Low Risk Options Trading Strategy - Option Spreads

[sreperu]

Hi AW10,
I want to start Options spreads soon. I'll put my doubts here please answer whenever the Time permits.
Sometime back I had used Option oracle tool, I thought it's better to use and understand Price graphs. I will try do that again and will update you soon.

 

[sriugdh]

Sriugdh, I fully support the reply of Smart_Trader above.
The capital is small to get into trading in F&O segment. And your risk limit of 10% of 10k = 1k can be wiped out in 1 day here.

So better stay away and don't trade. Learn about trading, options etc first and then start trading.
Just answer this question with realistic attitude - "when u have no knowledge of trading or option, what makes u think that u can win here ?". "Can a normal man without any knowledge of boxing, fight with Mike Tyson in boxing ring and win?".

Plz don't get me wrong. Get your gears in place first. Market will always be there, but u need to make sure that you have your strategy, approach etc in place before entering in the warzone.

There is something called paper trading, backtesting.. which is learning in a training room environment. Go thru that first (that won't cost you money, but will need time and effort from you).. and then come to real trading with real money. Atleast you will be in better position to win.
Otherwise, chances are high that ur 10k will disappear soon.

Happy learning and trading.

True!!

Thanks much sir.

I have purchased 5300 put (1 lot) @ 119 and 5400 call (1 lot) @ 54 as I said before.

Please suggest me what to do sir. Can I square off my positions?
Sir, really thanks for your advice. I will seriously follow your recommendations.

I really appreciate your help!!

Regards

 

[AW10]

True!!

Thanks much sir.

I have purchased 5300 put (1 lot) @ 119 and 5400 call (1 lot) @ 54 as I said before.

Please suggest me what to do sir. Can I square off my positions?
Sir, really thanks for your advice. I will seriously follow your recommendations.

I really appreciate your help!!

Regards

Have u checked smart_trader's reply to your position ?
I also think that is possibily the correct solution.

For this position to work out, u need big move of 200+ points in either direction.

Market has been in narrow range for 2 weeks now so directional move is expected. Once that comes in, either PUT or CALL leg will win.. but at the same time, other leg will loose.. If the move is large enough, then winning leg might give u more profit then the loss on other leg.

So wait for this move to happen in next week, once that happen, let you winning leg run with TRAILING STOPLOSS and place stoploss on your loosing leg.. so that you don't loose too much from the loosing leg. and in case winning leg also starts falling then u come out of it at some profit. Use your judgement and give some time for this strategy to workout.

If this move doesn't happen during next week, then close the position and take loss cause due to high rate of time-decay in last week both option will loose premium.

All the best.
in future, do understand the behaviour of your position and plan your exits before risking your money.

Happy Trading.

 

[DanPickUp]

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[Smart_trade]

Hy

Is anybody of you trading Calendar Spreads ( for example : short one option in Jan and long one option in Feb ) ?

Is this possible in India or are there again some restrictions ?

DanPickUp

Hy Dan....

Calender spreads are difficult in our markets because the far month contracts have very low volumes and extremely high spread....not workable in my view...

Happy trading...

Smart_trade

 

[sriugdh]

Have u checked smart_trader's reply to your position ?
I also think that is possibily the correct solution.

For this position to work out, u need big move of 200+ points in either direction.

Market has been in narrow range for 2 weeks now so directional move is expected. Once that comes in, either PUT or CALL leg will win.. but at the same time, other leg will loose.. If the move is large enough, then winning leg might give u more profit then the loss on other leg.

So wait for this move to happen in next week, once that happen, let you winning leg run with TRAILING STOPLOSS and place stoploss on your loosing leg.. so that you don't loose too much from the loosing leg. and in case winning leg also starts falling then u come out of it at some profit. Use your judgement and give some time for this strategy to workout.

If this move doesn't happen during next week, then close the position and take loss cause due to high rate of time-decay in last week both option will loose premium.

All the best.
in future, do understand the behaviour of your position and plan your exits before risking your money.

Happy Trading.

Sir,

Thanks so much!

I pray that, I dont burn my fingers this time. Once I exit from this position, I will make sure to learn the basics and do paper trading before getting into options trading again. Thanks a lot.

Regards,
Sriram

 

[sreperu]

Hi AW/ST da,
I read it in an Option Book, we should buy only Low Implied Volatility option and sell only High Implied Volatility options.

Can I get the Historical volatility to calculate the Implied volatility of Nifty Index?

Do I really take IV and other factors (risk free interest rate, Greeks...) to establish a Spread?

 

[sreperu]

Hi AW,
Here I want to go for Bull Put spread (Credit Spread). Currently Nifty is closed at 5244 and I am bit bullish on Nifty.

Trade details: (Planning for Monday)
-------------------------
1 . Short 5200 Put @ 77.4
2. Long 5100 Put @ 46.10

Credit received = 77.4 - 46.10 = 31.30 (Max Profit and my Investment)

Max Loss = (5200-5100)-31.30 = 68.7

BE Point = 5200-31.30 = 5168

If the Option closes below BE point then I start to loose my option trade.

AW, whether the above analysis is proper plz correct me or suggest me if it is better than this....

 

[sreperu]

Same message appeared again so deleted this post.

 

[shiree]

Hi AW,
Here I want to go for Bull Put spread (Credit Spread). Currently Nifty is closed at 5244 and I am bit bullish on Nifty.

Trade details: (Planning for Monday)
-------------------------
1 . Short 5200 Put @ 77.4
2. Long 5100 Put @ 46.10

Credit received = 77.4 - 46.10 = 31.30 (Max Profit and my Investment)

Max Loss = (5200-5100)-31.30 = 68.7

BE Point = 5200-31.30 = 5168

If the Option closes below BE point then I start to loose my option trade.

AW, whether the above analysis is proper plz correct me or suggest me if it is better than this....

This bullish strategy IMO , shd be taken after a bullish reversal indication ,e.g. Morning Star , Hammer, Bolinger Band Support .
Although there seems to be an Andrew's PF support. But as Pring says let the price show the action.
Trading is more of waiting game than trading.