Paper trading options

#1
I am starting this thread for doing paper trade in nifty options and see how my strategy goes on.

Nifty spot - 4952.60

Bought Nifty 5000PE Jan series - 185 (1 lot)
Short Nifty 4700PE Jan series - 75 (2 lot)
Bought Nifty 4600PE Jan series - 55 (1 lot)


Brokerage - Rs 50 per lot = 200 Rs for 4 lots
Margin requirement for 1 lot of nifty short = Rs. 25000
Total Investment - Rs. 12000 - Rs. 7500 + Margin requirement for 2 lots of nifty shorts + brokerage for 4 lots = 54700
Total risk - Rs. 4500 + Rs 200 = Rs. 4700
Breakeven - 4906

WARNING: The above strategy is only for learning purpose. Please don't initiate any real trade based on this thread. I am a novice and try to learn through paper trade.
 
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#2
Nifty spot - 4985.85

Nifty 5000PE Jan series - 143 (1 lot)
Nifty 4700PE Jan series - 52.5 (2 lot)
Nifty 4600PE Jan series - 37.05 (1 lot)

Net position - 50*143 - 100*52.5 + 50*37.05 = 3752.5
Profit = 3752.5 - 4700 = -947.5 Rs


Nifty spot - 4952.60
Bought Nifty 5000PE Jan series - 185 (1 lot)
Short Nifty 4700PE Jan series - 75 (2 lot)
Bought Nifty 4600PE Jan series - 55 (1 lot)


Brokerage - Rs 50 per lot = 200 Rs for 4 lots
Margin requirement for 1 lot of nifty short = Rs. 25000
Total Investment - Rs. 12000 - Rs. 7500 + Margin requirement for 2 lots of nifty shorts + brokerage for 4 lots = 54700
Total risk - Rs. 4500 + Rs 200 = Rs. 4700
Breakeven - 4906
 
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AW10

Well-Known Member
#3
I am starting this thread for doing paper trade in nifty options and see how my strategy is going on.

Nifty spot - 4952.60

Bought Nifty 5000PE Jan series - 185 (1 lot)
Short Nifty 4700PE Jan series - 75 (2 lot)
Bought Nifty 4600PE Jan series - 55 (1 lot)


Total Investment - Rs. 13000 + Margin requirement for 2 lots of nifty shorts.
Total risk - Rs. 4500
Breakeven - 4910
As I understand this, your breakeven of 4910 means, if mkt stays below this then you will be in profit.. above this you are in loss. hope your interpretation is also the same.

Secondly, have u checked the Net Delta of your position. In my view (roughly), it shd be -0.10 or -0.2. That means, with each up 1 point move upward, you will be loosing in this position. That is exactly what happened as nifty moved up today, ur position made some loss.

Hope you have planned the stoploss exit also from this position .. or are u willing to loose complete 4500 on this. Infact your loss with be more then 4500 due to brokerage on 4 lots.
IMO, one shdn't treat paper trade with less care then one would do to his real trade otherwise, even if strategy makes money in paper mode, will end up giving loss in real trading.

Happy Trading.
 
#4
Hi AW10,

Thanks a ton for your comment.

1)Yes, 4910 is the break even and the strategy will be in profit only if nifty is below 4910 on expiry.
2) I am novice and trying to learn and I don't know how to calculate the net delta for the position. Can you please help me in calculating the same?
3) I am presuming market to be range bound and therefore not having stop loss. But after 100 points upmove I will cover 1 lot of short position and will try to again short when it comes down by 100 points. This is the part of strategy.
4) Regarding brokerage, I am having rkglobal account so it is around 45Rs per option lot but yes that should also be taken into account. I will modify the post to take that into account.
5) I have already burnt my finger in real trading. Therefore, I am thinking to first paper trade the strategy and get enough confidence then only will again start real trading.

Once again thanks a lot for your comment. I hope you and other seniors at traderji will guide me to fine tune my strategy.
 
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AW10

Well-Known Member
#5
Dipesh,

Great idea about paper trading first to gain confidence in strategy. I always support this approach. But don't take it lightly cause there is no money involved. Do it as if it is your real trade. Once u will come to real trading, u will have new set of challenges in terms of psychology..which can't be learnt from paper trade.

Issue that I find with your strategy, is that it had BE point below the spot price. i.e. mkt had to show some more down more before u can see profit on it. Moreover, this BE point is near strong support level. So for you to remain in profit, this strong support shd get broken.

Yes the trend is down.. and you have the time in your hand. But as market bounces back after 250/300 points drop..in short term you will see the loss on this position. If trend reverses and does not come down towards your BE point, then your losses will increase further. Hence it is important to define your cut off point.. say if mkt crosses 5200 and stays above that then you might like to cut the loss. Or if your loss exceed X amount, then cut the position and accept it as wrong trade.

And do realise that in option trading, TIME is very crucial aspect. While waiting for this loosing trade to become profitable, u are missing the opportunity to get into another trade.

As you are new to this stuff. My suggestion will be to keep it simple and don't try to average your loosing trade and do more of it.. By averaging, you will fall in love with your loosing trade. and ignore the msg from mkt which is telling u that ur trade was wrong. Try to be with mkt's trend and don't fight the mkt.

Plz chk out this post.. Hope this will give u more stuff that u need to know as option trader.
http://www.traderji.com/options/305...ading-strategy-option-spreads.html#post333547

Happy Trading
 
#6
Nifty spot - 5144.60

Nifty 5000PE Jan series - 82.5 (1 lot)
Nifty 4700PE Jan series - 32.0 (1 lot)
Nifty 4600PE Jan series - 22.10 (1 lot)
Covered 4700PE Jan series - 40 Rs (When nifty is @5055; 100 points upmove)
New breakeven - 4906 - 40 = 4866
New Total risk = 4700 + 2000 = 6700


Net position - 50*82.5 - 50*32 + 50*22.1 = 3630
Profit = 3630 - 6700 = -3070 Rs


From the above it seems that covering the short was not good strategy. Lets see how it pans out.

