Options Adjustments

[toughard]

K gr8, Just sharing my inputs.

NIFTY at 7353.00
The danger with buying 7200 pe @ 58

1) Nifty runs up in this case 58 will come down quickly
2) Nifty stays where it is for a week. IVs go down marginally and theta eats up premium
Assuming nifty stays at 7353 for 4 days with 20 days to expire and vega goes down marginally it would be worth 48.

How do u plan to deal these scenarios as and when if it arises
How about buying 7200 pe and selling 7100 pe at 36.

In this case if Nifty stays where it is for a week. IVs go down (even if it stays same) and theta eats up premium
our 58 would go down to 48 but 36 becomes 28. So a loss 2 points in this scenario Max loss again would be capped to of course 22.

Positive scenario Lets say if nifty touches 7200 in 4 days our 58 becomes 100 and 36 becomes 63.
Total profit 42- 27 = 15

Sure this can be done at runtime too but would be good if we can list how do we tackle the above 2 scenarios

This should not be done - 2 reasons
1st you are capping the trade potential
2nd you are not avoiding the loss you are just reducing it by margin

lets fine tune it....

if the upper direction is confirmed to you then lets sell one higher strike like if you bought 7200 PE write 7300 PE & 74PE for 73PE...

Now can pull out the prices for the same and tell us what would be the situation if market expired higher?

 

[toughard]

There is a stop at 7400 lets say if it runs at 7450 too in lets say 4 days
58 => 28
36=> 15

Loss= 30 - 21 = 9 points. We will get out at that point of time. Sure OI scenario will change at that point

Thanks

This should not be done - 2 reasons
1st you are capping the trade potential
2nd you are not avoiding the loss you are just reducing it by margin

lets fine tune it....

if the upper direction is confirmed to you then lets sell one higher strike like if you bought 7200 PE write 7300 PE & 74PE for 73PE...

Now can pull out the prices for the same and tell us what would be the situation if market expired higher?

 

[lemondew]

Ok

At 7450 with 20 days to expire and PE having IV of 17.8 ( using sharekhan option calculator)

7200 58 becomes 28
7300 => We get 52

Would you sell back you r put?

What if nifty stays at 7353 woul you still hold put which would be worth 48 with 20 days to expire?

This should not be done - 2 reasons
1st you are capping the trade potential
2nd you are not avoiding the loss you are just reducing it by margin

lets fine tune it....

if the upper direction is confirmed to you then lets sell one higher strike like if you bought 7200 PE write 7300 PE & 74PE for 73PE...

Now can pull out the prices for the same and tell us what would be the situation if market expired higher?

 

[toughard]

if the upper direction is confirmed to you then lets sell one higher strike like if you bought 7200 PE write 7300 PE[/COLOR] & 74PE for 73PE...
Can you please clarify on the bold part

that's nothing but if some one bought 7300PE then they can think of writing 7400PE for now lets forget about that.... we assume that we bought 7200 PE

 

[toughard]

Ok

At 7450 with 20 days to expire and PE having IV of 17.8 ( using sharekhan option calculator)

7200 58 becomes 28
7300 => We get 52

Would you sell back you r put?

What if nifty stays at 7353 woul you still hold put which would be worth 48 with 20 days to expire?

NO.... what I meant was...
we bought 7200 PE at 58 app
if market reversed then by keeping this we will sell 7300 PE at around same/higher price... so it will become reverse put spread...

by doing this we have not caped the trade potential initially..(who knows, when you are doing this trade near Resistance market may strongly fall in some days with gap down, just for example i am telling) and if market ends higher then we attempted a free trade...

58 debit and 58 credit = 0 if both becomes zero on market ending higher....

 

[lemondew]

How about if nifty stays at around 7353 ?

NO.... what I meant was...
we bought 7200 PE at 58 app
if market reversed then by keeping this we will sell 7300 PE at around same/higher price... so it will become reverse put spread...

by doing this we have not caped the trade potential initially..(who knows, when you are doing this trade near Resistance market may strongly fall in some days with gap down, just for example i am telling) and if market ends higher then we attempted a free trade...

58 debit and 58 credit = 0 if both becomes zero on market ending higher....

 

[toughard]

How about if nifty stays at around 7353 ?

nothing just wait with till nifty indicates a decisive movement... good thing is we are already boarded the bus now bus have its own speed... If we think about its speed not board any bus then the trading journey will not happen... In any case our maximum bet is @ 1% (even after 50% stop loss) of the capital... i think this far more better for a naked option trades...

 

[lemondew]

Ok lets follow your rules. Gr8 going...

Are you looking for any levels for break out which you want to get out. Or breakdown levels.

nothing just wait with till nifty indicates a decisive movement... good thing is we are already boarded the bus now bus have its own speed... If we think about its speed not board any bus then the trading journey will not happen... In any case our maximum bet is @ 1% (even after 50% stop loss) of the capital... i think this far more better for a naked option trades...

 

[toughard]

Ok lets follow your rules. Gr8 going...

Are you looking for any levels for break out which you want to get out. Or breakdown levels.

No as of now I am having wait and watch mode on...
I feel the rates will be reminded unchanged.... and market correct... reasons behind it...
1. stable rates ensure constant growth
2. Modi may don't want to disappoint corporates by hiking the rates
3. more importantly Modi may don't want to disappoint people by reducing the rates

all are my own economics

 

[toughard]

At Present...

Portfolio design---
60% (15% X 4) structured trades
10% for naked option trading
20% for M2M (untouched)
///////////////////////////////////////////////////////////////////

1st 15%----------
Funds employed 15% of capital...
Per lot trade need Rs 40000...
RR - 1:4
aim to achieve 10% profits on invested amount if loss then 2.5% of 15% of portfolio (an income generation) Effect on portfolio if loss 0.5% including all charges...
Porfolio RRR is 0.5% to 1.5%
pay out sheet....

2nd trade ---- naked trading
bought 7200 PE @ +/- 60 with a stop as 7400 CE OI shedding below 4M
Money Management - using 2% of capital

updates for these simulated trades will be at necessary points...

good luck all....

toughard