Regular Income From Markets. Risk Free. Takes no Time

[Jeareh]

Hi Jami 05,

Are you following Option Stangle strategy? Your plan & approach looks good. Keep post. Also I want to see how this strategy works when the NF is upward trend.

 

[sahen]

I agree with you... on uptrends IV erosion is also fast in a cetain week... can not predict which week. Buying options in uptrends is generally dangerous.

 

[jamit_05]

Cost is 165... our purchase is still sound...

 

[jamit_05]

I agree with you... on uptrends IV erosion is also fast in a cetain week... can not predict which week. Buying options in uptrends is generally dangerous.

The intent is to remove the danger bit. That is why we are buying at a deep correction. Moreover, after buying is sharp oversold region, at least a relief rally always comes... always! In other words, if one decides to earn only twice as much as the brokerage then this method is very consistent. Before, one settles for it.... let us try to see if one can do better....

 

[jamit_05]

Today if market goes much lower then 4900 then we will make a bundle. But, if market goes sideways today too... then i guess 150 is the base.... we will have a 10 to 15 loss.... something which we have planned for.

 

[jamit_05]

As expected... the moves went in our favour...

Value of our earlier purchased (at 160) pair is 178... will exit as per TS. Or at NS = 4800.... around when value is Rs.200...

 

[jamit_05]

Results for this week are finalized... Lo and Behold gentleman...

Purchase price Rs.160
And sale price........
.
.
.
.
Rs. 196;

The Trail Stop worked wonders... at Rs.36 gain... in a directionless method is very good. Normally, a low risk enterprise has low returns... but this... 20% return in a week... !!!

I am seriously going to follow it now.

 

[jamit_05]

Last week low was 152. So in the coming week we make purchase near 130; only 22 points lower. As opposed to 30 that we were earlier so adamant about. The reason for softening this condition is that the premiums sharply fall in last week (very) and one before. Whereas, the first two weeks are relatively slow in fall.

So, the breakup for the fall is seen as 20-25-30-75 (open to discussion really!)

The cost at closing today was 175; fairly overbought. Since, we want a correction of atleast rs.45 to make a purchase. I think we might have to wait late till Wednesday.

Lets see. Will keep posted.

So, far all three trades were successful. Especially, the last one being a bumper. That is why even in the intraday trading I adhere to Trail Stops, no matter how poor the pattern looks.

 

[gurmy.]

This method is basically relying on the following Premise.

Buy at cost retracement. Buy at or near the "Base".

The trick is in understanding this reduction/retracement pattern.

We have a rough idea of how much the cost of the pair will retrace each week.
Rs.50 of value lost in expiry week, and Rs.30 each week, in first three weeks; This is for initial value of Rs.150 like in June 2012; Will further improve these estimates with experience.

This Rs.30 reduction may happen gradually or sharply or fluctuate. But will happen for sure. That is a certainty. Like today, the cost fell from 174 to 162 in a session. It must reach its destination of Rs.150 by tomorrow.

Hence, we know that the worst case on Friday closing will be near 150. Our purchase was for 160 hence we are prepared for Rs.10 loss+exp.

Similarly, we aim to take advantage of any sharp fall or fluctuations and buy near base or slightly higher for fear of losing out on the move.

If properly done, then one could get a good return on investment each week. People talk of 20% YoY return in MFs and beating the index. This method will be a superior substitute. Returns of 5 to 10% a month at least. Besides, I value accumulating skills over haphazardly earning money. Just a preference.

dear,
thanks for presenting a very simple and easy to understand way of option trading.
logic is good and thinking is right.
but as you yourself rightly said that reduction in cost price of pair is certain,ie it will go down with every week,
than is it not more prudent that we concentrate on selling instead of buying.
in selling we have another edge(time decay,and it works really fast towards the end of expiry)which works against us when we buy
anyway nice work and good thinking,keep it up.

 

[jamit_05]

Cannot sell Options.

Gurmy,

I am following the selling concept too. I want to approach it is maximum caution. shorting is inherently risky. Havent felt the heat... nor do I want to... pretty sure of that.

Conceptually, we will mostly be selling at Friday EOD or after any big moving day. We want to short it when the cost is hot.

What if there is a big moving day back to back... then what?
Well, simple, set a 10% stop loss.

So essentially we get two to four days of time decay. The real question is: Is that enough to make at least 10% (as much as the stop)?
I have seen 5% decay in 4 hours of trading. So yes, I think 10% should be easy in two days. Lets see.

Current, (paper) trade... sold Friday 4900 CE and 4700 PE at 175; need 10%; that is square off at cost of 155 (-exp);