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SarangSood

Well-Known Member
Thanks for your reply ,As on today 11400PE+12000Ce - 16/5/19 -- 30 , on 09/5/19 expiry it will come down to 10-15, it is true that both 30/5 and 23/5 prices are inflated because of election , however back testing since 14/02/19 may provide good insight of this strategy.
Great! Hope it works out for you. I'll keep an eye on it too.
 

kingkrunal

Well-Known Member
Thanks for your reply ,however my position is like following-
short 11400 PE -30/5/19--176
short 12000 CE -30/05/19--191
long 11400 PE --09/05/19--2.50
long 12000 CE---09/05/19--2.2
the weekly options is just not so priced. Every Friday position to be taken +-400 of nifty value and every week the price of OTM option will remain more or less same as current weekly OTM PE /CE .So in that case how cost of 3 ( excluding last week) weekly OTM PE/CE can be more monthly option value ? Am i missing some thing.
have you done backtesting for this - pls provide the results if yes ... the reason is markets are efficient in a manner where the position has to be actively managed.. ..
 

abhay.fintech

Well-Known Member
I have gone through you thread and value your opinion, so just want your view about the drawbacks of the following strategy if any, I am not comfortable with unlimited loss diagram ,so I want to hedge 400 +/- short strangle of MONTHLY option hedged with weekly option every week , is it feasible ? for e.g now nifty is 11724 , will short 11400 pe and 12000 ce of 30 May19 and want to hedge it with 11400 pe and 12000ce of 9/5/16 , will take profit / loss as on 09/5/19 weekly expiry and will again create position of +-300 from nifty hedging with CE / PE of 16/5/19.
Vega will impact your longer dated options much more heavily than the weekly options. So if a sudden jump in vol, your monthly options will appreciate a lot more than the weeklies and absolute rupee loss will be high in almost all cases (There is no delta hedge here)

Ex: Lets say Nifty drops to to 11400. You monthly shorted options will now be priced close to 600 pips. At the same time your Weekly long options will be hardly 150 pips.

Your approx P&L:

Weeklies : +150-5 = +145 gain approx
Monthlies : -600 +367 : -233 loss approx
 
Vega will impact your longer dated options much more heavily than the weekly options. So if a sudden jump in vol, your monthly options will appreciate a lot more than the weeklies and absolute rupee loss will be high in almost all cases (There is no delta hedge here)

Ex: Lets say Nifty drops to to 11400. You monthly shorted options will now be priced close to 600 pips. At the same time your Weekly long options will be hardly 150 pips.

Your approx P&L:

Weeklies : +150-5 = +145 gain approx
Monthlies : -600 +367 : -233 loss approx
Yes, I agree your view.:)
 

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