Nifty Options Vertical Spread Trading

[healthraj]

Yesterday's decision proved right today :thumb:

Still there is not much profit in the spread. IV is very low as of now.
Maximum OI is at 6000PE. I feel market can see that level. :thumb: but minor support at 6200.

Current status,

Long 6200PE @ 78 (83) = +5
Short 6100PE@ 50 (53) = -3

Net P/L = +2 Points

Nifty Fut premium is about +50 points that could be the reason for our spread not given much profit today. I will hold this position until NIFTY spot close above 6300.

For Debit Spreads or a combination of Long and Short we need to have a IV of at least 22% or let us say IV more than the VIX.

AVG CE IV @ 19.4%. AVG PE IV @ 17.81. VIX @ 20.25%. So I would say market is in a confused state. In the confused state (Range bound) and when the IV is low it is better to do Credit Spread (Selling Pairs).

 

[trader15]

Havent gone through all the posts, but simple question:-

Have you tried (actual trades or paper trades) on vertical spread with larger difference : Say 6200 and 6400 strike prices

or any observations on same

 

[comm4300]

when the IV is low it is better to do Credit Spread (Selling Pairs).

humbly disagree.

IV low = suitable for debit spread. for when IV rises, premiums will rise there by giving profit. long option gains more due to better delta than the short one.

IV high = suitable for credit spread. for wen IV falls, credit spread makes more money...as short option looses more money due to contraction.

 

[trader15]

humbly disagree.

IV low = suitable for debit spread. for when IV rises, premiums will rise there by giving profit. long option gains more due to better delta than the short one.

IV high = suitable for credit spread. for wen IV falls, credit spread makes more money...as short option looses more money due to contraction.

humbly agree with this view

 

[trader15]

Yesterday's decision proved right today :thumb:

Still there is not much profit in the spread. IV is very low as of now.
Maximum OI is at 6000PE. I feel market can see that level. :thumb: but minor support at 6200.

Current status,

Long 6200PE @ 78 (83) = +5
Short 6100PE@ 50 (53) = -3

Net P/L = +2 Points

Nifty Fut premium is about +50 points that could be the reason for our spread not given much profit today. I will hold this position until NIFTY spot close above 6300.

Whats the margin that gets blocked for this trade : Any benefits due to spread.

How do you calculate profit percentage : There are two ways to look at it. Say you got 8 point profit @ Net Cost of say 35 points, that translates to 22% profit, if we only view net cost

But to hold the Sold position, we are also putting in margin money : So assuming 24K as margin and another 2 K as net outflow for long position, we are looking at 400 rs profit for 8 point gain, that translates to roughly around 1% profit.

Need your inputs to understand these better

 

[DanPickUp]

humbly disagree.

IV low = suitable for debit spread. for when IV rises, premiums will rise there by giving profit. long option gains more due to better delta than the short one.

IV high = suitable for credit spread. for wen IV falls, credit spread makes more money...as short option looses more money due to contraction.

@Comm4300

Little impact in general as long as the spread between short and long is little. Do not let you lured into any comment from paper traders. Ananths and Healthraj are not real paper trader, just that you know this There is more behind them. They do real trades.

Take care my friend / DanPickUp

 

[ananths]

Whats the margin that gets blocked for this trade : Any benefits due to spread.

How do you calculate profit percentage : There are two ways to look at it. Say you got 8 point profit @ Net Cost of say 35 points, that translates to 22% profit, if we only view net cost

But to hold the Sold position, we are also putting in margin money : So assuming 24K as margin and another 2 K as net outflow for long position, we are looking at 400 rs profit for 8 point gain, that translates to roughly around 1% profit.

Need your inputs to understand these better

Dear trader15,

Margin required for a debit spread is about 17K. Take it as less than 20K.

I calculate my profit on total capital I have in my trading account at the end of the month. For calculation purpose, here i use 20k as investment and if i get 8 points (400 Rs) the return is 2%.

my target for every month is 5 to 10%...and it has been the same since i dont trade aggressively. I dont take too much risk and usually the cost of the spread is around 20 to 30 while entering and target would be 10 -15 points. :thumb:

I have not tried the other spread you mentioned say 6200/6400..just because the cost/risk is high. I'm thinking on ratio spread as well but not done any real trading on it.

All these are real trades with real money in market. I post my live trades here. I have been trading spreads for more than 6 months now.

 

[ananths]

For Debit Spreads or a combination of Long and Short we need to have a IV of at least 22% or let us say IV more than the VIX.

AVG CE IV @ 19.4%. AVG PE IV @ 17.81. VIX @ 20.25%. So I would say market is in a confused state. In the confused state (Range bound) and when the IV is low it is better to do Credit Spread (Selling Pairs).

humbly disagree.

IV low = suitable for debit spread. for when IV rises, premiums will rise there by giving profit. long option gains more due to better delta than the short one.

IV high = suitable for credit spread. for wen IV falls, credit spread makes more money...as short option looses more money due to contraction.

@Comm4300

Little impact in general as long as the spread between short and long is little. Do not let you lured into any comment from paper traders. Ananths and Healthraj are not real paper trader, just that you know this There is more behind them.

Take care my friend / DanPickUp

@comm4300,

I think you did not read Raj's post correctly.
I agree 100% with him on what he said.
When IV is low debit spread with one long and one short leg does not give returns quickly..why? because both legs will move relatively slow. Hence return will also take its own time. Also he has mentioned in range bound market selling two strike prices one put and one call would earn money because of time decay.
So deciding factor should not be only IV. There are other things to it. :thumb:

 

[ananths]

Current position,

Long 6200PE @ 78 (74) = -4
Short 6100PE@ 50 (48) = +2

Net P/L = -2 points :thumb:

Market closed at LOD...expecting bears to win!!! :thumb:

Closed the Spread #3

Long 6200PE @ 78 (75) = -3 (exited when NIFTY breached HOD)
Short 6100PE@ 50 (40) = +10 (Fixed target 10 points)

Net P/L = +7 points

Executed two legs at different times, because I saw HOD breaching in NIFTY and did this adjustment :thumb:

Now its better to enter the call debit spread. Will wait for some time. Let the dust settle. :thumb:

 

[ananths]

Spread #4

Long 6400CE @ 70
Short 6500CE @ 34

Total cost 36 points..bit high

My target is to get 50 points per lot this month ..so taking bit aggressive position! Let us see how it goes.