High Profit EOD based option Strategy for Advanced Traders

[pannalal]

I am not really trying to argue with this analysis. But I feel 1.3 % upmove has already taken place on thursday. If the results tomorrow are as indicated by the exit polls, nifty may not substantial move up. It it does move up, it will not more than 1%. If, on the other hand ,the results upset the predictions as per the exit polls there will a sharp decline of 1% or more.

Gmtji,

We never argue, we just discuss and try to understand the situation from various angles. The basic idea is to make profit and avoid loss.

 

[pannalal]

Nifty is much below the break even point and I hope we should get profit by 26 Dec.

 

[pannalal]

Some how I am not convinced with the strategy this time.
Last month it worked doesn't mean that this month also it should work.
We have election results on Dec 08th.
It is expected that BJP will clinch the election this time.
If BJP clinches in Delhi also then markets may shoot up heavily.

Election is over. What you have predicted came true to a large extent. Today, Nifty has closed at 6,307.90 and coming down every day. Hopefully, the strategy will work this month also. Let us wait and see the result on 26 Dec.

 

[jagankris]

Election is over. What you have predicted came true to a large extent. Today, Nifty has closed at 6,307.90 and coming down every day. Hopefully, the strategy will work this month also. Let us wait and see the result on 26 Dec.

Wish you good luck

 

[pannalal]

Dear Pannalal,
Your recommended strategy was based on Thursday's EOD level. Since nifty opened with a big gap up and remained at more than 1% higher throughout the day, would it have been prudent to take position around 3 pm as follows:
Buy 6700CE @ 12.35
Sell 6400CE @ 65.6
Sell 6500CE @ 39.25

This would have given 92.5 points and the BEP would have been 6400+92.5=6492.5.
This would have given a little less profit but it would have been a safer trade.
Do you agree?

Gmtji,

At present level of Nifty, if you square off, you need to pay just 8 points. I hope you got around 100 points as next day, the Nifty has gone up. So, you will still get around 90 points. However, you can wait till 26 December as your BEP is around 6500 and it is highly unlikely that Nifty will move to that level by 26 Dec. What do you say?

 

[gmt900]

Gmtji,

At present level of Nifty, if you square off, you need to pay just 8 points. I hope you got around 100 points as next day, the Nifty has gone up. So, you will still get around 90 points. However, you can wait till 26 December as your BEP is around 6500 and it is highly unlikely that Nifty will move to that level by 26 Dec. What do you say?

While I felt that this trade suggested by me was safer, I, in fact, went for the trade suggested by you.

Bought 6600CE @21
Sold 6300CE @ 100.5
Sold 6400CE @ 61.5.
Total points received : 162
Covered 6600CE @ 26 : +5 points

.
Total points received 167.

When nifty spot crossed 6350, bought NF @6380.
Sold NF @ 6336 with a loss of 44 points.

Present position 167 - 44 = + 123 points.
Today 6300CE @ 20.5
6400CE @ 6.55
If I were to square off the position today I would have been 123 - 27.05 = 95.95 points.
BEP as of now is 6300 + 123 = 6423.
I will decide tomorrow whether i should square off before expiry or wait.
Regards,
gmt

I suppose it will be prudent to square off. Let's see.

 

[pannalal]

When nifty spot crossed 6350, bought NF @6380.
Sold NF @ 6336 with a loss of 44 points.

I purchased 6400 CE - 2 lots one at 85 and another at 84 on 6th December. The basic idea was to hedge the position. Even if Nifty opens at 7000, my loss was limited. On 9th December (on Monday after Election result), the premium was at 120. However, I have purchased to hedge the risk. So, one I sold at 110 and another at 97. So, net gain was around Rs. 1850 because of Election Result.

