Nifty calender spread with calls or puts

[timepass]

I have to get it confirmed, but from I was told margin for calendar spread would be as low as 5000 per lot. I will post once I get the confirmation.

Yes. Please let us know about it too, using different combinations. Who is your broker ?

I suppose, when one uses the tool of option spreads, RR should not be the decisive factor, but the strike rate should be.

I mean, in option trading although the RR may be as low as 1:1 (or less), the trader must leave himself enough flexibility/room/scope to be able to manage the said spread as and when the need be.

Selling an option that is about to expire in 9 sessions does give very good RR, but I'd rate it very low on manageability.

So how about buying the current month and selling the next month ??

 

[jamit_05]

Yes. Please let us know about it too, using different combinations. Who is your broker ?
So how about buying the current month and selling the next month ??

Buying em cheap is good... but two problems:

1) you'd have few days to let it play out... then you'd have to square of the spread.

2) The bot premium will decay more rapidly then the sold one. You'd be dependent on a big move to make this spread profitable.

 

[gmt900]

Yes. Please let us know about it too, using different combinations. Who is your broker ?
So how about buying the current month and selling the next month ??

I will let you know after I get confirmation. My current broker is Zerodha.

I am talking to another broker who mentioned this during discussions but not yet confirmed.

 

[jain.er]

Kindly ask if there is a way to buy calendar spreads using a single order

 

[jamit_05]

So how about buying the current month and selling the next month ??

Instead, it is best done the other way around.

Buy far month and sell near month.
Am doing such trades on another thread where have Bought DEC at 225 and am selling August. Cud have sold July, but only few days left for expiry making it difficult to adjust in case of adverse move.

Once August premiums are dried, will switch to selling Sept... Oct... Nov.

 

[sabharwal_RK]

How do you adjust in case of adverse move

 

[timepass]

Buying em cheap is good... but two problems:

1) you'd have few days to let it play out... then you'd have to square of the spread.

2) The bot premium will decay more rapidly then the sold one. You'd be dependent on a big move to make this spread profitable.

So both the orders are squared at the same time ? Can't one leg out one by one ? Is it auto-squared off ?

 

[jamit_05]

So both the orders are squared at the same time ? Can't one leg out one by one ? Is it auto-squared off ?

The idea behind getting into an option spread is to have manageability, control risk. Else, one would simple trade futures with a SL.

So, square off the both legs at same time is best.


sabharwal,

Tough question to answer.

 

[Somatung]

@TP

To give you a visual view about going short this month and long next month or going long this month and short next month, check the screen shoots. The examples are done with horizontal calendar spreads and the pictures speak there own words:

Short the month which is more near expiry and long the month which is more far away from expiry:

Long the month which is more near expiry and short the month which is more far away from expiry:

Depending what strike levels you choose and what combinations you make, those pictures will look different. So as told: In this example I show only the different which shows up when doing "Horizontal Calendar Spreads" the way you mentioned.

Now to your next question about squaring off. Depending what you further plan with your long leg from the next month series, you let the short leg expire and play the long leg further in what ever way you wish to do so. If there is no further plan with your long leg, then you square off the whole trade at the end of the month.

@Sabharwal

One simple way is to roll up or down your whole calendar spread or you buy back the short leg and play an other strategy with your long leg. Here you have to be flexible in your option strategy planing/thinking. No fix rules here, only experience and tested strategies which worked for you in the past. Start with paper trades with the roll up and down strategy to get a first feeling about it.

Take care and have a good start into the new week / Dan

 

[sabharwal_RK]

Thanks Dan you are the best always ready to reply .....

Just an example:

Say
Nifty is at 8000 and I sell Aug CE (30day to expiry) and Buy Sep PE(60 days)

say Nifty moves to 8200; now what to do?

1. Buy back sold CE and sell 8200 CE (didnt make much sense better to roll up the entire spread)
2. Book loss (most of the time this is the worst alternative)
3. Wait till expiry nears (can help sometimes if there is a pullback in the index)