Bank Nifty Strategy Expert advise needed

[Purushotham]

Hi,

I come across this idea while watching the nse option chain today.

If i buy 25000 PE AND 25500 PE OF WEEKLY EXPIRY i.e 16 th nov.

For protection(Hedge) as 25600 CE AND 24900 PE. As shown in the Excel Below. As per my under standing the Profit at the end of the contract it is 48 points. Is it correct or anything wrong. Please advise.

 

[Raj232]

I'm not an expert, but it is a good idea to begin with which will surely work.

To do this with 1 lot of BankNifty Options, requirement is Rs 1.5 Lakhs
Profit is Rs 48 x lot size (40) = Rs 1920 which is 1.28% for the week
In 52 weeks it would be approx 66.56% returns per year.

When will you exit or will you wait till expiry ?

 

[Purushotham]

I'm not an expert, but it is a good idea to begin with which will surely work.

To do this with 1 lot of BankNifty Options, requirement is Rs 1.5 Lakhs
Profit is Rs 48 x lot size (40) = Rs 1920 which is 1.28% for the week
In 52 weeks it would be approx 66.56% returns per year.

When will you exit or will you wait till expiry ?

Thanks for the input,
If it is sure shot gains when ever it will give 45 to 48 points profit will exit.

 

[mazher]

If expiry happened at 25600 then you will be losing 53 points.

 

[Purushotham]

If expiry happened at 25600 then you will be losing 53 points.

Yes you are right. As it expires at 24900 also some loss occurs.

 

[Raj232]

If expiry happened at 25600 then you will be losing 53 points.

However, the above is not a sureshot strategy. In case of volatile days the Puts and Calls might both increase instead of decreasing, which is also a risk.
When the losses happen, then they are big as well using these strategies.

Even mutual funds have given approx 20% per year since the last 2 years.

When one is working directly in the market it is mostly for super gains: such as below which is an actual chart of Nifty 9200 call in April 2017.

 

[Raj232]

So its like BUY @Rs 18 .. SELL @ Rs 50. .. however there is risk here as well

In case of 2 lots: BUY amt =Rs 36 .. SELL amt @ Rs 100
Margin requirements (2 lots) = 80 X 18 = Rs 1440

 

[travi]

The strategy is called an Options Iron Condor, you can read more about it.
The closer your short strangle strikes, more premium you can collect but your breakeven range is smaller and vice versa if you widen your sell strikes.