Delta Neutral Strategy (Long Nifty @ Long Puts)

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Hi Harish,

Yes, you are right, we have to sell more puts. The question is for how long we are going to wait? What if market never comes down, as it happened in the recent past? If we wait too long than we will loose all the time value and our holding will not have any value whatsoever. At this stage we have to decide as how much risk we are willing to take. Since you are doing such a good job, I leave it up to you to decide.

Good Luck.

Wastej

 

[chheda]

Hi Harish,

Yes, you are right, we have to sell more puts. The question is for how long we are going to wait? What if market never comes down, as it happened in the recent past? If we wait too long than we will loose all the time value and our holding will not have any value whatsoever. At this stage we have to decide as how much risk we are willing to take. Since you are doing such a good job, I leave it up to you to decide.

Good Luck.

Wastej

Hi WasteJ ,

I am trend follower and never try to predict the top & bottom . so it is very hard for me to to take decision in this situation .
At this stage what would you do in my place ?

Regards

Harish Chheda

 

[[email protected]]

Hi Chheda,

Some time one has to take difficult decisions in life, decision delayed can be more damaging than the wrong decision. Don't be afraid, it is not real money on the stake.

I will simply roll the ball back in your court, for you to decide.

Good Luck,

Wastej

 

[[email protected]]

Hi Harish and Chheda,

We started this trade by going Long on Nifty futures and Long Puts. What if we had gone short Nifty futures and long calls? What would be the effect of such a trade in comparison with our trade?

Good Luck

Wastej

 

[ksvelusamy]

Where can i find the latest SPAN MARGIN for derivatives

 

[nautilus]

Hi Harish and Chheda,

We started this trade by going Long on Nifty futures and Long Puts. What if we had gone short Nifty futures and long calls? What would be the effect of such a trade in comparison with our trade?

Good Luck

Wastej

Hi Wastej:

I am assuming that you meant nautilus instead of Chheda! . I will try and answer as per my understanding of the options so far.

I am also assuming:

1) that we have held both the positions without taking any further action since the trade began.
2) Based on close of 16/09/05 Nifty closed @ 2552.35 & Calls(sp2340) closed @ 217.
3) We would have paid a premium of Rs50 for calls (sp2340) on 31/8/05.
4) We are short 1000 Nifty futures and Long 2000 calls(sp2340)

Position as of 16/9/09

1) Short Nifty futures: This position would have sustained a loss of (2347-2552.35)x1000 = (205350) Loss.

2) Long Calls: This position would have made a profit of (217-50)x2000 = 334000 profit.

The overall p/l would have been = (334000-205350) = 128650 Profit.

I think this is what would have been the position taking into account the above assumptions.

Regards

Nautilus


I think the overall impact of the trade would have been

 

[chheda]

Hi Chheda,

Some time one has to take difficult decisions in life, decision delayed can be more damaging than the wrong decision. Don't be afraid, it is not real money on the stake.

I will simply roll the ball back in your court, for you to decide.

Good Luck,

Wastej

Hi WAsteJ ,

Trade 2380 (i.e Trade where we Sold Nifty call option SP 2380 on 12th Sep. )

Trade Today :
Sold 1300 Nifty Put SP 2400 at 4.65
(As market open and remain strong after 1st Hour of trading , Sell on 11 AM at Market Price )

To Day's prices (Name : open - high - low - LTP )
Nifty Fut : 2549.00 - 2565.00 - 2540.55 - 2560.95
Nifty Put SP 2340 : No Trade (prev. close 4.50)
Nifty Put SP 2350 : 3.10 - 4.00 - 3.00 - 3.55
Nifty Put SP 2360 : No Trade (prev. close 5.00)
Nifty Put SP 2380 : 2.00 - 2.00 - 2.00 - 2.00
Nifty Put SP 2400 : 4.00 - 6.00 - 4.00 - 4.50
Nifty Call SP 2380 : No Trade (prev. close 136.90)
Nifty Call SP 2460: 88.95 - 110.00 - 88.95 - 109.20

Profit / Loss calc.

