Nifty Options Vertical Spread Trading

ananths

Well-Known Member
Spread #2 Dt - 01/10/2013

Bot 6000CE @ 84
Sold 6100CE @51

Cost is 33 points
Holding this position today,

6000CE @ 84 (133) = + 49
6100CE @ 51 (88) = - 37

Net P/L = +12 points.

I have added few more to this position today..which I normally dont do....so the average P/L comes to be around +8 points

I'm holding this position because market is in bullish mode and expecting some more upside. If there is any reversal or consolidation at 5900 - 6000 level I will cover 6000CE and buy 6200CE and make this a Credit spread. Let us see how it goes.
 

ananths

Well-Known Member
Holding this position today,

6000CE @ 84 (133) = + 49
6100CE @ 51 (88) = - 37

Net P/L = +12 points.

I have added few more to this position today..which I normally dont do....so the average P/L comes to be around +8 points

I'm holding this position because market is in bullish mode and expecting some more upside. If there is any reversal or consolidation at 5900 - 6000 level I will cover 6000CE and buy 6200CE and make this a Credit spread. Let us see how it goes.
Closed this position today

6000CE @ 84 (121) = + 37
6100CE @ 51 (80) = - 29

Net P/L = +8 points

Today I did a mistake of covering the spread during that 60 points fall intraday..should have exited early or waited for recovery..:(..maximum profit around 15 points was available today.

Yesterday's addition also gave around +1 points ...so total profit average is +9 points

Spread #3
I converted this to a credit spread today as planned
6100CE @ 80 (89) = - 9
6200CE @ 50 (55) = +5

Total P/L = -4 points
 
Last edited:

ananths

Well-Known Member
Closed this position today

6000CE @ 84 (121) = + 37
6100CE @ 51 (80) = - 29

Net P/L = +8 points

Today I did a mistake of covering the spread during that 60 points fall intraday..should have exited early or waited for recovery..:(..maximum profit around 15 points was available today.

Yesterday's addition also gave around +1 points ...so total profit average is +9 points

Spread #3
I converted this to a credit spread today as planned
6100CE @ 80 (89) = - 9
6200CE @ 50 (55) = +5

Total P/L = -4 points
Spread #3 Closed

Short 6100CE @ 80 (65) = +15*
Long 6200CE @ 50 (43) = -7*

Net P/l = +8 Points.

*covered at different times.

Result of spread trading till now for October series..

Spread #1 = +12
Spread #2 = +9
Spread #3 = +8

Total P/L = 29 Points...This is around 7% return if we take per pair cost is 20K. :thumb: :thumb:
 

ananths

Well-Known Member
Spread #4 Dt 07/10/2013

Another credit spread for the month

Short 5600PE @ 55 (54) = +1
Long 5500PE @ 38 (39) = +1

Net P/L = +2 points

Why credit spread now?..I expect market to hold 5800 and for a debit spread in call side, the cost is too high (~40). Since rupee has appreciated market is not falling too much and PUT side IV is around 28 - 30 and call side its only 23!
Whats the plan if market falls below 5800? Will adjust this spread...how? I have something in mind which I think may not be needed at this stage. Let us see how it goes.
 
For me this is all nonsense
No one can make consistent profit from this strategy never nver
Here is the corection
instead of buying and selling CE or PE of different strike

u can Buy CE and Buy PE of different strike price having equivalent value

means
if 6300 CE is 30 Buy it
and 5600PE is near about 30 rs. that buy it

u can buy both CE and PE (but the point is of nearing about same value)
then u can find or back test or paper trade this strategy u will get the good returns

dont go for my english I am russian
 

ananths

Well-Known Member
For me this is all nonsense
No one can make consistent profit from this strategy never nver
Here is the corection
instead of buying and selling CE or PE of different strike

u can Buy CE and Buy PE of different strike price having equivalent value

means
if 6300 CE is 30 Buy it
and 5600PE is near about 30 rs. that buy it

u can buy both CE and PE (but the point is of nearing about same value)
then u can find or back test or paper trade this strategy u will get the good returns

dont go for my english I am russian
Nonsense? :annoyed::annoyed::annoyed:

Consistency is already proved in this thread and I'm trading this for past few months...and I dont need your silly advice on how to trade options. :annoyed:

Go and start a new thread with your strategy mentioned above and let us see your consistency...