 

[pannalal]

This month is a difficult month. First, it was election result, then RBI Policy and Fed Tapering. Federal Bank reduced bond buying from 85 billion to 75 billion. Now, the Nifty has reached to 6274.:annoyed:

 

[gmt900]

This month is a difficult month. First, it was election result, then RBI Policy and Fed Tapering. Federal Bank reduced bond buying from 85 billion to 75 billion. Now, the Nifty has reached to 6274.:annoyed:

Yes, indeed it is a difficult month to trade. But that is the new normal. The way market goes up and down is nothing but crazy. You are not able to apply any logic to trade. Analysts keep predicting market movements and all those predictions are worthless.

The only way to succeed is money management, handling of emotions and assessment of R/R ratios and it is easier said than done.

BTW, I squared off my trade by buying 6300CE @ 13.3 and 6400CE @ 3.25 on 19 th Dec when the markets panicked.

Total profit was 123- 16.55 = 106.45 points which is more than 13 % ( 5300/40,000) in three weeks:rofl:

 

[gmt900]

While Saravanan was typing his idea, I was typing my thoughts as follows :

I have been thinking about Pannalal’s strategy vis a vis other option strategies I have used in last one year. I am giving below my subjective thoughts for members to comment.

If one uses short strangle one is sure of max profit, but the losses would be unlimited unless one uses delta neutral strategy which could be easier said than done for beginners.

If one uses long condors, one is sure of both max profit as well as max loss.

Credit and debit spreads are safer option but unless one can guage the trend properly, will not give good profits.

In case of Pannalal’s strategy ( I don’t know whether it has a generic name), profit is handsome but one is not sure of losses one may have to incur if market goes against you. If the method indeed can give profits for say 10 months in a year, losses in 2 months should be small enough to give an overall decent profit. I am presuming Pannalal would be giving recommended trades at least for one year.

Considering the present case, let us assume one has got 140 points by entering 6600CE/6400CE/6300CE trade. Nifty is at 6176. If one wants to close trade at loss in case nifty spot crosses 6350 during next week (+174 points), one is not sure of the quantum of loss since it will depend on the time of the week. During early part it will be more and later in the week it will be lesser. How much ? Difficult to assess.

If one wants to adjust trade instead of accepting loss, I think it will be easier to do than delta neutral strategy .One can go long on nifty future say between 6200 and 6350 depending on one’s judgement and keep a stop loss of say 40 points. That will give insurance in case nifty moves up. This insurance will cost of 40 points and will ensure profit of 100 points. In fact if one goes long on NF @ 6200 with a stoploss of 40 points, one will be fairly safe since if nifty goes below 6160, chances of losses would be even lesser. In case nifty moves up to say 6250 and comes down in the following week, one can square off NF without loss.

If one does not take any action even after nifty starts moving up, one is safe if nifty remains below 6440 by expiry.

Unlike long condor, it will difficult to see graphic picture on OptionsOracle after one goes long on NF.

If one gets 140 points at the end of series it is 7000/40000 X100= 17.5% profit. If one gets 100 points, it is 5000/40000X100= 12.5% profit. Even if one slips in adjusting trade profit would be still in excess of 5%.
So it may be worthwhile adjusting the trade instead of accepting loss .

Dear Pannalal,
I have taken positions in nifty short strangle in the past and tried to convert them into iron condor to hedge risk. Typically I would get about 90 - 100 points for one lot.For example if one were to enter 6500CE/6000PE for Jan yesterday one would get 91.7 points. If one can leg in , it could even be more, although it is not certain.
With this position you are safer even when the market moves in either direction. Yesterday VIX was low. Premium would be higher if VIX is high.

My question is : with " High Profit EOD based strategy" when you are covered only for one side of the market movement what is the extra premium you can get?

You have a program which gives you recommended trade considering the option greeks whereas I take position in short strangle purely on the basis of premium available and the "Safe" limits of nifty on the up and down side.

Could you explain how your strategy is superior to short strangle ?

Needless to add, I find your strategy interesting and I have got good results when I tried it during the current "Difficult" month.