Long Nifty Fut
Closed out profit of 32000.00
Plus open profit 400 * (2560.95 - 2347) = 85580.00
Total Profit (closed) 32000.00 + (open) 85580.00 = 117580.00

Long Nifty Put SP 2340
2000 * (4.50 - 46.00) = (Loss) 83000.00

Short Nifty Put SP 2350
200 * (6.50 - 3.55) = 590.00

Short Nifty Put SP 2360
200 * (26 - 5) = 4200.00

Short Nifty Put SP 2380
300 * (21 - 2) = 5700.00

Short Nifty Put SP 2400
1300 * (4.65 - 4.50) = 195.00

Short Nifty call SP 2380
200 * (104 - 136.90) = (Loss) 6580.00

Short Nifty call SP 2460
200 * (29 - 109.20) = (Loss) 16040.00

Total Profit = 117580.00 - 83000.00 + 590.00 + 4200.00 + 5700.00 + 195.00 - 6580.00 - 16040.00 = 22645.00

Open Positions :
Long Nifty Future : 400
Long Put SP 2340 : 2000
Short Put SP 2350 : 200
Short Put SP 2360 : 200
Short Put SP 2380 : 300
Short Put SP 2400 : 1300
Short Call SP 2380: 200
Short Call sp 2460: 200

Paid / Collected Primium in options

Long Put SP 2340 : 2000@ 46 : - 92000
Short Put SP 2350 : 200 @ 6.50: + 1300
Short Put SP 2360 : 200 @ 26 : + 5200
Short Put SP 2380 : 300 @ 21 : + 6300
Short Put SP 2400 : 1300 @ 4.65 : +6045
Short Call SP 2380 : 200 @104 : + 20800
Short Call sp 2460 : 200 @29 : + 5800
Total : - 46555.00

The calculation of profit/loss ( i.e. if fut and options expired today )

Long Nifty Fut
Closed out profit of 32000.00
Plus open profit 400 * (2560.95 - 2347) = 85580.00
Total Profit (closed) 32000.00 + (open) 85580.00 = 117580.00
minus
Long Nifty Put 2000 SP 2340 at 46 = loss (92000.00)
plus
Short Nifty put 200 SP 2350 at 6.50 = 1300.00
plus
Short Nifty put 200 SP 2360 at 26.00 = 5200.00
plus
Short Nifty put 300 SP 2380 at 21.00 = 6300.00
plus
Short Nifty put 1300 SP 2400 at 4.65 = 6045.00
Minus
Short Nifty call 200 sp 2380 at 104.00 = 200 * (2380+104-2560.95) = loss (15390.00)
Minus
Short Nifty call 200 sp 2460 at 29.00 = 200 * (2460+29-2560.95) = loss (14390.00)

Total Profit = 117580 - 92000 + 1300 + 5200 + 6300 + 6045 - 15390 - 14390 = 14645.00


Thanks & Regards

Harish Chheda

 

[chheda]

Hi WasteJ ,

Trade 2480 (i.e Trade where we Sold Nifty call option SP 2480 on 12th Sep. )

Trade Today :
Sold 700 Nifty Put SP 2400 at 4.65
(As market open and remain strong after 1st Hour of trading , Sell on 11 AM at Market Price only 700 put in this trade )


To Day's prices (Name : open - high - low - LTP )
Nifty Fut : 2549.00 - 2565.00 - 2540.55 - 2560.95
Nifty Put SP 2340 : No Trade (prev. close 4.50)
Nifty Put SP 2350 : 3.10 - 4.00 - 3.00 - 3.55
Nifty Put SP 2360 : No Trade (prev. close 5.00)
Nifty Put SP 2380 : 2.00 - 2.00 - 2.00 - 2.00
Nifty Put SP 2400 : 4.00 - 6.00 - 4.00 - 4.50
Nifty Call SP 2480 : 80.00 - 85.00 - 77.00 - 84.00
Nifty Call SP 2460: 88.95 - 110.00 - 88.95 - 109.20

Profit / Loss calc.

