I feel what I posted yesterday about shorting main series options and buying current series option may confuse some fellow traders... hence I like to elaborate here... whatever I say here are for educational purposes
I just want to make the walk down the path a bit easier for relatively new traders
Okay so lets start with the data:
Main series (26th July expiry)
As on today in option chain ATM options price
26500 PE+CE = 676
Means we are covered upto 676 pts both sides of the ATM.
Lets see what is at a distance from ATM
ATM+- 400 strikes options price
26100PE + 26900CE = 352
Means we are covered upto 752 pts from both sides of ATM.
We can take any strike... ATM or +-100, 200, 300, 400, 500
Once we short these options... both PE+CE we get credit points.
But this is market... unpredictable... it dances with any tune... hence we need protection...
So for protection we buy current series (12th July) option at 700-800 strikes from ATM which cost us about 30-35-40 max and just wait
Now there is some maths here.
First let's look at ATM
676pts
On any Friday Current Series ATM option will cost us about 400+pts MAX.
676-400 = 276 pts
This is 2nd series of the month. Hence, we got 276 pts to decay within 2 wks, considering ATM remains same. In case of premium will drop irrespective of 26500 become ITM or OTM. We are just taking ATM as a reference point getting value of 276 pts which is up for grab during next 2 series.
Means there is about 130 pts per series.
We are investing 40 pts max a series... so there is still 90 pts
One line I like to add here is nothing is easy... but once we put a system in place we should have patience...
I hope you got the drift by now and request you to observe this... do paper trade for a few weeks...
I wrote a long post... may be there are some mistakes, typos...
Thank you.
I just want to make the walk down the path a bit easier for relatively new traders
Okay so lets start with the data:
Main series (26th July expiry)
As on today in option chain ATM options price
26500 PE+CE = 676
Means we are covered upto 676 pts both sides of the ATM.
Lets see what is at a distance from ATM
ATM+- 400 strikes options price
26100PE + 26900CE = 352
Means we are covered upto 752 pts from both sides of ATM.
We can take any strike... ATM or +-100, 200, 300, 400, 500
Once we short these options... both PE+CE we get credit points.
But this is market... unpredictable... it dances with any tune... hence we need protection...
So for protection we buy current series (12th July) option at 700-800 strikes from ATM which cost us about 30-35-40 max and just wait
Now there is some maths here.
First let's look at ATM
676pts
On any Friday Current Series ATM option will cost us about 400+pts MAX.
676-400 = 276 pts
This is 2nd series of the month. Hence, we got 276 pts to decay within 2 wks, considering ATM remains same. In case of premium will drop irrespective of 26500 become ITM or OTM. We are just taking ATM as a reference point getting value of 276 pts which is up for grab during next 2 series.
Means there is about 130 pts per series.
We are investing 40 pts max a series... so there is still 90 pts
One line I like to add here is nothing is easy... but once we put a system in place we should have patience...
I hope you got the drift by now and request you to observe this... do paper trade for a few weeks...
I wrote a long post... may be there are some mistakes, typos...
Thank you.