Thoughts and Trades on Options

[munde_77]

Re: Day trading Nifty Futures

Munde_77,

When you have the time, could you post about your positions and how you dealt with them in Aug 2013 series and Oct 2013 series ?

Thanks.

As I mentioned in my earlier posts. My position will be

Sell 1 Lot ATM/OTM call , Sell 2 Lot OTM Put.
Sell 2 Lot Far OTM Put Buy 4 Far FAR OTM Put.

So I am always protected from downside by ratiobackspread. In downtrend Also I keep on booking profits in higher strike calls and keep on writing lower strike calls . For uptrend The ratio of put will always be more than calls. So it will take care of the calls in uptrend. I keep on booking profits by covering lower strikes of put and keep on writing higher strike price.

It is almost hedged all the time by adjustment. Without hedging and adjustment it is very risky to sell options.



I hope you read this post

Originally Posted by Smart_trade
How do you adjust in case the market makes a large swing ? Kuchh gyan banto, Mundeji....

ST
Originally Posted by munde_77
Sold 300 BNF JAN 11300 PE at 247 and 200 BNF JAN 11600 CE at 272

Sold 300 BNF JAN 11100 PE at 178

Bought 600 BNF JAN 10900 PE at 105

If market closes above 11600 , I will write 11700 or 11800 pe after covering and booking profit in 11300. If market closes below 11300 , i will write 11100 or 11000 ce after coveriing and booking profit in 11600. So likewise i will keep on covering lower strike pe and writing higher strike pe if market rises and if market falls i will keep on covering higher ce and keep on writing lower strike ce

The downside is protected from any unknow crash by ratio backspread. There is difference between Theoritical and real movement of backspread.
__________________

I always keep roughly 300 points in my hand for adjustment on upperside. Also the ratio is sell 1 lot call otm , sell 2 lot put otm again sell 2 lot far otm put and buy 4 lot far far otm put. i.e by ratio backspread downside is protected from unexpected crash. I always keep 1.5 or 2 times more position in put than call andl alway keep distance of 300 points for adjustment.call 250 + put 250 + 250 = 750/2 = 375 so 11300 - 375 is breakeven downside. Meanwhile I will cover calls and keep on writing lower strike price. by covering upper strike price. I dont know how to express or convince as my english is not good
__________________
Preserving your capital is more important than capital appreciation
Last edited by munde_77; 26th December 2013 at 11:14 PM.

 

[comm4300]

Re: Day trading Nifty Futures

I always keep roughly 300 points in my hand for adjustment on upperside.

have you faced any scenarios where the BNF spiked more than 300 points on upside and you got nervous....

300 point on BNF at 11000 is around 2-3%. and this side of the trade is naked.

want to know your thoughts on how you deal on upside spike.

PS - why not ratio backspread on call side as well....to have peaceful sleep.

 

[munde_77]

Re: Day trading Nifty Futures

have you faced any scenarios where the BNF spiked more than 300 points on upside and you got nervous....

300 point on BNF at 11000 is around 2-3%. and this side of the trade is naked.

want to know your thoughts on how you deal on upside spike.

PS - why not ratio backspread on call side as well....to have peaceful sleep.

I have faced many times. I get surprised but not nervous as I know It can be managed by adjustment . No need of ratio back spread of call because put ratio is always more than the call ratio 1.5 to 2 times. so even if market moves 500/600 points in 1 lot call and I make loss in 1 lot only but I make profit in 2 lot profit in put.So it can be managed. Recently I faced this situation in Pre-election result day and on post election result day , it was managed easily as the profit in 2 lot manged to cover the loss in 1 lot call. Market can crash any time so we have to be very careful on downside than upside.
Sudden spikes redues the profit potetial but can be managed well

Just watch the market when market spikes 500 points in a day
1 lot call and 2 lot put . The profit of 2 lot put will cover almost all the loss of 1 lot call

Call ratio back spread means more margin, more brokerage, more reduction of profit potential. Overall it will reduce the profit potential .






As the put ratio is always more than call , the upside can be managed.