Closed out profit of 32000.00
Plus open profit 400 * (2560.95 - 2347) = 85580.00
Total Profit (closed) 32000.00 + (open) 85580.00 = 117580.00

Long Nifty Put SP 2340
2000 * (4.50 - 46.00) = (Loss) 83000.00

Short Nifty Put SP 2350
200 * (6.50 - 3.55) = 590.00

Short Nifty Put SP 2360
200 * (26 - 5) = 4200.00

Short Nifty Put SP 2380
300 * (21 - 2) = 5700.00

Short Nifty Put SP 2400
700 * (4.65 - 4.50) = 105.00

Short Nifty call SP 2480
200 * (33.85 - 84) = (Loss) 10030.00

Short Nifty call SP 2460
200 * (29 - 109.20) = (Loss) 16040.00

Total Profit = 117580.00 - 83000.00 + 590.00 + 4200.00 + 5700.00 + 105.00 - 10030.00 - 16040.00 = 19105.00

Open Positions :
Long Nifty Future : 400
Long Put SP 2340 : 2000
Short Put SP 2350 : 200
Short Put SP 2360 : 200
Short Put SP 2380 : 300
Short Put SP 2400 : 700
Short Call SP 2480: 200
Short Call sp 2460: 200

Paid / Collected Primium in options

Long Put SP 2340 : 2000 @ 46 : - 92000
Short Put SP 2350 : 200 @ 6.50 : + 1300
Short Put SP 2360 : 200 @ 26 : + 5200
Short Put SP 2380 : 300 @ 21 : + 6300
Short Put SP 2400 : 700 @ 4.65 : +3255
Short Call SP 2480: 200 @ 33.85 : + 6770
Short Call sp 2460: 200 @ 29 : + 5800
Total : - 63375

The calculation of profit/loss ( i.e. if fut and options expired today )

Closed out profit of 32000.00
Plus open profit 400 * (2560.95 - 2347) = 85580.00
Total Profit (closed) 32000.00 + (open) 85580.00 = 117580.00
minus
Long Nifty Put 2000 SP 2340 at 46 = loss (92000.00)
plus
Short Nifty put 200 SP 2350 at 6.50 = 1300.00
plus
Short Nifty put 200 SP 2360 at 26.00 = 5200.00
plus
Short Nifty put 300 SP 2380 at 21.00 = 6300.00
Plus
Short Nifty Put 700 SP 2400 at 4.65 = 3255.00
Minus
Short Nifty call 200 sp 2480 at 33.85 = 200 * (2480+33.85-2560.95) = loss (9420.00)
Minus
Short Nifty call 200 sp 2460 at 29.00 = 200 * (2460+29-2560.95) = loss (14390.00)

Total Profit = 117580 - 92000 + 1300 + 5200 + 6300 + 3255 - 9420 - 14390 = 17825.00


Thanks & Regards

Harish Chheda

 

[nautilus]

Hi Wastej:

Here are the valuations for today:

Closed out profits on long futures = 67200

Open position p/l calculations:

1) 200 long futures@2455 = (2560.95-2455)x200 = 21590 profit
2)2000 long puts(sp2340)@46 = (0.05-46)x2000 = -91900 loss
3)200 short calls(sp2480)@21.55 = (21.55-84)x200 = -12490 loss
4)400 short puts(sp2350)@12.50 = (12.50-3.55)x400 = 3580 profit
5)1000 short puts(sp2400)@11.50 = (11.50-4.50)x1000 = 7000 profit
6)300 short puts(sp2480)@21.50 = (21.50-9.20)x300 = 3690 profit

Total p/l = (67200+21590+3580+7000+3690-91900-12490) = -1330 (loss)

Open positions:

1) 200 long futures@2455
2)2000 long puts(sp2340)@46
3)200 short calls(sp2480)@21.55
4)400 short puts(sp2350)@12.50
5)1000 short puts(sp2400)@11.50
6)300 short puts(sp2480)@21.50

Regards

Nautilus

 

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OPTIONS STRATEGY DEFINITIONS.

Every day I will define One option strategy, those interested should make notes. The definitions will be posted in alphabetical order.

The quick Reference Guide will not be repeated, so please make your notes.

B Buy
S Sell
1 1 Contract
2 2 Contracts
C Call
P Put
HC Higher Strike Call
LC Lower Strike Call
HP Higher Strike Put
LP Lower Strike Put
U Underlying Instrument
ATM At-the-Money
OTM Out-of-the-Money

Note: In India all spreads require margin.



Back Spread: A spread in which more options are purchased than sold and where all options have the same underlying and expiration date. Back spreads are usually delta neutral.

wastej