Nifty spot - 4952.60

Bought Nifty 5000PE Jan series - 185 (1 lot)
Short Nifty 4700PE Jan series - 75 (2 lot)
Bought Nifty 4600PE Jan series - 55 (1 lot)


Brokerage - Rs 50 per lot = 200 Rs for 4 lots
Margin requirement for 1 lot of nifty short = Rs. 25000
Total Investment - Rs. 12000 - Rs. 7500 + Margin requirement for 2 lots of nifty shorts + brokerage for 4 lots = 54700
Total risk - Rs. 4500 + Rs 200 = Rs. 4700
Breakeven - 4906
 
#7
Hi AW10,

Thanks for your comment. As you can see from above post my strategy is failing very badly without having proper stop loss.
1) Can you suggest me with the initial risk of Rs. 4700 where should be my stop loss for the trade?
2) What is your opinion about the covering put option when nifty went up by 100 points from the day when trade initiated? Specially, my assumption was short term trend is downside and nifty is range bound and will not cross 5150 decisively.
3) Was Covering put done at the right time or do you think I should cover only when market goes up by 200 points or I should never cover my short trade specially when I don't have stop loss for my trade?
 

AW10

Well-Known Member
#8
1) Can you suggest me with the initial risk of Rs. 4700 where should be my stop loss for the trade?
This is upto u to define, not me. If you are ready to loose complete 4700 then u need no stop. Cause with this strategy, u can't loose more then that, irrespective of whatever mkt does.
If you want to limit loss say 2000 rs. Then, monitor the position's net value and as soon as crosses 2000, u know that it is time to accept the mistake and book loss.
You can also define the NIFTY Spot level.. where your view about market will change..So when u entered the position, u thought that mkt will remain below 4150 and for that view, this position made sense to you. After few days that if u see, that mkt has proven ur assumption wrong and it is staying above 4150 then close the position.

2) What is your opinion about the covering put option when nifty went up by 100 points from the day when trade initiated? Specially, my assumption was short term trend is downside and nifty is range bound and will not cross 5150 decisively.
Fundamental trading rule "Cut your losses and let your profit run". By above adjustment, u have done the opposite of that.. You have booked profit quickly on 1 winning leg.. and left 2 loosing legs open.
So you just eaten your safety net of 75 *2 = 150 Rs that was coming to this strategy by 2 short positions of 4700 PE. Now you have safety net of only 75. Your assumption contadicts with your plan booking profit with 100 pts move. This assumption is still assumption. Mkt has not shown that it is trading above 5150 level yet. So u shdn't have taken any action today. You are predicting market and doubting your plan.. not right approach for a winning trader.

3) Was Covering put done at the right time or do you think I should cover only when market goes up by 200 points or I should never cover my short trade specially when I don't have stop loss for my trade
That's not me to say whether that was right was wrong. It should come from your trading plan. Maybe in this case you have simulated various scenario and ensured your plan takes care of it.
Say if mkt goes up/down by 100 pts, what will happen to your position ? If you adjust by closing 1 short Put, how will adjusted position will behave in future ? What if mkt goes up/down by 200 pts etc ?

Good that u are paper trading.. so u can afford to learn from this excercise.. I don't know how many people would have jumped with this trade in mkt with real money and would be sitting on loss of 3k+.

Happy Learning and Trading
 
#9
Hi AW10,

Thanks for the explanation.

Good that u are paper trading.. so u can afford to learn from this excercise.. I don't know how many people would have jumped with this trade in mkt with real money and would be sitting on loss of 3k+.

Happy Learning and Trading
I am really sorry, if someone have initiated real trade. As I mentioned I already burnt my finger in real trading thats why I am doing paper trading so that I can learn and of course traderji seniors like AW10 can help me to understand where I am getting wrong.

Sorry guys, please don't initiate any trade out of this thread.
 
#10
As the trade went wrong for learning purpose lets continue the trade with two strategy
Strategy 1: No short covering. No stop loss.
Strategy 2: Cover one short position after 100 points up and again short when nifty comes down by 100 points. Close the trade if nifty closes above 5200.

Nifty spot - 5178.40

Nifty 5000PE Jan series - 70.5 (1 lot)
Nifty 4700PE Jan series - 23 (2 lot)
Nifty 4600PE Jan series - 17.10 (1 lot)

Strategy 1:
Net position - 50*70.5 - 100*23 + 50*17.10 = 2080
Profit = 2080 - 4700 = -2620 Rs

Strategy 2:
Net position - 50*70.5 - 50*23 + 50*17.10 = 3230
Profit = 3230 - 6700 = -3470 Rs




Nifty spot - 4952.60

Bought Nifty 5000PE Jan series - 185 (1 lot)
Short Nifty 4700PE Jan series - 75 (2 lot)
Bought Nifty 4600PE Jan series - 55 (1 lot)


Brokerage - Rs 50 per lot = 200 Rs for 4 lots
Margin requirement for 1 lot of nifty short = Rs. 25000
Total Investment - Rs. 12000 - Rs. 7500 + Margin requirement for 2 lots of nifty shorts + brokerage for 4 lots = 54700
Total risk - Rs. 4500 + Rs 200 = Rs. 4700
Breakeven - 4906

WARNING: The above strategy is only for learning purpose. Please don't initiate any real trade based on this thread. I am a novice and try to learn through paper trade.
 

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