Low Risk Options Trading Strategy - Option Spreads

[DanPickUp]

I guess it is risky to write naked option now.

Still 4800 CALL+PUT and 4800CALL+4900PUT are better I feel. Both are June series.

Though currently these trades have high risk I feel.

Dear AW10, your opinion on these two combination for writing. Just for education purpose.

Happy trading!

Hi ST

What about writing the options and setting the stop/loss with the future ?

In that way, you can take the full risk but you are still save, if you do not mind to own the future when it comes to the point.

DanPickUp

 

[VaibhavPRO]

.. i am also a newbie.. strtd trading options 5-6 mnths back... wht i have learnt from trading calender spreads is that they are mostly succesful when the expiry is nearer for one the position..
talking about ur position.. i think this the best trade u cud have done keeping the markt sentimnts and ur capital constraint in mind..
5000 may call trading at 58 means its purely a time value for 7 days and even a bullish peson will think twice before buying it because there is no gain until markt closes above 5058.. which is still 110-120 points away.. so a movemnt of atleast 150 points is wht u r expecting whn u r buying such a call.. n keeping sentiments in mind this might not be gud trade.. so selling the call was a bttr strtgy and u r safe till 5058..

also, hedging it with a 5100 june cal was also gud because it has lot of time in expiry and hence if markt falls furthr from here it will not fall as sharply.. and u can gain from ur above position.. and if markt increases on worse side say 150 points nxt week.. thn in such situation sentimnts will chng from bearish to bullish and the 5100 june call will increase shrply and will reach around 160-170.. so overall u will be in gain from your position...

thnx.. commnts to improve the above are surely welcomed..

n regarding the calculator.. u can alwyz chck ur position from the link:

http://www.volatilitytrading.net/option_position_calculator.htm

thank u for the link sir but this is not showing calender spread payout correctly i think... correct me if i m wrong.

Also thanx for explaining the trade.. though this trade may not give gud profit in the end but i feel that one can easily exit this trade without much loss if the break even range is looking in danger of being broken. i m still in trade lets see what happens. will exit it on any sign of danger.. The trade is in profit of roughly Rs 500 right now.

 

[AW10]

I guess it is risky to write naked option now.

Still 4800 CALL+PUT and 4800PUT+4900CALL are better I feel. Both are June series.

Though currently these trades have high risk I feel.

Dear AW10, your opinion on these two combination for writing. Just for education purpose.

Happy trading!

simple_trader,
Just a few posts back I have replied on Short Straddle /Short Strangle.
I think, one can very well use that approach and find out if these two strategies are acceptable on not.

You are right, due to bearish sentiment, short PUT positions are risky. So better to buy far otm put beyond the lower BEP for protection.

As suggested by Dan, we can also use Futures for protection.. but my preference will be buy otm put, free up the margin and any M2M swing in the account.. and enjoy the time decay of option positions.

Happy Trading

 

[simple_trader]

Hi ST

What about writing the options and setting the stop/loss with the future ?

In that way, you can take the full risk but you are still save, if you do not mind to own the future when it comes to the point.

DanPickUp

Hi Dan,

thanks!

Future SL is an option. Like AW10 said, OTM option would be another option. However these would add cost and complication in the position i guess.

 

[DanPickUp]

Hi Dan,

thanks!

Future SL is an option. Like AW10 said, OTM option would be another option. However these would add cost and complication in the position i guess.

Hi

Not necessarily. If you sold some option, you would have money come into your account.

This money you could use to buy other options.

DanPickUp

 

[AW10]

Hi Dan,

thanks!

Future SL is an option. Like AW10 said, OTM option would be another option. However these would add cost and complication in the position i guess.

As a serious trader, risk mgmt is everything for us. So additional legs don't complicate the position, but makes them more robust and gives us nice sleep.

I think, it is matter of how we percieve them. Our belief about hedging and risk taking.

Happy Trading

 

[simple_trader]

As a serious trader, risk mgmt is everything for us. So additional legs don't complicate the position, but makes them more robust and gives us nice sleep.

I think, it is matter of how we percieve them. Our belief about hedging and risk taking.

Happy Trading

My comment was based on these points, there are lot of complication involved in such hedging I think.

- What if price move against the future position after triggering SL? It may even show loss in certain price ranges.

- What if due to gap up or gap down, we do not get future SL trigger. Is it not going to give big loss/complication?

- What if we wait for buying OTM option to take protection, it would cost a lot when trade is for limited profit.

Happy trading!

 

[Capricorn]

My comment was based on these points, there are lot of complication involved in such hedging I think.

- What if price move against the future position after triggering SL? It may even show loss in certain price ranges.

- What if due to gap up or gap down, we do not get future SL trigger. Is it not going to give big loss/complication?

- What if we wait for buying OTM option to take protection, it would cost a lot when trade is for limited profit.

Happy trading!

You are progressing in the right DIRECTION. Get that right and the exit will fall into place.

 

[AW10]

My comment was based on these points, there are lot of complication involved in such hedging I think.

- What if price move against the future position after triggering SL? It may even show loss in certain price ranges.

- What if due to gap up or gap down, we do not get future SL trigger. Is it not going to give big loss/complication?

- What if we wait for buying OTM option to take protection, it would cost a lot when trade is for limited profit.

Happy trading!

What if you have not addressed this questions before opening the tread, and somewhere another plane hit a building, bomb blasts, politicians take crazy action, or a country defaults ?

The questions that u have mentioned and known risk and we can manage them, if we plan properly. But the points that I have mentioned are unknown risks. They can't be be planned and hence we need insurance for them.

To buy or not to buy insurance, is is personal choice.. and we all have different preferences for that. There is no single correct answer for it.

Happy Trading.

 

[laxsri]

Hi,

I have 4800 PUT @ premium of Rs, 40/-. Please advise what should I do with this position. The CMP is Rs. 24/- not sure if there would be a gap up opening, the prices will loose its sheen. Please advise.