Nifty calender spread with calls or puts

[jamit_05]

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.

Seeing a senior option trader take a look at my post, I thought of adding that, my no means am capable of doing what I just said. I only intended to convey the current stage of my mindset regarding options trading.

However, I am trying to learn with each expiry by learning to manage a options strategy on another thread.

 

[sabharwal_RK]

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.

Just a couple of pointers that might be a help

1. Yes strike rate seems to be low if you hold till expiry, but if you exit a couple of days earlier *on Monday) strike rate jumps to as high as 70%, may be due to volatility on expiry day.

2. One should avoid high volatile months like May 14 (election) month

3. If you get close 50 negative with 7/8 days in expiry then one should adjust, result of adj too are present in the excel (for eg. Ausg 13(2))

4. I am going to extend this excel further back to see more result.

5. I am earning close to 10% on my surplus capital, if I can earn ROI of 25% on this with a little bit of effort I see no reason to not to use this method.

 

[jamit_05]

Sell Aug CE 7800
Buy Sept CE 7800

In this spread, the principle that works in our favour is that:

Theta of Aug > Theta of Sept.

So, essentially, we want to see the price coming back to 7800 after travelling away on either side. As a result, Aug will have decayed more than Sept.

And what'd we do if price went up or down 400 points and wouldn't return? How much would be the loss? Will we get a window, an opportunity, to get out break-even?

 

[gmt900]

Sell Aug CE 7800
Buy Sept CE 7800

In this spread, the principle that works in our favour is that:

Theta of Aug > Theta of Sept.

So, essentially, we want to see the price coming back to 7800 after travelling away on either side. As a result, Aug will have decayed more than Sept.

And what'd we do if price went up or down 400 points and wouldn't return? How much would be the loss? Will we get a window, an opportunity, to get out break-even?[/QUOTE

If you sell Aug 7800CE @ 121 and buy 7800CE Sep@191, max loss you will incur is 3,500 for one lot. Rest will depend on how you manage the trade.

 

[sabharwal_RK]

How to manage a calendar spread?
Can someone throw a detailed view about this management.....

 

[jamit_05]

If you sell Aug 7800CE @ 121 and buy 7800CE Sep, max loss you will incur is 3,500 for one lot. Rest will depend on how you manage the trade.

Like it was posted earlier by SS, it'd be better if we accepted defeat and got out of positions a week before expiry or rolled over.

 

[hardik229]

Hi gmt900 & jamit_05,

I am following this silently and I found this exciting, at the same time having the same question as sabharwal... How to manage the calendar spread? If we have taken the 7800 calendar then we should be in loss at this point of time.

1. Till what time we have to wait to adust?
2. What should be the stoploss?

Thanks..!!
Hardik

 

[gmt900]

Hi gmt900 & jamit_05,

I am following this silently and I found this exciting, at the same time having the same question as sabharwal... How to manage the calendar spread? If we have taken the 7800 calendar then we should be in loss at this point of time.

1. Till what time we have to wait to adust?
2. What should be the stoploss?

Thanks..!!
Hardik

As I mentioned in my first post, I am trying to learn calendar spreads. So, I will not be able to answer your questions precisely.
However, what I gather so far is:
1. These strategies can be used to generate income without taking unlimited
risk.

2. I still have to figure out whether margin requirement will be less than that for Iron Condor.

3. From Sabharwal Saheb's excel sheet, it is clear that max loss will not exceed initial debit, something like buying a naked option.

4. Like any other strategy, one will have to figure out how to handle the trade
by experience.

5. Rather than fixed stop loss, one can decide to close trade with pre decided
profit or loss. I entered into a paper trade on 28 JULY as follows;

sell Aug 8000CE @ 35.90
buy Sep 8000PE @ 45.50
sell Aug 7500PE @ 38.00
buy Sep 7500PE @ 65.50

On 28 Aug, Max Profit ; 5011
Max loss : 1855
Return on 1 Aug was 1290.
Assuming margin req of 50,000 (it should be less), profit is 2.5 %. So, one might decide to take the profit and move on to the next trade.

Let us exchange any more ideas the members may have on the strategy.

Thanks and regards

 

[Somatung]

@Gmt900

I guess you made a typo in the above post. Buy Sept 8000 call and not the 8000 put. If it was not a typo, then you kindly check the analyzing picture to see what you talk about. An analyzing picture which shows all four legs you posted. Have a nice day

 

[gmt900]

@Gmt900

I guess you made a typo in the above post. Buy Sept 8000 call and not the 8000 put. If it was not a typo, then you kindly check the analyzing picture to see what you talk about. An analyzing picture which shows all four legs you posted. Have a nice day

I stand corrected. It is 8000call and not put. Thanks!