please explain this strategy. how to get in and get out.
Last friday i saw bullish OI and COI in aug/sep month and max pain consolidation range 7800-7850-7900......
So to capture expiry and next week if market stays sideways or directionless instead of going down or up i sold this pair......and many pairs of mine are hedge against other pairs along with futures.....however i strictly suggest all the new traders not to go by such strategy or thought process as selling options during possible high volatile.......yes sell shud not sell pairs that can go instantly ITM......in this case this pair is sort of delta neutral ie one leg would always loose and other would win thus this pair helps us capture trend,once its establish u can buy some more profit making options or futures so that u can have more profit making legs..... u can sell more options.....
also check IV...if it is high then sell and when it is low buy....some people strictly folow vix
this trade is called SHORT straddle
where seller sells same strike ATM CALLS/PUTS....this is a neutral credit spread with limited profit and unlimited loss...
Max profit is preminum received...here is
260
max loss unlimited...occurs when underlying is greater than strike call sold + premimium or when underlying stock price is less then strike of put - premium received
LBEP : 7900-105 = 7745
UBEP : 7900-155 = 7808
profit is when trade is between upper or lower break even point
loss is when the trade is outside upper or lower break even point
I strongly suggest to enter this at mid or 5-7 earlier to expiry and pair should be of next month.
Such trade helps in capturing trend, it helps in sideway,range bound stagnant market. Huge volatility hurts in such case
Keep the trade for some time....calculate to prf and loss before hand and plan for adverse situation before entering that helps to trade actively.
...... ideas from internet .....
