Low Risk Options Trading Strategy - Option Spreads

[abigbull]

Yes it take me to understand almost one year to know the formula what market will going to do it has succes ratio of 85 % where i can tell you what market is going to do but i have a problem of 25 % which is struk me very hard so i am working on that also but as for as my knowleadge i think now market is not going to DO much till expiry so NO need to panik now i think it will expire in close to 5200 level.

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Ok agreed but still if u r willing u can give some direction as to how that success ratio of 85 % work and in the meanwhile u can work on the remaining 15 % ... any steps to look out for
thanks in advance ...

 

[abigbull]

Just understanding a simple strangle
Today Nifty is at : 5235 and i understand that there are only 5 working days to March 2010 expiry so i would not get much option premium to play with . any ways just wanted to know at this time if i
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write - PUT - 5100 @ Rs 10 &
Write - CALL - 5300 @ Rs 19
Is it a acceptable strategy or since if the market goes up i may lose some money on sell - call - 5300 a (write - call - 5400 @ Rs 3.2 ) is a better deal .
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Now i will venture into the April options as the March premiums were lacking lustre .

Write - PUT -April - 5100 @ Rs 73
Write - Call - April - 5400 @ Rs 55
Is this good one to sell now and wait till April end for 128pts credit with my loss starting when the nifty moves above 5363 or the Nifty moves below 5107 .
Pls suggest if apart from these i need to see something more .
thanks

 

[AW10]

Just understanding a simple strangle
Today Nifty is at : 5235 and i understand that there are only 5 working days to March 2010 expiry so i would not get much option premium to play with . any ways just wanted to know at this time if i
-------------------
write - PUT - 5100 @ Rs 10 &
Write - CALL - 5300 @ Rs 19
Is it a acceptable strategy or since if the market goes up i may lose some money on sell - call - 5300 a (write - call - 5400 @ Rs 3.2 ) is a better deal .
-----------------------------
Now i will venture into the April options as the March premiums were lacking lustre .

Write - PUT -April - 5100 @ Rs 73
Write - Call - April - 5400 @ Rs 55
Is this good one to sell now and wait till April end for 128pts credit with my loss starting when the nifty moves above 5363 or the Nifty moves below 5107 .
Pls suggest if apart from these i need to see something more .
thanks

abigbull, I think, you still need to get the basics right about SHORT STRANGLE strategy ? Plz search and read on the net specially about breakpoint, max profit, max loss etc on it.

In short, your calculation of breakeven points in April series is wrong.

Regarding March series, you are just going to get 29 rs (minus brokerage) for the position. As long as market expires between 5100 to 5300, you can keep whole 29, else you are running the high risk. So you should check whether reward of 29 justifies the risk that foresee.

Happy Trading

 

[rkkarnani]

I am bullish in the near term so I bought 5200 Call at 59 and sold 5300 Call at 21. I will square my Long position if Nifty spot breaks 5220 or square my Short position if Spot breaks 5310!!!
Is it advisable to close one leg only , keeping in mind that only 4 trading sessions left!!!

Seeking AW's views!!!

Today (19th March)
I Sold my 5200 Call at 79.80 and bought back 5300 Call at 21.20 a gain of around Rs.1000/- per lot less charges.

 

[trader.trends]

I am bullish in the near term so I bought 5200 Call at 59 and sold 5300 Call at 21. I will square my Long position if Nifty spot breaks 5220 or square my Short position if Spot breaks 5310!!!
Is it advisable to close one leg only , keeping in mind that only 4 trading sessions left!!!

Seeking AW's views!!!

RKK

I know the query is for AW10 but just wanted to share my experience. Whenever I have done a spread trading, I have almost always regretted it when I closed one leg. Today when I do a spread trade, mentally I think of them as an FX trader. trading in pairs. The idea is that when we do the spread our risk and reward are predetermined. That is the reason to put on the trade. when we close only one position, we are converting it into a different trade. So the rationale that was there in putting on the trade in the first place undergoes a change. For me that has never worked.

Sometimes I have wished that the exchange offer us the pair trading where one will close the other. I am sure many spread traders would welcome that. It will take away the arbitrary decision that we make often and lose the winning position.

This is just my view. I have never been good at judging the direction of the mkt hence would consider the spread trading as a pair trading would not like to leave one leg exposed.

 

[msri]

Dear experts! Pl. guide.

Yesterday I opened a position with 1 lot of Bear Put spread strategy as follows:
Buy 5200 PE -25 Mar 2010 @30.25
Sell 5100 PE -25 Mar 2010 @ 11.90 anticipating consolidation.
Cost: 917.50
Currently the trend is unfavourable .
Kindly advice what to do immediately or shall I wait for a downtrend. What is the prospcts before expiry?

 

[rkkarnani]

I am bullish in the near term so I bought 5200 Call at 59 and sold 5300 Call at 21. I will square my Long position if Nifty spot breaks 5220 or square my Short position if Spot breaks 5310!!!
Is it advisable to close one leg only , keeping in mind that only 4 trading sessions left!!!

Seeking AW's views!!!

I Sold my 5200 Call at 79.80 and bought back 5300 Call at 21.20 a gain of around Rs.1000/- per lot less charges

 

[prasham]

Dear experts! Pl. guide.

Yesterday I opened a position with 1 lot of Bear Put spread strategy as follows:
Buy 5200 PE -25 Mar 2010 @30.25
Sell 5100 PE -25 Mar 2010 @ 11.90 anticipating consolidation.
Cost: 917.50
Currently the trend is unfavourable .
Kindly advice what to do immediately or shall I wait for a downtrend. What is the prospcts before expiry?

Opening a position just a week before expiry will always be tricky. I suggest you wait till Tuesday and see what happens. If market climbs sharply close your trade otherwise keep it as it is till tuesday.

 

[rkkarnani]

As I am bullish on Chambal I bought April Rs.65.00 Call at Rs.1.70 and also sold April Rs.70.00 Call at Re.1.00
Net outflow Rs.0.70 paise (lot size 3450)
CMP of April futures was : ~61.50
Reason for bullishness : Took support at 100 SMA and 200 SMA!!

 

[Capricorn]

i have onde more quesstion i will we find the option stirke which will loose his value like 10 to 20 rs a day if we are selling calls and puts so it will give us a better return
in daily time frame is there any wat to know which strick prize loose money fast .

You need to know about Implied's and option pricing for that. Theta is just the bread , Vega and zeta is the cream. Bottom line not for Amateurs. Bite the bait only if you can digest it.