Low Risk Options Trading Strategy - Option Spreads

[DanPickUp]

Thanks Dan for your inputs.
I really want to learn more about options in details.
currently I am going through various sites & reading same.
But I am looking for someone who can personally guide me on this.
Appreciate if you can advice on this. I am from Mumbai.

You also mentioned option software. Pls advice more on that.

Hi

AW10 is the man for you. He trades the Nifty and he is familiar with numbers and possibility's there.

If you read regular in this thread you will be able to make your first credit spreads live in Nifty.

I some times only will put in my two cent in this thread.

I a nut shell : Options are options. If you understand them in general on the Nifty, you also can trade other markets. You then only have to understand the different way, some market works.

If you want to learn more about options, you should regularly read books
about it.

One book I already recommended, is from Guy Cohen. It is called : The bible of option strategies.

Also AW10 has recommended books from Guy Cohen and he has also recommend software, you could use for analysing strategies on Nifty.

Take care

 

[AW10]

Dear AW10,

Thank you for your response.

you are right, 5000-5100 will be better at current level. But I am looking those strike when NIFTY tests 4950-4900 (if at all).

As per my under standing then, it would be like this (at 4950) -

5000-5100 = 95-55 = 40 cost, max profit 60.

5000-5200 = 95-20 = 75 cost, max profit 125.

double position is giving 5 points less in 5000-5100 pair, also brokerage will eat some more. However you have raised a good point.

break even point is lower in 5000-5100 pair, but margin requirement is higher if we consider double position.

All in all, I would prefer 5000-5100 due to lower break even point. As it will increase probability of the trade.

regards

if you are planning to trade this when nifty reaches 4950/4900 level, then I would suggest to do these calculation at that time. Good to see that u are thinking of making a strategy in advance but you got to chk with the latest at that time

Few points that might have to looked at that moment
- How many days are left for expiry
- What is the chance that nifty will go and close above 5100 to give u max profit
- How is option OI distribution ? does it indicate that nifty can move above 5100 level ?

In my view, at that time 5100 will be 2 strike OTM and it might be difficult for market to make 200 points move in remaining life of the contract. Probably, u might like to use June contract..but then your whole calculation will have to be re-done.

All the best and happy trading

 

[AW10]

250 - (5305 - 5100) = 45 and not 145 Sir....You were having 45 + 40 = 85 points of time value in your hand leaving 5385 as your high BEP and I must say, that was indeed a very brave move at that time as noises of 5350-5375 were eminent owing to Reliance results and positive OI buildup....
Had positioned myself for April series 5300-5400 Call debit spread, which did not succeed ultimately.

cheers,
:thumb:

Thanks Hitesh for pointing out my error. I have corrected my post.

You are right, 85 points of time value at that time was not much. But in my view, that was sufficient to cover risk as per my reading of mkt at that time.
I was seeing typical topping situation there where mkt was not showing any momentum to move up.. and it was overbought at that moment. Not just our mkt but all global mkts were stretched.. Hence I traded my views at that time.

Happy Trading

 

[AW10]

Thanks Dan for your inputs.
I really want to learn more about options in details.
currently I am going through various sites & reading same.
But I am looking for someone who can personally guide me on this.
Appreciate if you can advice on this. I am from Mumbai.

You also mentioned option software. Pls advice more on that.

Rahul, Chk out first few posts of the thread where I have given links to books/sites/software for learning options trading.

Happy Trading

 

[simple_trader]

if you are planning to trade this when nifty reaches 4950/4900 level, then I would suggest to do these calculation at that time. Good to see that u are thinking of making a strategy in advance but you got to chk with the latest at that time

Few points that might have to looked at that moment
- How many days are left for expiry
- What is the chance that nifty will go and close above 5100 to give u max profit
- How is option OI distribution ? does it indicate that nifty can move above 5100 level ?

In my view, at that time 5100 will be 2 strike OTM and it might be difficult for market to make 200 points move in remaining life of the contract. Probably, u might like to use June contract..but then your whole calculation will have to be re-done.

All the best and happy trading

Thank you for your response.

Obviously I think market will expire at higher level, so thinking.

I have mentioned in another thread that NIFTY can give a final push to 5500 after this down move. Do not know where it will take support though.

Will consider this trade after market tests 200 DMA.

 

[rrmhatre72]

Rahul, Chk out first few posts of the thread where I have given links to books/sites/software for learning options trading.

Happy Trading

Thanks AW10.
I will go through initial threads.
But I must say one thing, You express your thoughts in very simplified manner but most of the books goes too technical & confuse reader:annoyed:.
Still let me give try on your recommendations.

 

[darkstar]

Hi AW10

Nice way you trade that straddle.

High-risk strategy; not for novices or intermediates.

For those which just follow AW10 and are now in the trade, but do not have a clue what they do, they may lower there risk by buying further out of the money calls and puts. In that way they will have a long Iron butterfly, which is a less risk strategy.

Take care

hello i wanna to start option but how. i don't even know there abc ?

 

[AW10]

Darkstar, plz chkout this post in this thread where I have give a broad roadmap to learn option trading.. Including some free resources..

http://www.traderji.com/options/305...ading-strategy-option-spreads.html#post333547

 

[darkstar]

Darkstar, plz chkout this post in this thread where I have give a broad roadmap to learn option trading.. Including some free resources..

http://www.traderji.com/options/305...ading-strategy-option-spreads.html#post333547

thanks friend

 

[DanPickUp]

Hi darkstar

Thanks for your interest. What I wrote in the following post is also my answer to you :

http://www.traderji.com/options/305...ng-strategy-option-spreads-84.html#post432607

AW10 has some post about the option greeks, which you also have to understand. He may can post this link again for you. It is very well written and it must have been a hell of time to do it.

If you have questions, ask what ever you need and some body will answer.

Take care