Options during Elections

[bandlab2]

sold 10 lots NF 3500 calls at 195, bought 3600 calls at 141. maximum profit = 53 rs per lot, maximum loss = 47 rs per lot. maximum profit range = below 3500 and above 3600. maximum loss = at 3500 or at 3600. 3500-3600, loss zone

 

[rkkarnani]

Not much versed with Options. Please explain if u hv time: Why do we call 3500-3600 as loss zone.

As per my understanding :
If Nifty closes at 3500 :
You loose entire premium of 141 paid for 3600 call but simultaneously you retain the entire amount of 195 received for Selling 3500 calls.

AND
If Nifty closes at 3550
you again loose entire amount of 141 paid as premium for 3600 calls but you pay only 50 out of 195 received for selling 3500 call and retain 145 as profit.

If Nifty closes say at 3800 :
You loose 300 less 195 = 105 in 3500 calls sold
You gain 200 less 141 = 59 in 3400 call bought
Net loss 46!!

Are these calculations (above and below) correct ?

You do not loose anything in 3500 Call sold till 3500+195 = NF close till 3695, but here you also loose Net 46 in the 3600 Call bought.

At 3600+141= NF 3741 you gain the 141 premium paid for 3600 calls but loose 46 in the 3500 calls sold. For every rise by a point in NF above 3741 you loose a rupee and also gain a rupee, keeping your Loss static at Rs.46/-

You retain the entire amount of 195 for the 3500 calls sold if NF remains at 3500 or lower. Here you loose entire amount of 141.

 

[bandlab2]

yes , you are right. my calculation was wrong

btw, what are the startegies to take advantage of this volatality in election time. i want to cap my loss to some value and dont mind limited or unlimited profits. capital is around 2 lakhs (margin), expected profit 25000, allowed loss 15000 rs

 

[arnav_rulz]

yes , you are right. my calculation was wrong

btw, what are the startegies to take advantage of this volatality in election time. i want to cap my loss to some value and dont mind limited or unlimited profits. capital is around 2 lakhs (margin), expected profit 25000, allowed loss 15000 rs

Well See what i am doing is.. Selling Deep Out of money options on both Sides.. and by deep i mean very deep...

Like 3900 call and 3000 Put.

This gives me a premium of atleast 70 right now (which is very high considering how out of the money the options are..) Well i dont see much risk in it caz even a move of 400 points will give me all the premium !!

Also as days go.. these will reduce rapidly and even a strong move on either side after election results wont increase of the premium in these options...

Basically this is my election strategy... Sell both sides(thats imp), Far far out of money options..

 

[praveen taneja]

Bros dont know about others but i will surely buy straddle of ATM options so after result one will become half or zero other will ohh myy my I am Loving it...........
anticipation of 200 point updown after result declared

 

[rkkarnani]

Well See what i am doing is.. Selling Deep Out of money options on both Sides.. and by deep i mean very deep...

Like 3900 call and 3000 Put.

This gives me a premium of atleast 70 right now (which is very high considering how out of the money the options are..) Well i dont see much risk in it caz even a move of 400 points will give me all the premium !!

Also as days go.. these will reduce rapidly and even a strong move on either side after election results wont increase of the premium in these options...

Basically this is my election strategy... Sell both sides(thats imp), Far far out of money options..

3900 CALL Buyers are at 26.20
3000 PUT Buyers are at 46.60
Nifty Spot is : 3570

 

[praveen taneja]

3900 CALL Buyers are at 26.20
3000 PUT Buyers are at 46.60
Nifty Spot is : 4570

sorry bro here is a typo mistake:rofl::rofl::rofl::rofl:

 

[rkkarnani]

sorry bro here is a typo mistake:rofl::rofl::

Yeah!!! It is !!!! Correcting it now.........

 

[bandlab2]

Well See what i am doing is.. Selling Deep Out of money options on both Sides.. and by deep i mean very deep...

Like 3900 call and 3000 Put.

This gives me a premium of atleast 70 right now (which is very high considering how out of the money the options are..) Well i dont see much risk in it caz even a move of 400 points will give me all the premium !!

Also as days go.. these will reduce rapidly and even a strong move on either side after election results wont increase of the premium in these options...

Basically this is my election strategy... Sell both sides(thats imp), Far far out of money options..

thanks arnav for the startegy. but how deep is deep ? market suddenly jumped to 3700 now. 3900 from here is not far. dont u think its too risky ? also as much as possible both legs must be equally seperated

i feel selling 4000 call and 3100 put is ok. but need to handle the risk when when one leg moves too fast

 

[bandlab2]

3900 CALL Buyers are at 26.20
3000 PUT Buyers are at 46.60
Nifty Spot is : 3570

in this case risk is unlimited. i am looking for limited risk and limited/unlimited profits

long straddle is a good strategy, but right now the premiums are high on both sides.