Low Risk Options Trading Strategy - Option Spreads

[linkon7]

bot 4900 put at 90.5
sold 4800 put at 60.5 double qty

 

[Pralhad]

bot 4900 put at 90.5
sold 4800 put at 60.5 double qty

Dear Linkon Sir,

Can you please elaborate how this ratio bearish spread will perform in diff. market condition?

Regards,

-Pralhad

 

[linkon7]

Dear Linkon Sir,

Can you please elaborate how this ratio bearish spread will perform in diff. market condition?

Regards,

-Pralhad

This budget is short sighted... wont please the long term investors (read FII) one bit...

So bullish sentiments will keep market up... long term fellas will not be aggressive... so cap is on 5050
4930 to 5050 is the range expansion....for the next week...


my assumption is...we'll have a small burst and then we'll dance to the global cues. Not much up side... not much down side... range expansion likely scenario.

i can buy 4800 call and sell 4900 call... that too is good for the next week, but i prefer having a scenario where i'm safe till 4800 on the down side...

I looking forward to AW-da's view on this. I might be wrong. He can highlight scenario's far far better than anyone i know...

 

[Pralhad]

Thank you Linkon Sir,

I have just checked this strategy on OptionOracle and here is performance chart at the expiry. I have taken your brokrage cost into consideration.

BTW is Bear Put Ratio Spreed correct name?

 

[linkon7]

Thank you Linkon Sir,

I have just checked this strategy on OptionOracle and here is performance chart at the expiry. I have taken your brokrage cost into consideration.

BTW is Bear Put Ratio Spreed correct name?

I'm not very good at names. I just do it on excel sheet... punch out a few scenarios and if i like my BEP..i take it...

 

[SwingKing]

Missed the point ...

 

[AW10]

I'm not very good at names. I just do it on excel sheet... punch out a few scenarios and if i like my BEP..i take it...

Linkon, xls is better for quick work.. but plz get used to these risk graphs, u are not comfortable with them. Once ur brain can visualise them (easier it gets with practice), less u will need the excel sheets.

The graphs, shows that your position is safe for any upmove. You will not loose anything on it. (blue line is always in +ive zone on upside).. As per commonsense, you have collected premium on Put positions, so as long as mkt is going up, u don't have to worry.
Your BEP is around 4680..
So even if mkt goes below 4800, this will not push u in loss immediately. (beauty of short option trades, which gives u extra buffer).

I don't remember if Optionoracle can draw another graph which is as of today. The shown picture is as of expiry and I am Linkon is not going to sit on this position till expiry.
So for you it is important to see this risk graph plotted for time less then expiry or as of today.

Happy Trading

 

[linkon7]

Linkon, xls is better for quick work.. but plz get used to these risk graphs, u are not comfortable with them. Once ur brain can visualise them (easier it gets with practice), less u will need the excel sheets.

The graphs, shows that your position is safe for any upmove. You will not loose anything on it. (blue line is always in +ive zone on upside).. As per commonsense, you have collected premium on Put positions, so as long as mkt is going up, u don't have to worry.
Your BEP is around 4680..
So even if mkt goes below 4800, this will not push u in loss immediately. (beauty of short option trades, which gives u extra buffer).

I don't remember if Optionoracle can draw another graph which is as of today. The shown picture is as of expiry and I am Linkon is not going to sit on this position till expiry.
So for you it is important to see this risk graph plotted for time less then expiry or as of today.

Happy Trading

actually, my logic was, as long as 4924 is not broken, on EOD basis, 4800 will be written badly.... i gain from there. I can trade 4900 and bring the BEP below 4500... and then i'll keep shifting up 4900put -5000 put as long as charts show bullishness...

If we break 4924, and charts show end of upside, then i'll buy same qty of 4900 put and convert it to 4800-4900 spread...

I'll still trade 4900 put intraday no matter which direction market decides to move...

 

[abigbull]

Hello AW10 & Linkon

I am a new to option trading and just made one trade during the Budget day and would like to know ur thoughts on it .

4700 PUT Buy at Rs 80 10.50 am Nifty at 4886
4900 CALL Buy at Rs 140 10.50 am Nifty at 4886

Now when the market started to rise at around 4965 my CALL was priced at 155
and PUT at 40 so got 50% loss in my PUT value and only 15 pt increase when my call was ITM .

and finally when the day ended the value of my positions are as follows .
BUY call 4900 at 140
Buy Put 4700 at 40 .
so i am in loss ? Is this the correct way of options working and also would like to know if my approach was right for this Budget day ?


Thanks in advance ...

 

[trader.trends]

Hello AW10 & Linkon

I am a new to option trading and just made one trade during the Budget day and would like to know ur thoughts on it .

4700 PUT Buy at Rs 80 10.50 am Nifty at 4886
4900 CALL Buy at Rs 140 10.50 am Nifty at 4886

Now when the market started to rise at around 4965 my CALL was priced at 155
and PUT at 40 so got 50% loss in my PUT value and only 15 pt increase when my call was ITM .

and finally when the day ended the value of my positions are as follows .
BUY call 4900 at 140
Buy Put 4700 at 40 .
so i am in loss ? Is this the correct way of options working and also would like to know if my approach was right for this Budget day ?


Thanks in advance ...

abigbull

On a day like today you should keep out of trading if you are still learning options. One big reason is before a big event like today unfolds, the implied volatility in options is very high as a result of which they are over priced both calls and puts. After the event unfolds the IV comes down drastically and the options drop in prices drastically for no move in the underlying. You would have witnessed it today around 1130-1230pm.

A better options would have been to wait for the trend of the day to set and then take position. 4830 was support and 4914 was the resistance. You could have waited for the break of one level and taken a directional call on that.
One more thing to keep in mind when starting to trade in options in to exit in parts. When NF touched 4980-5000 levels your Ce would have been in profits also on the charts you could see that the momentum was lacking. That would have been the point to exit in profits on the calls.

If your trade was purely a budget day trade then it should have been different meaning it should have been directional. If you are holding it a a positional call then you should calculate your break even which is at 5120 and 4480. If your view is that the mkt will break these levels by expiry then you should hold.