GOOD PROFIT: Hedged nifty positions with straddle...

[linkon7]

Is there any method of calculating what the straddle is worth at 100 point intervals?
Lets say we sold the 3400 straddle for 400. If the index goes 3500 or 3600 what would the cost be?
At least a rough estimate.

there are a few sites that gives a way of calculating this ideal value but honestly, it doesnt matter. Our markets dont really give a damn about such values. Since its not widely followed, there is no self-fulfilling prophecy that will come true. something like every one keeps a track of 100 ema, 200 ema and expect activity there and since every one believes that there will be selling / buying pressure that, when markets trade at that value, selling / buying pressure does come at that level. self-fulfilling prophecy...! no such luck with options.

The straddle value normally fluctuates with the volatility and the time to expiry (theta). But as a thumb rule, i assume, that the straddle will be at a premium of 200-250 points to the actual value, at 100 points away from the strike price, about 1 week before the beginning of the series. at 200 points distance from the strike price the premium reduces to 80-150.

the further the index is from the strike price, lesser the premium since few buyers are interested in buying expensive options.

 

[ANBE SHIVAM]

Linkon7
great system of trading:thumb:,can u say which broker do u have ur account.since they charge only 2 points as brokerage for single buy & sell( 1 trade)

regards
Srinishare

 

[linkon7]

Linkon7
great system of trading:thumb:,can u say which broker do u have ur account.since they charge only 2 points as brokerage for single buy & sell( 1 trade)

regards
Srinishare

its reliance money. the cost of buy-sel+taxes comes to 0.05%. for nifty it works out to 1.70

I also trade in indiabulls, and they offer me 0.02% as brokerage and buy-sell + taxes comes to 2.72

I trade with both. reliance money i suited for positional trades as their trading terminal is web based and has a tendency to log me off every 10 min. for intraday jobbing, i use indiabulls. their terminal is fast and very efficient.

 

[singhksb]

linkon i would like u to suggest some small good formula in option for traders who can invest 15k to 50k........with small risk huge profit

 

[linkon7]

linkon i would like u to suggest some small good formula in option for traders who can invest 15k to 50k........with small risk huge profit

i think...the moment u buy / sell options...its not an investment. Its a bet on the market's direction. The time frame is too small and end of the month the contract expires. thats huge risk and incase the direction you called doesnt work out you'll loose a huge percentage of the capital invested.

most people use options as a hedge to their investments. some use a combination to make neutral positions where markets movement in either direction doesnt make u lose money.

you see...bottom line is not to lose money... how much comes from options is luck.

with 15 K to 50 K you can make plenty of positions. but risk will remain high. the reward is equally high.

selling 1 lot of may 3300 puts for 114 and buying 3400 put at 154....is a good strategy.

 

[MurAtt]

i think...the moment u buy / sell options...its not an investment. Its a bet on the market's direction. The time frame is too small and end of the month the contract expires. thats huge risk and incase the direction you called doesnt work out you'll loose a huge percentage of the capital invested.

most people use options as a hedge to their investments. some use a combination to make neutral positions where markets movement in either direction doesnt make u lose money.

you see...bottom line is not to lose money... how much comes from options is luck.

with 15 K to 50 K you can make plenty of positions. but risk will remain high. the reward is equally high.

selling 1 lot of may 3300 puts for 114 and buying 3400 put at 154....is a good strategy.

Can u give an indea of the end results i.e what will be position - say after 10 days in May series - when mkts trading @ 3100-3200 and mkts trading at 3500.

 

[linkon7]

Can u give an indea of the end results i.e what will be position - say after 10 days in May series - when mkts trading @ 3100-3200 and mkts trading at 3500.

after 10 days, if the market trades around 3100 levels,
then
actual value of the straddle = 300 points.
the intrinsic value of the put = 300
value for put would be 350-360
the intrinsic value of the call = -300,
since most major support would act as resistance, the call writers will kill the premium and the value would be hardly 40-60 points.
the straddle value expected = 300 + (90 to 100 points as premium )

after 10 days, if market trades in the 3500 levels,
then
actual value of the straddle = 100 points.
the intrinsic value of the put = -100
value for put would be 110-130
the intrinsic value of the call = 100,
value of the call would be 180-210
the straddle value expected would be = 100 (190-230 points as premium )

since time decay doesn't set in before 15 days to expiry, the value is mostly dictated by the sentiments so the probability of the value of the straddle would be a guess work only.

This is just my estimated value and your guess would be as good as mine.

 

[MurAtt]

after 10 days, if the market trades around 3100 levels,
then
actual value of the straddle = 300 points.
the intrinsic value of the put = 300
value for put would be 350-360
the intrinsic value of the call = -300,
since most major support would act as resistance, the call writers will kill the premium and the value would be hardly 40-60 points.
the straddle value expected = 300 + (90 to 100 points as premium )

after 10 days, if market trades in the 3500 levels,
then
actual value of the straddle = 100 points.
the intrinsic value of the put = -100
value for put would be 110-130
the intrinsic value of the call = 100,
value of the call would be 180-210
the straddle value expected would be = 100 (190-230 points as premium )

since time decay doesn't set in before 15 days to expiry, the value is mostly dictated by the sentiments so the probability of the value of the straddle would be a guess work only.

This is just my estimated value and your guess would be as good as mine.

Oops, got me wrong there or I am confused ....
I was asking about the Sell 3300 May Put and Buy 3400 May put.

 

[linkon7]

Oops, got me wrong there or I am confused ....
I was asking about the Sell 3300 May Put and Buy 3400 May put.

I thought u were asking about the 3400 straddle that i am playing.

the 3300 - 3400 put spread is giving a difference of 40 points. if the market falls to 3100 then the difference would be 70-80 points. if the market goes up to 3500 levels, then the difference would be expected to be around 20-30 points, since 3300 put would decay much faster that the 3400 put.

 

[psvaja]

....What I mean is I shorted nifty at 3397 and it went down to 3360 levels, the 3400 put gained in value, 3400 call lost some value and nifty short was in good profit. But when nifty started going back to 3400 levels, why should I let the profit I made in shorting nifty go away by riding it back. I closed the short at 3365 and put a sell nifty trigger at 3367 and hence I can safely wait it out, for nifty to break 3400 on the upside and 3367 on the down side. And when nifty started falling, I can short it again and ride it down for some more profit. but the main golden rule is not to let nifty go down without me. 3400 and 3367 becomes the range and I have to ride nifty breaking out in either direction.

Hi,

This is indeed good strategy to trade. i have small suggetion, instead of looking to protect small profit on futures position, i suggest to trade stop-and-reverse at around 3300,3200,3100 etc so you can have more room to play because if you try to get profit of say 40-50 points on futures position , then there will be more trades, more small losses, more brokerages and ultimetely, all will eaten up your profit slowly.

This is just my suggetion. Otherwise i found, a good strategy. pl post your views.

thanks for sharing strategy :thumb:.

Pravin