High Profit EOD based option Strategy for Advanced Traders

[pannalal]

I have suggested the following transaction:

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Transaction to be done on 30 Dec 2013 for Base Index at 6315.25
Sell 6600 CE at Price 25.23
Buy 6700 CE at Price 10.80
Net Points Received: 14.43
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If anybody has taken the position, he can close the trade tomorrow (8th Jan 2014) and needs to pay around 2.15 points.

The net profit in 10 days will be around Rs. 600/=. If we assume the margin required is Rs. 15,000/=, it will be around 12% return per month.

 

[DanPickUp]

@Pannalal

How are you? How is it going with your software? What is the next trade your software recommends? Take care my friend / DanPickUp

 

[pannalal]

@Pannalal

How are you? How is it going with your software? What is the next trade your software recommends? Take care my friend / DanPickUp

I have gone through the link given by you. As my software (without many screens, but with many things hard coded) works 90% the same way as the link given, there was no need to change in my software.

Right now, it is middle of the month and IV is very low. So, I shall give trade recommendation once IV increases.

 

[ananths]

I have gone through the link given by you. As my software (without many screens, but with many things hard coded) works 90% the same way as the link given, there was no need to change in my software.

Right now, it is middle of the month and IV is very low. So, I shall give trade recommendation once IV increases.

Dear Pannalal ji,

No strategy when IV is low?
Option selling may not work because it's cheap but no strategy can be constructed?

 

[pannalal]

Dear Pannalal ji,

No strategy when IV is low?
Option selling may not work because it's cheap but no strategy can be constructed?

Dear Ananthji,

Whatever may be market condition and IV, it is always possible to construct some strategies. However, I generally take positions after the current month expiry date (For this month, this date is 30th Jan). My target profit is 10 to 12% per month. As soon as I get this, I close the trade and then no trade till current month expiry date. I am not a day trader and I do only one trade in a month (another one to square it off).

Note: If the market goes against my strategy (like it went in December 2013), I may hedge or take a loss (depending upon the situation). In December, I have taken the risk and luckily it paid off. However, if it would go against, I had to take greater loss. The lesson is not to take position in the month of election result.

 

[pannalal]

Anyway, as a special case, I give the following strategy:

Transaction to be done on 16 Jan 2014 for Base Index at 6320.15
(For options expiring on 26 Feb 2014)
Buy 7000 CE at Price 3.60
Sell 6700 CE at Price 16.80
Sell 6000 PE at Price 29.38
Net Points Received: 42.58

Delta: 0.04420
Gamma: -0.00117
Theta: 1.39910
Vega: -7.82554
Rho: 0.36164

Loss for Index equal to 5900 on 26 Feb 2014 is -57.42
Loss for Index equal to 5950 on 26 Feb 2014 is -7.42
Profit for Index equal to 6000 on 26 Feb 2014 is 42.58
Profit for Index equal to 6050 on 26 Feb 2014 is 42.58
Profit for Index equal to 6100 on 26 Feb 2014 is 42.58
Profit for Index equal to 6150 on 26 Feb 2014 is 42.58
Profit for Index equal to 6200 on 26 Feb 2014 is 42.58
Profit for Index equal to 6250 on 26 Feb 2014 is 42.58
Profit for Index equal to 6300 on 26 Feb 2014 is 42.58
Profit for Index equal to 6350 on 26 Feb 2014 is 42.58
Profit for Index equal to 6400 on 26 Feb 2014 is 42.58
Profit for Index equal to 6450 on 26 Feb 2014 is 42.58
Profit for Index equal to 6500 on 26 Feb 2014 is 42.58
Profit for Index equal to 6550 on 26 Feb 2014 is 42.58
Profit for Index equal to 6600 on 26 Feb 2014 is 42.58
Profit for Index equal to 6650 on 26 Feb 2014 is 42.58
Profit for Index equal to 6700 on 26 Feb 2014 is 42.58
Loss for Index equal to 6750 on 26 Feb 2014 is -7.42
Loss for Index equal to 6800 on 26 Feb 2014 is -57.42

Note: There is profit only if Nifty remains between 6000 and 6700 on 26th February 2014. There will be loss if Nifty goes below 6000 or goes above 6700.
Break Even Points are 5960 and 6740. Beyond this, there can be unlimited loss.

Disclaimer: I shall not be responsible if anybody does any trade based on the above guidance. The above strategy is only for advanced traders (and not for the novice). I do not share your profit so not ready to share the loss.

 

[pannalal]

According to my probability calculator, tomorrow (24th Jan), the probability of Nifty closing between 6275 and 6425 is 87%. The probability of Nifty below 6275 is 7% and Nifty above 6425 is 6%. However, intuition tells that it will be between 6300 and 6400.

 

[timepass]

According to my probability calculator, tomorrow (24th Jan), the probability of Nifty closing between 6275 and 6425 is 87%. The probability of Nifty below 6275 is 7% and Nifty above 6425 is 6%. However, intuition tells that it will be between 6300 and 6400.

150 pts is a huge range

 

[pannalal]

150 pts is a huge range

I know that, but it is according to probability calculator.

 

[pannalal]

According to my probability calculator, tomorrow (24th Jan), the probability of Nifty closing between 6275 and 6425 is 87%. The probability of Nifty below 6275 is 7% and Nifty above 6425 is 6%. However, intuition tells that it will be between 6300 and 6400.

Today Nifty closed at 6,266.75. This implies:

(1) Intuition does not work in the stock market.

(2) The probability of Nifty closing below 6275 was only 7%, but it closed below. So, irrespective of the probability, it still can happen. Professors are very smart, they will always give some percentage for each event. This will allow them to say that the probability was less, but not impossible.

I have sold 6500 CE (expiring in Feb 2014) at Rs. 54/- 3-4 days ago. But, each day it was closing above 54 (The idea was to get some amount of earning before the actual trade for Feb 2014). Today, Nifty pre-open was 6301.65. Quick computation shown the price of 6500 CE for 6301.65 around Rs. 47. So, I put the order of buying at Rs. 48 at around 9:10. The trade was taken at 09:15:04 and executed at 09:15:05. So earned around Rs. 275/= per lot in 3-4 days (Not very good but not bad either).:thumb:

The negative side of this trade is 6500 CE closed at Rs. 36.40. So, if I would have waited till 3 PM, I could have got a much better return.