This strategy has been tested many times when market spiked 500/600 points in a day

 

[comm4300]

Re: Day trading Nifty Futures

I have faced many times. I get surprised but not nervous as I know It can be managed by adjustment . No need of ratio back spread of call because put ratio is always more than the call ratio 1.5 to 2 times. so even if market moves 500/600 points in 1 lot call and I make loss in 1 lot only but I make profit in 2 lot profit in put.So it can be managed. Recently I faced this situation in Pre-election result day and on election result day , it was managed easily as the profit in 2 lot manged to cover the loss in 1 lot call. Market can crash any time so we have to be very careful on downside than upside.
Sudden spikes redues the profit potetial but can be managed well

Just watch the market when market spikes 500 points in a day
1 lot call and 2 lot put . The profit of put will cover almost all the loss of 1 lot call

Call ratio back spread means more margin, more brokerage, more reduction of profit potential. Overall it will reduce the profit potential .

This strategy works for me.




As the put ratio is always more than call , the upside can be managed.


This strategy has been tested many times when market spiked 500/600 points in a day

makes sense.

thank you for sharing you strategy and explaining it in detail.

a good new year gift to share with TJ members. thank you.

One last question: what sort of profit target do you aim at. Here , i assume you primary goal is to eat premium and keep adjusting strikes.

 

[Smart_trade]

Re: Day trading Nifty Futures

Thanks Munde, I have understood how to adjust positions when market moves . You have been trading this for a long time. What is the total margin required and typical profit/loss one is likely to face...just an indication no committment as it will depend on how much the market moves.

Smart_trade

 

[Smart_trade]

Re: Day trading Nifty Futures

Some time back I met a trader from Mumbai and he trades a similar strategy. Assuming Nifty at 6300 , he will sell 3 straddles....6200call/put, 6300 call/put and 6400 call/put. If market goes up then at 6500 he will cover 6200,6300 puts and sell 6500 puts...at 6600 cover 6400 and sell 6600 puts and so on and so forth.He says he makes 8-10 % on his margin money every month...and he has not faced a single loosing month in last 10 months.

Smart_trade

 

[munde_77]

Re: Day trading Nifty Futures

makes sense.

thank you for sharing you strategy and explaining it in detail.

a good new year gift to share with TJ members. thank you.

One last question: what sort of profit target do you aim at. Here , i assume you primary goal is to eat premium and keep adjusting strikes.

No fixed target. I take what market gives. Suppose the market is in very small range for more than a week and IV drops drastically , I exit the position and wait for breakout. I also try to keep nil positions on the day if any very important news is to come. I keep position size small when IV is low.

Lot of margin is blocked as 4 legs are involved

 

[munde_77]

Re: Day trading Nifty Futures

Some time back I met a trader from Mumbai and he trades a similar strategy. Assuming Nifty at 6300 , he will sell 3 straddles....6200call/put, 6300 call/put and 6400 call/put. If market goes up then at 6500 he will cover 6200,6300 puts and sell 6500 puts...at 6600 cover 6400 and sell 6600 puts and so on and so forth.He says he makes 8-10 % on his margin money every month...and he has not faced a single loosing month in last 10 months.

Smart_trade

Thanks

Sirji , I will paper trade this strategy and observe it

 

[munde_77]

Re: Day trading Nifty Futures

Thanks Munde, I have understood how to adjust positions when market moves . You have been trading this for a long time. What is the total margin required and typical profit/loss one is likely to face...just an indication no committment as it will depend on how much the market moves.

Smart_trade

Sirji , Margin depends from broker to broker. My broker has exlcuded me recently
from exposure margin. Means I need 35 to 40 less margin.


I convinced him that as I hold put back spread and my position is always hedged to great extent there is no risk to the broker.

After verifying my trades , he excluded me from exposure margin.

It is a like a new year gift for me.


I hope we can get between 4 and 10 % per month.

Then there will some months where we will have no profit at all or negligible loss.

So if you want to trade in options , you can bargain with your broker for margin

 

[Smart_trade]

Re: Day trading Nifty Futures

Sirji , Margin depends from broker to broker. My broker has exlcuded me recently
from exposure margin. Means I need 35 to 40 less margin.
I convinced him that as I hold put back spread and my position is always hedged to great extent there is no risk to the broker.

After verifying my trades , he excluded me from exposure margin.

It is a like a new year gift for me.


I hope we can get between 4 and 10 % per month.

Then there will some months where we will have no profit at all or negligible loss.

So if you want to trade in options , you can bargain with your broker for margin

That is good return small loss in some months also ok....margin is no problem, will try to trade it with small positions first before committing large funds.

ST