Low Risk Low Returns- Target 50 NF per month per NF Lot

[jamit_05]

Logic for Shorting a Straddle.

The option table is showing the range of 62/59;

Therefore, selling a straddle when price reaches midway also makes sense.

Logic:

From midway, the distance will be 150 points on each side. Therefore, if the premium collected is more than 150 points, then the position is secure till expiry... Unless there is a breakout of those levels. In which case, exit the spread. Till that happen one can happily consume the Theta:

At the rate of 3 points in July and 5 points in June.

 

[jamit_05]

It is possible that 5900 acts as support. So, we will take our chance.

Short a 60/59 Strangle

If Support breaks, we will square off 59 PE at a loss and let 60 CE decay.
Else If todays HOD breaks conclusively in the coming days we will square off 60 CE; And let 59 PE to decay.

Credit 160; Will decay by 4 points everyday.

PS: Got a fill for 155.95; Not happy.

The above could qualify as a shorted straddle (not purely).

Points collected 155; So there is security till 6150 and 5750;

This looks agreeable.

 

[jamit_05]

Goods in stock:

Pair Collected Current
59/61 164 114
59/60 156 145
57/62 101 98

 

[jamit_05]

5850 is .50 Fib Ret.
5770 is .618

Price is likely to take support soon. It is behaving such. Therefore, shorting June 5900 PE, after a cue from the chart, will pay off. Looking forward to converting to a strangle if price goes up.

 

[jamit_05]

That is the advantage of shorting spreads.

It does not give you any significant losses unless the market moves STRONGLY, which happens occasionally in Nifty.

As of now, I have credited about 75K in premiums. The Delta has skewed against me, enough to cause discomfort since the market has had a downward bias. Yet, Current Cost < Prm Collected.

On the other hand, I also have some shorted positions in Puts. It is giving me a 1:1 loss thus far. This is uncomfortable. I am only waiting to get out breakeven.

 

[jamit_05]

@GMT

With the spread that you have placed, expiry of June at what Spot price range, you think, is most favourable. What are you targeting as your ideal case expiry?

 

[jamit_05]

@GMT

With the spread that you have placed, expiry of June at what Spot price range, you think, is most favourable. What are you targeting as your ideal case expiry?

@GMT

If market were to jump to 6100 in this very instance, then you would have to pay a Net. of Rs.180 (where you received only 158 when you sold it).

I see little scope for this strategy. Simple because the purchased pair is having theta of -3.10 and the sold pair is having a theta of -2.50; Meaning, the former will decays 0.60 Rs faster !

So, unless there is a breakout from 62/59 you will not earn. And this expiry is unlikely to see a breakout

Please provide clarification in case my thought process needs re-direction.

 

[jamit_05]

Goods in stock:

Pair Collected Current
59/61 164 106
59/60 156 140
57/62 101 97



5900 Is confirmed as the months low, which is going as planned.

 

[gmt900]

@GMT

If market were to jump to 6100 in this very instance, then you would have to pay a Net. of Rs.180 (where you received only 158 when you sold it).

I see little scope for this strategy. Simple because the purchased pair is having theta of -3.10 and the sold pair is having a theta of -2.50; Meaning, the former will decays 0.60 Rs faster !

So, unless there is a breakout from 62/59 you will not earn. And this expiry is unlikely to see a breakout

Please provide clarification in case my thought process needs re-direction.

I have realised that this strategy has no future with nifty trending lower.
One more lesson learnt. I have squared off the position with 6 points profit which will go towards costs. I have not analysed it in terms of greeks but have come to the same conclusion.
I am going to take a week's break and go out of town and resume trading after 10 days.
I am convinced though that short strangle is the strategy for me. It is a question of choosing right strike prices, hedging positions whenever required and keeping moderate expectations of returns. I don't mind if the returns are not consistent. Initially I will concentrate on making profits ,however small (avoiding even small losses).
Happy Trading,
gmt900
I am a slow learner (only for trading)

 

[jamit_05]

I have realised that this strategy has no future with nifty trending lower.

Trend is not the problem. The difference in theta which is against you is.

I am convinced though that short strangle is the strategy for me. It is a question of choosing right strike prices, hedging positions whenever required and keeping moderate expectations of returns.

Shorting Strangles is fraught with major risks. In the months of breakouts, strangle can really strangle you back. So beware!


I don't mind if the returns are not consistent. Initially I will concentrate on making profits ,however small (avoiding even small losses).

Choosing to reduce risk does not make income any easier (or any more possible). I think a lot more amount of work needs to be put in by you and me both.

As beginners our focus should be to learn from experience, grow and be sure to enjoy the entire process. Profit may or may not come. Just my belief.