GOOD PROFIT: Hedged nifty positions with straddle...

[skgarg]

Hi Linkon

Waiting for ur comments on my post : http://www.traderji.com/options/28235-good-profit-hedged-nifty-positions-straddle-22.html#post359372

 

[lazytrader]

with this strategy...the intention is not to give back anything.

You get paid less for a short strangle than a short straddle. And if the protective range remains the same then i prefer straddle over strangle anytime. I dont mind losing back some premium i received as extra.

If the range remains the same then it's straddle over stangle but i've never seen a straddle with higher range than a strangle. is there anyway that can happen?

from what i understand the probablity to make the little extra over the strangle is offset by the probability to lose more if you are wrong.

 

[linkon7]

If the range remains the same then it's straddle over stangle but i've never seen a straddle with higher range than a strangle. is there anyway that can happen?

from what i understand the probablity to make the little extra over the strangle is offset by the probability to lose more if you are wrong.

the range remains rougly the same..unless u go for deep OTM options. But the objective is to target the premium and convert a neutral strategy to a hedg for nifty....

 

[VJAY]

Dear linkon,
I have position in 4700 PE oct-sold and 4700 CE oct 210 -sold.I think market on the range 4800-5100.if it go aginst my view what can i do?squareoff or go for another position.
Please give some guidance .

 

[linkon7]

Dear linkon,
I have position in 4700 PE oct-sold and 4700 CE oct 210 -sold.I think market on the range 4800-5100.if it go aginst my view what can i do?squareoff or go for another position.
Please give some guidance .

I didnt get ur position... U sold 4700 oct call and put. What's the total premium u received. Did u hedge it with nifty? or just a naked sell of the 4700 straddle..?

 

[linkon7]

Hi

Thanks for the reply.

How about if I trade with buy/sell orders all the time and always keep a position open for overnight ? I think that shud cover the risk of being outside of the market movement.

Even if markets move far from the straddle point that I have shorted, wont it still be in my favour only as long as I ride the trend with futures.

Say I short 4800, and Nifty goes for a free fall to say 4200 and I am able to ride it with NF, then wont I still be making profit ?

Yes the key thing is always in the position with NF or else if markets makes a big move without me, the short options wud hurt badly.

Say u short 4800 straddle, and u ride NF above or below 4800, then ideally, u have nothing to fear. Further it is away from the pivot (4800), the more secure your position is.

Only problem is, we dont get any scenario thats easy. You will have situations when NF will jump around the pivot or gap up or down from the pivot or simply trade plus minus 15 points from the pivot. Thats the grey area of this strategy. But the nice part is, we only loose potential profit. It will take some real bad luck for us to loose.

I prefer buying a 4700 put in addition to the short straddle (4800) if i am long above 4800 before carrying it for the next day. It pays not to trust the market. I buy the put as a added protection against gap down for my NF long position and square it off within 30 min of the market next day if market remains in my desired direction. Incase market opens down, then i square off NF and ride the put. I dont short NF unless it is below the pivot...

 

[DanPickUp]

Edit: did not read linkons last post, so deleted that one.

 

[VJAY]

I didnt get ur position... U sold 4700 oct call and put. What's the total premium u received. Did u hedge it with nifty? or just a naked sell of the 4700 straddle..?

Dear linkon,
I not hedged the position.it's naked sell of 4900 stradle(think i typed wrong on abv post)got 380 premium for it.Please guide me ehat cautions take for this position.

 

[linkon7]

Dear linkon,
I not hedged the position.it's naked sell of 4900 stradle(think i typed wrong on abv post)got 380 premium for it.Please guide me ehat cautions take for this position.

We got a lot of days for the next series to end and the Intrinsic value is very low. Taking a naked short straddle means you are expecting market to be range bound for the next few weeks. Incase volatality comes back to the market, IV will shoot up

so you are not going to gain if :
1. volatality increases...(its a cycle, u initiated the straddle when vix is low and when vix shoots up, your premium will jump)
2. market continues in its present momentum for a tgt of 5300 (weekly chart is very bullish and 5298 is the next known resistance)
3. we have a deep correction ( with so many qip coming in and big companies raising cash, liquidity gets sucked out of the system)

preferably... buy 5200 call and 4600 put as a hedge to your position. Keeping it naked is just a bit risky.

 

[VJAY]

We got a lot of days for the next series to end and the Intrinsic value is very low. Taking a naked short straddle means you are expecting market to be range bound for the next few weeks. Incase volatality comes back to the market, IV will shoot up

so you are not going to gain if :
1. volatality increases...(its a cycle, u initiated the straddle when vix is low and when vix shoots up, your premium will jump)
2. market continues in its present momentum for a tgt of 5300 (weekly chart is very bullish and 5298 is the next known resistance)
3. we have a deep correction ( with so many qip coming in and big companies raising cash, liquidity gets sucked out of the system)

preferably... buy 5200 call and 4600 put as a hedge to your position. Keeping it naked is just a bit risky.

Dear Linkon,
thanks for the detailes replay.I am following your posts to learn option trading since last some months.i thought without taking position not able to learn it perfectly.so took the position .now am following my position and asking you about it so it will helping to understand it perfectly.
as per your guidance i will hedge it on tueseday....

one more doubt..if wnat to take short naked stradle its better to take it on high VIX?
as per your thought which postion is better to enter now?