Low Risk Options Trading Strategy - Option Spreads

[comm4300]

Brum brum, let us start the motor for the begin.

How would you start to trade each one of this strategies ?

Hi Dan,

If iam extremely bullish about upmove, i'd prefer Short call ladder for its "unlimited" profit potential.

and if money permits i'd also initiate the Bull put spread to make that extra credit.

let me know if i understood your question correctly.

thank you.

 

[DanPickUp]

Hi Dan,

If iam extremely bullish about upmove, i'd prefer Short call ladder for its "unlimited" profit potential.

and if money permits i'd also initiate the Bull put spread to make that extra credit.

let me know if i understood your question correctly.

thank you.

Hi comm or what is you name ? By the way: My real name is Dan.

I understand what kind of strategy you have in your mind. My question was more related to; How would you like to trade those strategies ?

The question my sounds a little bit confusing. Why ?

At the moment you tell me : If i am extremely bullish about up move, you already have some thing in your mind.

Now I ask you: Are you a master of predicting markets ?

Hope you get my point, as I not want to value your knowledge !

Dan

 

[DanPickUp]

One of the answers is here : How do I implement any strategy in the market:!

 

[AW10]

Dear AW10, Dan and other options expert:

kindly let me know which of these strategies would you prefer IF you are bullish on the underlying.

a) Short Call ladder
b) Call backspread
c) Bull Put spread

a) limited downside with "unlimited" upside potential. move above all the strikes profitable.
b) good upside potential.
c) you get to keep credit if your judgement about positive upmove happens.


Concerns:
the said UP move may not come. [direction proven wrong]
the said UP move may not happen fast enough [time value being eaten on long calls]

kindly share your views.

Comm4300, which straetgy to choose depend on the comfort level of individual trader and whether he has got trading system build around it or not.
IMO, the option strategy given in literature is starting point for an option trading system. Books dont' talk about setup (what mkt condition are suitable, do u have approach to objectively identify mkt conditions or not), exact entry (which strikes to choose, is their alternative strategy possible or not etc), stops (when to cut the loss) and profit taking exits. Very rarely option traders know how their trade is going to pan out with each passing day. Knowing at expiry risk graph is just 1 case.
IMO, a pro-option trader has trading system built around theoratical strategy. So have you got your system for above strategies or not. If not, then you are acting or partial system ( like "when 10dma cross 20dma from bottom to upward, go long" system.. no idea about exit, stop, trailing stop etc). And if you have the system, and backtested it on past data, then you just have to follow the system.

My criteria of selecting any strategy is - lower Breakeven point (so that I can see profit as early as possible), and limited risk strategy (no open risk strategies). I don't use unlimited word in my option trade planning (unlimited loss or unlimited profit) cause it doesn't exist in reality. Market can move only to some extent in remaining life of option. It is only significantly HIGHER risk or reward.

hope this helps in your decision making.
Happy option trading

 

[comm4300]

My criteria of selecting any strategy is - lower Breakeven point (so that I can see profit as early as possible), and limited risk strategy (no open risk strategies). I don't use unlimited word in my option trade planning (unlimited loss or unlimited profit) cause it doesn't exist in reality. Market can move only to some extent in remaining life of option. It is only significantly HIGHER risk or reward.

hope this helps in your decision making.
Happy option trading

WOW..thanks. I'm just going to take a print out of this and hang it above my PC....very nicely put.:thumb:

thanks again.

 

[anju.krishna234]

I have started options trading on june 1st by investing only 16k and i have made 11500 as profit using covered call (buying call - put) method, but same time i have lost 9500 in trading JUNE5500CE - which i have bought for 48 rs and sold for 25 rs, this 5500CE touched a bottom of 5rs and after 3 days it touches above 75 rs......

 

[madasudhakar]

hello freinds
what are the rules for option trading in nifty for profit booking in bearish or bullish.

 

[Mujaharul Islam]

i am new in this area. Please tell me about option trading. i know nothing about option trading.:

 

[AW10]

i am new in this area. Please tell me about option trading. i know nothing about option trading.:

Mujaharul, please go thru the post #7 of this thread. I have written that for person like you who are new to option's trading. It is a vast subject, so you will be better off doing some self reading first. I have given links to some good sites to learn about options.

And then you can come to this thread or to other thread in Traderji and clarify your doubts / observations.

Happy Trading

 

[pvs]

hello aw10 sir,
For a successful option trader wht the qualification we need to develop ? i mean when we land in option trade, not tracking abt volatility and without knowing different option strategy can we be success... only knowing technical analysis a bit...

Cheers,
pvs