i dont know u r using any charting software or not but if u r using any charting software then u can find trends by moving averages , average with a tilt upward indicates uptrend , average with a tilt downward shows downtrend , averages which r gone flat shows sideways trend , its not that hard to understand , here are some examples



 
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#4
I am currently holding a long call butterfly spread. Risk reward is favorable with this spread but probability of success is low.

Long: 6800 Call - 1 Lot, 7000 Call - 1 Lot
Short: 6900 Call - 2 Lots

Max loss: 900 - Cost of creating the spread. Paid extra cost as took positions in different spreads at different times.
Max Gain: 4100, if expires at 6900.
Low probability of success as markets are sure to move from this point after elections.

The spread can be viewed at http://i58.tinypic.com/2ah9th5.png

Not the best spread to enter at the start of a series. These spreads are generally made later in the series. It was a forced trade to hedge my long 6800 May call as VIX was dropping and the call was losing value.
Will probably close out the position before elections. Expect to break even or book a loss of 300 rs.

This trade reinforced my view that predicting VIX is very important if you are trading options.
 
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#5
bhai please dont mind but in your earlier thread u were asking about trend and when smart trade post some informational post about trend and trend reversal u deleted the thread ,here also u had written ( Identification of trends is essential ) , let me know how u can do that without charts , as u were using only odin for analysis .
Hariom bhai, The objective of the previous thread was connecting with full time professional traders. The thread took a detour, hence, the request for deletion.
Would request you to maintain the chain in this thread by discussing only non-directional option strategies. There are plenty of threads which talk about trends. I could refer to them. No need of creating another thread for that.
 
#6
As you already are pessimistic about your BFL, take an other range and test once a Batman or also called a: Double Butterfly. http://i60.tinypic.com/vs0xn5.png As you came up with the following link http://optionstrategy.co.in/optionstrategy.html, play around with the idea which is simply a pure call BFL on the call side and a put put BFL on the put side. You even can do a Broken wing BFL on the side you think market will move. Take care :)
 
#7
I am currently holding a long call butterfly spread. Risk reward is favorable with this spread but probability of success is low.

Long: 6800 Call - 1 Lot, 7000 Call - 1 Lot
Short: 6900 Call - 2 Lots

Max loss: 900 - Cost of creating the spread. Paid extra cost as took positions in different spreads at different times.
Max Gain: 4100, if expires at 6900.
Low probability of success as markets are sure to move after elections from this point.

Not the best spread to enter at the start of a series. These spreads are generally made later in the series. It was a force trade to hedge as VIX was dropping and long 6800 May call was losing value.
Will most probably close out the position before elections. Expect to book a loss of 300 rs.

This trade reinforced my view that predicting VIX is very important if you are trading options.
Can anyone advise on how to post images. I can post the image of the actual spread.
 
#8
#9
As you already are pessimistic about your BFL, take an other range and test once a Batman or also called a: Double Butterfly. http://i60.tinypic.com/vs0xn5.png As you came up with the following link http://optionstrategy.co.in/optionstrategy.html, play around with the idea which is simply a pure call BFL on the call side and a put put BFL on the put side. You even can do a Broken wing BFL on the side you think market will move. Take care :)
@Somatung, I do not plan to take any further position till elections. Election results are too unpredictable. At max I will go for a reverse butterfly or a calender or a reverse calender depending on the exit poll. I may also go long vega before exit polls considering historical VIX data.

One thing I realized later was the margin required to make the butterfly spread (51000). There should be very minimal margin requirement for this spread (Max 10000), 1000 if max loss is considered. Can someone explain the margin requirements?
 
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#10
@Somatung, I do not plan to take any further position till elections. VIX and election results are too unpredictable. At max I will go for a reverse butterfly or a calender or a reverse calender depending on the exit poll. I may also go long vega before exit polls considering historical VIX data.

One thing I realized later was the margin required to make the butterfly spread (51000). There should be very minimal margin requirement for this spread (Max 10000), 1000 if max loss is considered. Can someone explain the margin requirements?
Knowing the margins for any trade where ever we trade is an absolute must IN ADVANCE KNOWN. General rule in India market: Per lot short option = 25'000 Rs margin. Hedges are not taken into account (Not like in the States where most brokers take it into account) in most cases. Talk with your India broker and see if you can make a deal.
 

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