NIFTY Options trade : Why and what-if...

[adityasaraf007]

What was your exit strategy....?

you ended in HOPE-mode.... and lost big for being unplanned...! As a trader, getting stop loss hit is normal... playing without an exit strategy is suicidal...!

Exit Strategy was to get out once Nifty starts trading around 4985-4990.... But this being the 1st Option trade, emotion got hold me and lost big on it...

Otherwise, I do get out once Stops are hit

 

[SB2000]

This thread will be a discussion on nifty options trades. Logic behind the trade taken and the what if scenario...

Its important to think about the what if scenario as only then market cant surprise you... there is a action plan for every scenario,...:thumb:

Got a question:

Towards the expiry, I have noticed few lots (out of the money options) that trade only between 5 paisa and 10 paisa. Can we trade these actually? Have you noticed/ or tried the same anytime?

I have noticed this happening with NIFTY and Renuka Sugars.

 

[trader.trends]

Got a question:

Towards the expiry, I have noticed few lots (out of the money options) that trade only between 5 paisa and 10 paisa. Can we trade these actually? Have you noticed/ or tried the same anytime?

I have noticed this happening with NIFTY and Renuka Sugars.

How exactly do you propose the trade can be done? Zerodha charges 20 per trade. So to break even you have to trade 20 lots (1000units). After that every 1000 will give you profits of Rs 55/-. This is assuming you go long and pay only the premium. Also assuming you will find buyer at .10 after buying at .05.

Have not figured out those trades. Can understand people squaring of shorts to release their margins. But longs???

 

[SB2000]

How exactly do you propose the trade can be done? Zerodha charges 20 per trade. So to break even you have to trade 20 lots (1000units). After that every 1000 will give you profits of Rs 55/-. This is assuming you go long and pay only the premium. Also assuming you will find buyer at .10 after buying at .05.

Have not figured out those trades. Can understand people squaring of shorts to release their margins. But longs???

Alright, here it is....please correct me if i am wrong:

I have used 1000 lots here. Maximum risk is 2,500 but profit calculation is below.

Buy: .05*50*1000=2,500
Sell: .1*50*1000=5,000
Brokerage: 52.9 (including buy and sell) Please also refer to Zerodha's calculator on their website. My calculation also includes the stamp duty.
Profit after brokerage: 2,447.1


Now, finding a buyer at .10:

Well, just as an observation for this month's expiry, please look at the price movements of the lots in Nifty and Renuka ( I know of only these but one can look at Hindalco, Tata Steel etc also) which would be priced .05 by next week and check the liquidity of the lots. Actually, this is one aspect I am skeptical about and hence have put up the question here. But personally, I have seen lots doing just .05-.10 entire day (my lots that went into losses did this) and it made me look into it.

Also, this kind of trade could not be done through our regular brokers as they would charge per lot and not per trade and therefore I think none of us thought about these. So if these trades are happening then someone must be doing them, and I am guessing, if they can, we can too.

Using the bhavcopy for last few months/years one can backtest this too.

 

[linkon7]

Shorted Dec 5000 call and 5000 put for a total of 330...!

exited the 5000 put leg at 212
sold 4800 put at 125

effective cost of 5000 call = 330 - 212 -1 = 117
cost of 4800 put = 125

cost of 4800-5000 strangle short = 242 (117+125)

plan of act: wait for 4800 or 5000 to be hit....!

 

[columbus]

Not deep cuts any more like yesterday.

 

[linkon7]

exited the 5000 put leg at 212
sold 4800 put at 125

effective cost of 5000 call = 330 - 212 -1 = 117
cost of 4800 put = 125

cost of 4800-5000 strangle short = 242 (117+125)

plan of act: wait for 4800 or 5000 to be hit....!

exited the 5000 dec call...!

entered 4800 call dec short...!
entered 4700 put nov long...!


Now position held :
4800 straddle short+ 4700 put long november for over night risk...!

 

[columbus]

PE options are going strong and CE options are losing steam.

 

[linkon7]

PE options are going strong and CE options are losing steam.

Ideally comparison should be between calls of strike price 4700 and above
and puts of strike price 4800 and below.... !

 

[columbus]

Ideally comparison should be between calls of strike price 4700 and above
and puts of strike price 4800 and below.... !

The series started with BANG !!!!.(at around 5400). So I kept the band in the
range 5600~5000.I removed 5600 and 5500 and introduced 4900 and 4800 as
other PE options turned COSTLY.