Nifty calender spread with calls or puts

[Somatung]

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[sabharwal_RK]

Sorry everyone;

I have been working on this sheet regarding calendar spread (its crude but I am still working on it).

So to understand this sheet:

1. Its a monthly calendar spread with selling near month Put and call and buying next month put and call

2. Strike price of put and call are the same which is as close to nifty spot value on the 1st of the new month

3. The last column gives you the profit at EOD

4. All prices as the closing price

5. A quick observation if the combination is sold off on the 4th last day then its the most profitable

6. Opinions are invited.

@Dan Post 31 was modified as soon as I saw that....(which was a couple of days back)

http://www.megafileupload.com/en/file/553810/New-Microsoft-Office-Excel-Worksheet-xlsx.html

 

[Somatung]

Can the calemdar spread be also used in Futures too?

For eg. sell current month and buy next month?

Yes. Here just one way how a such a future calendar spread can be done and be used: http://www.futurestradingpedia.com/futures_calendar_spread.htm

 

[harshabhat1]

:clapping::clapping:

 

[gmt900]

gmt,

Good line of thought. However, I have a point of worry.

For,

Sell 7650CE JUL @ 82.70
Buy 7650CE AUG @ 129.90

The Sold July CE can quickly get out of hand. A 100 point up move could make the spread unmanageable, where July7650CE would threaten to close ITM at July expiry... and Aug will only appreciate in premium, which is the reason why I do not think that the max loss is limited.

In short, shorting options in last two weeks is a nefarious task. I would be more inclined towards selling Aug v/s Sept.

Hi Amit,

Check Sabharwal Saheb's excel sheet. Max loss will never be more than

initial debit.

 

[sabharwal_RK]

Hi Amit,

Check Sabharwal Saheb's excel sheet. Max loss will never be more than

initial debit.

Thanks gmt for that.... :thumb:

 

[sabharwal_RK]

Pros and cons of calendar spread

Pros
1. Risk limited to initial debit
2. Passive income close to 25% P.A
3. No continuous monitoring can be side income to current job
4. No need to judge market direction (on a a day to day basis)


Cons
1. One spread needs 4 contracts
2. Next month contract illiquid in India
3. Above mentioned gains are on paper; no idea in real time
4. 25% PA returns are less (you need to play in 400 lots of Nifty to get an income of 10L)

 

[jamit_05]

Pros and cons of calendar spread

Pros
1. Risk limited to initial debit
2. Passive income close to 25% P.A
3. No continuous monitoring can be side income to current job
4. No need to judge market direction (on a a day to day basis)


Cons
1. One spread needs 4 contracts
2. Next month contract illiquid in India
3. Above mentioned gains are on paper; no idea in real time
4. 25% PA returns are less (you need to play in 400 Nifty to get an income of 10L)

Going from the above bold line, the rupee-risk is commensurate with rupee-return one is projecting. Then what is the advantage of trading with option spreads over futures (with manageable and sensible stoploss). The latter will employ a much smaller position size for same amount of risk/reward.

 

[trader_ks]

May be I am missing something but seeing historical data of 18 months from excel sheet
Profitable month:9 months
Loss Month: 10 months

In my view this strategy cannot guarantee consistent profit. Yes but loss will be limited and pre calculated only. Moreover this strategy is profitable in range bound market, but just a thought that in coming days market may be more volatile.

 

[jamit_05]

May be I am missing something but seeing historical data of 18 months from excel sheet
Profitable month:9 months
Loss Month: 10 months

In my view this strategy cannot guarantee consistent profit. Yes but loss will be limited and pre calculated only. Moreover this strategy is profitable in range bound market, but just a thought that in coming days market may be more volatile.

I was expecting this kind of result.

Simply getting into a position is only the start. How it is managed makes all the difference.

My point is, I'd get into option spreads or more complex strategies (as opposed to futures position) only if I get the flexibility to manage the portfolio, so that I can manipulate the delta exposure as I see fit.