Nifty Options Vertical Spread Trading

[gmt900]

@gmt900,
Whats the status of your spread now?

I could not trade today...missed such a good day for trading
So no position as of now...but will enter on Monday.

Yesterday at EOD, there was a loss of 640. Today at EOD it is 1200 profit. I decided to hold on , since Raj's tool shows max pain @ 5800. They say, you have to let your profits run and cut your losses.

 

[healthraj]

Yesterday at EOD, there was a loss of 640. Today at EOD it is 1200 profit. I decided to hold on , since Raj's tool shows max pain @ 5800. They say, you have to let your profits run and cut your losses.

Hope you have taken partial profit

 

[gmt900]

Hope you have taken partial profit

Actually I have not. Thanks for the suggestion.I should be doing it Monday onwards if the market is moving in positive direction.

 

[ananths]

Hope you have taken partial profit

Actually I have not. Thanks for the suggestion.I should be doing it Monday onwards if the market is moving in positive direction.

@gmt900,
I think Raj is asking this because its expiry time and high chance is that you will lose time value. Hence during expiry week we need to be careful....in other times I would prefer to carry on with the profit making trade as much as possible because we take low risk anyway. :thumb:

 

[gmt900]

@gmt900,
I think Raj is asking this because its expiry time and high chance is that you will lose time value. Hence during expiry week we need to be careful....in other times I would prefer to carry on with the profit making trade as much as possible because we take low risk anyway. :thumb:

Ananth,
I don't think losing time value is the issue for the trade which I have taken.
At expiry if nifty closes below 5950, I make max profit. If nifty closes above 6000, I make maximum loss. On the other hand if nifty slips below 6000before expiry, I will make profit but not max profit. If I don't close the trade then and at expiry, nifty closes above 6000, I make max loss. So, it's a question of taking the right call so that I don't lose out on the possibility of getting max profit if nifty closes below 5950 or take whatever profit I get before expiry and not take a chance. Since max pain is @5800, I might be better off taking a chance to wait till expiry. Of course, Max pain keeps on changing. But, according to Raj, in the expiry week max pain theory is more likely to work.
So, watching max pain for taking action may be the best course.

 

[ananths]

Spread #3 Dt - 23/09/2013

Bot OCT5900PE @ 129
Sold OCT5800PE @ 100

Total cost 29 points

 

[gmt900]

Squared off my put debit spread for a profit of 21 points (250*21= 5250).
Mulling long butterfly spread @ 5800 or 5900. max pain was 5800 till 1.0 pm. Now it is 5900. May take a call tomorrow.
Thanks to Raj for introducing us to the concept of Max Pain.

 

[ananths]

Spread #3 Dt - 23/09/2013

Bot OCT5900PE @ 129
Sold OCT5800PE @ 100

Total cost 29 points

Position at COP today,

Bot OCT5900PE @ 167
Sold OCT5800PE @ 133

Net P/L = +5

 

[gmt900]

I have taken the following trade today.
Long Butterfly Spread ( Two lots);
Sold 5900C @ 67
Sold 5900P @ 67
Bought 5950C @ 45.5
Bought 5850P @ 43

Maximum Profit : 4,550
Maximum Risk : 450

I have taken this trade because:
-Max pain was at 5900 when I took the trade
-RRR of 10 is attractive
-I exited from Put Debit Spread which gave me a profit of 5,250.
Thanks and regards,
gmt900

 

[ananths]

I have taken the following trade today.
Long Butterfly Spread ( Two lots);
Sold 5900C @ 67
Sold 5900P @ 67
Bought 5950C @ 45.5
Bought 5850P @ 43

Maximum Profit : 4,550
Maximum Risk : 450

I have taken this trade because:
-Max pain was at 5900 when I took the trade
-RRR of 10 is attractive
-I exited from Put Debit Spread which gave me a profit of 5,250.
Thanks and regards,
gmt900

Hi gmt900,

Congrats for the successful trade today...great!

I could not understand how this butterfly spread will give 4,550 profit (Edit:- sorry..I guess you are calculating for 2 lots)
I just checked in options oracle and here is the result,

http://imageshack.us/photo/my-images/46/8ccu.png

http://imageshack.us/photo/my-images/826/oi12.png
Please correct me if my understanding is wrong. :thumb: