Hi Bro,
I cudn't understand after reading your whole post thats why I requested you!
Tx
@Bapu: Ok, here we go:
Nifty spot @ 6029.90
You think market will go down. Now you can choose many different ways to play/trade options and non of them is the only correct or only wrong way. The final profit, how ever it occurs, will be a product by handling the implemented trade the right way.
Simple example on plain vanilla option trading without considering any complex option strategy:
First way you can do: You sell one call at the money 6050/Feb for 102.00. So your maximum profit you can have is 102.00 in 15 days. Your maximum loss
could be your stop loss you have on this short call if the stop loss level is executed. If you are not executed, and this can happen when a market really fast moves, you can be in hell. That's why I wrote:
Could be.
Second way you can do: Instead of selling the call, you can buy a put in the money 6100/MAR for 138.90. MAR is choosen to give the market more time to move in the direction you expect and to protect you from possible, bigger time decay loss in case market first moves against you. Your option then would get first atm, may even otm and that would mean a higher time decay loss, as the intrinsic value would be out of the option. On the other hand: If market moves in your direction, itm options will quicker gain profit compare to atm and otm options, as the delta is higher and more related to the real delta of the underlying (Nifty)
If market now quickly moves downwards, your call should loose quick in value, (means profit for you) or your put is increasing quick in value (means profit for you). So who is correct or who is wrong?
To make it very clear: At this moment I not even started to spot on the way how such trades can/could be handled according to market moves = Trading knowledge is needed and will make the different outcome of this two example trades, which easily can be traded in the real market.
Just to say: If market is bearish, the itm put has a great chances to bring good profit, even the market first moves slowly down with a few pull backs to the up side. Even those pull backs to the upside can bring profit at any time and this profit is added to the final outcome of the whole trade. How? Trading knowledge and how to handle such trades. As you now more as clearly should understand: There is no absolute correct or absolute wrong for any strategy/market. There is only trading experience/knowledge which will bring the final outcome/profit in any choosen trading methodology/strategy.