Hi RiddhiPD
I did analyze your all questions and comments. I recognize that you have theoretical knowledge about options and option strategy trading but it seems that you really miss the practical part. Your questions do shout from every corner and all in all: You try to concentrate on too many points and things and there seems to be not even one single out worked trading plan for any option strategy.
Let me post this: No way to manage all what you ask for at once at the begin of any option trading career or as an option or option strategy new comer. You must cut down dramatically to just a few points and best to just one option strategy at the begin. An option strategy you will learn to handle under any market conditions with even converting it to an other one when needed. For this step you already will need a clever and worked out trading plan which is from you and is proved through live observation of the market and execution of the needed steps on the option side. If you have one of such in dept out worked trading plan and the prove that it works for you, then and only then you will start to concentrate on the next option strategy. So easy and slowly is what is asked for at the moment.
As you are asking for one option strategy which not needs your attention at all the time during the day, I am not sure how safe you will feel with naked shorts. If you want to sell a whole short option strategy at once, you are more into the direction of what you want.
Now as you mentioned "Short Straddle" and "Short Strangle" beside many other option strategies, both of them can do fine. How to trade them """"(Entry rules, time to expiration, strikes, market conditions, market expectations, adjustments, stop loss rules, exit the trade rules, used analyzing tools, and so on)?
There are various ways to do so and there is no best or worst. But just to understand and properly handling only the mentioned points in real live in the market trading, is far enough at the begin for one strategy. So again: If you can handle and make your self bullet proved in the market with just one option strategy, only then you will go for other option strategies. Guess the question about talking about an other four or five option strategy is cleared for the moment.
- Question: 1.Suppose I sold a strangle/straddle and Vola increases what can be done? Even when we avoid times when we are anticipating increased Vola ,there are times when Market suddenly moves (down 100 point in 15 minutes) and vola jumps up.What to do in that time?
Answer: As you have some kind of stop loss on each side, you should be protected against such moves. If IV increases steady and market moves steady into one direction, you close this leg or you adjust the leg by move it up or down, or you remove your size or you add a long option leg so that your short leg is protected. There are even some other ways to act here, finally it depends all on your individual trading plan and risk you can accept or want to take. If you want to convert in other strategies, then this again is an other topic which needs even deeper option strategy knowledge and experience. So I will not go deeper into this direction. I mean: The "Butterfly" you mentioned is already one of many of such possibilities to expand a "Short Straddle" and can be played in different ways.
- Question: 2.There are certain time when Vola probably will go up (e.g 2nd June RBI announcement) and come down after that. Now should I avoid that time altogether or sell just after Event like that.
Answer: Absolute your choice and no rules written in stones about this. It all depends on any specific trading plan worked out for such event trading and the risk you want accept.
- Question: 3.Is it right to avid Expiry Week? What are good strategies for Expiry week?
Answer: The same answer can be given here like in question two. Some love to trade the expiry week and others avoid it. Every strategy you understand in dept and know to handle in dept is a good one even for expiry weeks, regardless if "Short Straddles" or "Short Strangles" and many other strategies.
- Question: 4.Sometimes Volatility goes up for three to five days (April 20-24).Do I get out quickly or neutralizing Delta can help me through that time. Any Past experiences will help me.
Answer: If your break even is not touched or your stop loss can handle it in any way you use it and accept it, then no need to act. If your BE or stop loss levels are in danger, you act according to your worked out trading plan which includes all the points mentioned here """". If you want to neutralize it through delta hedging, you will need to add other legs or vice versa to adjust the delta. Different ways to do so. If you understand to do this under pressure and some times hectic market conditions, your choice and an other topic of difficulty to learn.
- Question: 5.If you neutralize Delta in a credit spread how often do you do that? like once a day or twice a day? or more?
Answer: If you even want to do this, then your trading plan and the given market moves and conditions do give you the road you drive. And you drive a car different then others do. So there is no once a day or twice a day rule. If you have a "Credit Spread" and market moves against it, you simple also can buy back the short leg or vise versa how ever you want to use the CS.
Final word:
I am clear you have a difficult journey in front of you. As told: If you can find a mentor in India which can teach you in a live going on market, so that you can discuss your queries with him ad hock, that would be surely one of the best helps you can have. But regardless if you have one or not, reduce the amount of topics you all want to work on at once, keep it more simple and concentrate on one, powerful option strategy with which you make real money under any given market conditions.
Take care / Dan
