Thoughts and Trades on Options

[jamit_05]

"Generally" this method gives correct approximations of option values but not in this case , because of huge difference in IV of June & April options.
Choosing april contracts value now as june contracts value 2 months from now, (correctly) induces drop in time value , but also (incorrectly ) induces big drop in IV {we were considering constant volatility as per post #285} .

Anyone interested can cross verify with options oracle or http://option-price.com

Yes, IV may play spoilsport. In fact, I am counting on it, because I don't believe that trading is like aiming at sitting ducks. It will take real-time adjustment and plenty of capital. Hence, it makes sense why Munde is so hands-on... and does not leave sold pair on auto-pilot.

 

[jamit_05]

Do you think about the logic behind this trade is sound?

Short Apr ATM: 6200
Credit: 280

Long Mar 300 OTMs: 65/59
Debit: 25

Net Credit: 255;

Worst Case: March Expires at 6500. The cost of buyback of Apr 6200 would then be below 365; Giving a loss of Max 100 odd points.

Best Case: March expires between 6100-6300; Estimated cost of buyback 190, hence max profit around 75;

Basically, the risk reward ratio is below 1:0.75, but the probability is well in our favor as we know that the price spends more time going sideways than trending.

 

[forcast_man]

What 6200 pe or CE?
65 and 59 CE or pe? Please elaborate..

 

[jamit_05]

What 6200 pe or CE?
65 and 59 CE or pe? Please elaborate..

6200 PE and CE both, as it is a shorted straddle. And buying protection at 65CE and 59PE.

I hv been advised to be more creative, instead of playing by the book.

 

[pokrate]

YESBANK

CMP 302.50

It is on the verge of a sharp explosion either way.

So, buy 320 CE and 300 PE. Total cost 16K + Brokerage.*

Extremely big chances of bumper profits.

 

[munde_77]

Please close this thread as this thread is inactive . Also I am not able to post here regularly.