Thoughts and Trades on Options

[munde_77]

This is strange.

Since, yesterday June 63CE has climbed 60 points. Whereas, Nifty has climbed only 45 odd points!

Is there a way to gauge a proper price for illiquid options.

You mean June 6300 CE . Today it is showing as -2.8. LTP 367.2 PCP 370

 

[jamit_05]

You mean June 6300 CE . Today it is showing as -2.8. LTP 367.2 PCP 370

My bad... I meant June 6000 CE...

 

[munde_77]

My bad... I meant June 6000 CE...

June 6000 CE is up only 28 points , Nifty up 50 points

 

[munde_77]

Exited April 5500 PE at 12 Bought 6000 PE March at 36,45

April 5500 PE lost 5 points and March 6000 PE lost 17 points

A difference of 12 points

As I am holding -1600 put and call -1000 of June 6000



Nifty is in a tight range so expecting to give a breakout in March above 6300 or below 6000

So hedged with March 6300 CE and 6000 PE


So the position has become similar to Calendar Short Iron Butterfly,

 

[Somatung]

This is strange.

Since, yesterday June 63CE has climbed 60 points. Whereas, Nifty has climbed only 45 odd points!

Is there a way to gauge a proper price for illiquid options.

Far otm options and far out of the month options tend to have a higher Implied volatility. The IV on June 6300 call is nearly @ 24. Affect of this: Higher price fluctuation.

 

[gmt900]

Exited April 5500 PE at 12 Bought 6000 PE March at 36,45

April 5500 PE lost 5 points and March 6000 PE lost 17 points

A difference of 12 points

As I am holding -1600 put and call -1000 of June 6000



Nifty is in a tight range so expecting to give a breakout in March above 6300 or below 6000

So hedged with March 6300 CE and 6000 PE


So the position has become similar to Calendar Short Iron Butterfly,[/QU

I am trying to keep pace with your trades, although finding it a bit difficult.

You are using a sophisticated software for analysing your trade and using your experience.

I use Option Oracle to analyse. I have one question.

OptionOracle gives me the positive and negative delta values for my position.
Ideally, net delta should be zero. But, inexperienced people like me find it diffucult to do frequent adjustments to the delta of the position.

While it is good to keep position at delta neutral always, I will take action in adjusting delta only when the difference between positive and negative delta is "Substantial'.

BTW, i have taken the June short strangle trade today, as follows ;

SHORT 6500CE 100QTY @282

SHORT 5500PE 100QTY @139

LONG 6800CE 100QTY @1.65

LONG 5400PE 100QTY @2.5

Positive delta : +23
Negative delta : -42.60

 

[munde_77]

This Strangle Strategy is a Far Far Month of expiry in June So no need to hurry in adjusting Delta.

Also you have also bought March CE and PE pair for hedging.

You can wait for at least some days for market to move sharply on either side.



I have no idea of Delta in Option Oracle as I am not using it

As per my software

The Delta for June 6500 CE 50 Qty is -20 and March 6800 CE is .01

The Delta for June 5500 PE 50 Qty is +10 and March 5400 PE is -.02

So the net delta is -20 - 10 = -10 Net for 50 Qty. For 100 -20

So Net Delta -40-20 =- 20

 

[bearish.bull]

Why are PEs trading without time value for the months of March & April?
Markets are inching up but with less and less volume and within range, tapering effect will come in the next month or two with continuous reduction in tapering, election dates to be announced, all these point towards an imminent fall. Yet only calls have time value.

I was going to build naked short position in 6200PE for next series, but seeing the cheap price of future contracts should I spread it out like, 6200PE for March and 6400PE for April after nifty moves a little more up.

 

[jamit_05]

Hi Munde,

Have taken this short spread.

Short: Jun 6000CE and PE; 544+276= 820
Long: April 6400 CE and 6000 PE = 67+67=134

Net Credit: 686;

This has cost me margin of 72K minus credit of 34K... net margin blocked 38K.

 

[gmt900]

Hi Munde,

Have taken this short spread.

Short: Jun 6000CE and PE; 544+276= 820
Long: April 6400 CE and 6000 PE = 67+67=134

Net Credit: 686;

This has cost me margin of 72K minus credit of 34K... net margin blocked 38K.

I too have taken similar short spread.

Advice on how one should prepare for action with market moving up and down till April will be appreciated.