If you are not interested in my strategy stay away from it but dont use words like nonsense to my way of trading.
 
ananths :
PUT side IV is around 28 - 30 and call side its only 23!

as call side iv is lesser , isn't it better to buy bull debit call spread ?
i m new to option trading and regularly following ur low risk trading , pls reply...
 

ananths

Well-Known Member
ananths :
PUT side IV is around 28 - 30 and call side its only 23!

as call side iv is lesser , isn't it better to buy bull debit call spread ?
i m new to option trading and regularly following ur low risk trading , pls reply...
Hi Abhinay,

Yes. You are right. its better to buy Call debit spread because IV is low and market is finding support around 5800 level.
My view is that market should move towards 6000 now but 6100CE has highest OI. So 6100 will act as a resistance.

See the cost of Call spreads, its above 30..if you want cost below 30 then you have to buy 6200CE/6300CE...I did not choose this because its the strike price after the resistance 6100. But we cant say anything if market moves fast on the upside this would give good RR.

I felt market will be range bound this week and for a range(5800 to 6000) bound market Credit spread will work better than Debit spread. Since the view is on the upside till 6000, instead of going for a Call Debit spread, I took put credit spread which has high risk. I have plan to adjust the spread in case market falls below 5800.
 
can u pls mention some basic rules u follow for choosing the strike price like the cost below 30 , u mentioned and also things like after how much profit u like to exit the trade.
it will help to many newcomers here. thx
 

ananths

Well-Known Member
Hi Abhinay,

I look for very simple setup for a trade and also dont want to make my trade to be a complex one. I do this because I can't promise myself complete attention to market during trading hours.

Main intention is to take low risk. First and foremost thing in my mind is to save the capital...then manage the trade properly money will come automatically..I'm just learning like you!

There are few things we need to keep in mind when we are trading options. Few things i can list down are,

1) OI - check where is the highest OI in options chain. Currently its at 5700PE and 6100CE. I take these two act as support and resistance. So market can bounce from support and fall from resistance. If these points are broken then further downside or upside can be possible and the become strong support and resistance
So if market is near support you can take Debit call spread or Credit put spread and if market is near resistance you can take debit put spread or credit call spread both these spreads act simillarly but the difference is the RR.

2) IV - observe the IV of options. They say if IV is low and expected increase, buy options. If IV is high and expected to decrease then sell options.

3) Direction of the market - this is bit tricky but you need to find some way to find it, like using EMA's or trend lines. I sometimes use ADX too. However these are not necessary. You can see the direction of the market just by seeing any graph. You dont need to be always correct because even if you are wrong you can adjust the spread or get out with minimal impact to your spread. What I do is keep a SL in mind in terms of NIFTY levels. Say now i feel 5800 is SL..so i will adjust my spread if its breached or simply get out and look for another opportunity.

4) You need not have position in market always...sometimes you will miss some rally but its ok. Sometimes I also feel I should have played a naked option..missed such a good run in market because of my spreads my profit is limited and all that things but try to control that because spread will save us in bad times...surviving in market is important than earning.

5) For exiting the trade, If market is in my favor i try to ride it as much as possible until it finds resistance and if we see some change in direction, exit is triggered. If we play OTM's it will be usually 10 - 15 points. There are exceptions..if IV increased after we enter sometimes we get more than 20 points..

I also play naked options when I feel but I know my limit and play within my boundary.

These are all not hard and fast rules...sometimes I take high risk trades like 30-40 points(ATM)..but it all depends on situation but always I avoid trading current month options during expiry week.

When my intention is to take low risk trade and I'm able to get consistent return, I'm happy with it. Just need to maintain discipline. There is nothing secret in this other than what I mentioned above.One just need to enter the trade and learn to manage it.

For more knowledge, read AW10 & Dan's thread which I mentioned in the first post of this thread.

If you have any more queries you are welcome to ask here. Experts like Dan visits this thread, he shares his knowledge if its a genuine and valid question.

All the best!.
 

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