Paper Trading Nifty Straddles

[linkon7]

hi...Hichleviche..!

Market looks overbought and demand supply equation is tilted towards the supply side.... smart money dumping on overzealous retail.... distribution phase.

can u explain the rationale of buying ITM put of 3200 at 181. My logic is if there is further upside then the %-age drop in premium will eat away your premium way more faster than the percentage gain in case the market dips. i.e. say, if the market remains at these levels or market gains further grounds, your premium may drop by 10% to 25%, that's a range between 135 & 162 and then the markets dips to 3000 to 3030 levels and u gain back 10% to 25%, ur premium will be (125% * 135 = ) 168 and (162 * 110% =) 178.

i am still learning options and your input will help me a lot....

note : i am assuming that the trend may continue for the next week and the dips are bought around 3000 levels. In case the markets dips on Monday then we both will be smiling as i have a bear spread also.

P.s. : just to make u feel better, Reliance, ongc and other weighty nifty scripts all have a RSi of 70 which is where technical experts expect dumping. with Q4 results and election coming, and the FII net buy fig dipping, chances are you and I will make money next week.

happy trading....!

linkon7

 

[munde_77]

this is the way i like to play it on monday

sell 2 lots of 3100 call april at 145
and
sell 2 lots of 3100 put april at 117

total premium collected = 262

our lower break even point is 2838
and
our upper break even point is 3362

strategy :
buy 2 lot of nifty futures above 3100 and keep it till nifty falls below 3100, where i intend to reverse my position. i.e. I hold on to 2 lots of nifty long above 3100 and 2 lots of nifty shorts below 3100.

whchiever direction nifty closes above or below 3100 till the expiry.... i get to keep the net premium collected.

total investment :
1,25,000 /- assuming 16% margin is charged the broker for holding nifty positions

target profit : 26,000 /-

time frame : till end of expiry of April series.

how it works :
on expiry above 3100, the profit i make by going long on nifty will be nullified by the loss i make on selling the 3100 call.
on expiry below 3100, the profit i make on going short on nifty will be nullified by the loss i make on selling the 3100 put.

Shortcomings of this strategy :
1. if the nifty becomes directionless at 3100 and continues to trade plus minus 20 or 30 points pivoting 3100.

then,
we just let the premium decay and watch out for a break down or break out.... above or below 3100.

2. if there is a massive gap down or gap up around 3100.

then we have to cut some amount of net targeted profit we intend to collect. and continue to hold nifty position in the desired direction.

3. worst case scenario : nifty gaps down or up 200 points from above 3100 to below 3100
then,
we order a pizza and curse the dilevery boy for our misfortunes. :



happy trading...
linkon7

ps : no plan is too good to be true.... there has to be a catch and i want to find out what the catch is by experience. I intend to trade this strategy and will post on how the strategy played out ....

if nifty moves to 2800 or 2700 u will have lose nifty future. and if the markets are volatile till expiry. whhe will u you exit from nifty future.
ithink market is not going to remain rangebound for the next week. we may test 3300 or comebact to 2800

 

[linkon7]

Dear Munde 77...
The objective here is that nifty should move in either direction from 3100 and as long as it doesnt bounce around the 3100 levels.... i will be smiling.

if market goes to 2800, i'll hold on to my nifty shorts innitiated at 3100 levels....
if markets goes to 3300 levels, i'll hold on to nifty longs innitiated at 3100 levels....

either direction... i get to keep the net premium at expiry....

 

[linkon7]

todays position :
sold nifty at 3060 2 lots...
sold 3100 call april at 110.... 2 lots...
still waiting for end of day for an ideal place to short the 3100 put.... 2 lots again...

lets see how things play out....:clap:

 

[linkon7]

sold 3100 put at 185.... 2 lots...

so the net premium collected is 295....
and the profit target of this short straddle becoes 29,500...

will keep posting about the net position as and when i get time....

 

[linkon7]

status of the short stradle:


sold 3100 put 2 lots @ 185 current price : 187, loss : Rs. -200
sold 3100 call 2 lots @ 110 Current price : 81, Profit : Rs. 2900
sold nifty futures 2 lots @ 3060 current price : 2995, Profit : Rs. 6500

Net position so far : profit : Rs. 9200


linkon7

 

[nareshch]

status of the short stradle:


sold 3100 put 2 lots @ 185 current price : 187, loss : Rs. -200
sold 3100 call 2 lots @ 110 Current price : 81, Profit : Rs. 2900
sold nifty futures 2 lots @ 3060 current price : 2995, Profit : Rs. 6500

Net position so far : profit : Rs. 9200


linkon7

Where is the protection for Nifty futures ? Its a naked short now

Naresh

 

[munde_77]

Dear Munde 77...
The objective here is that nifty should move in either direction from 3100 and as long as it doesnt bounce around the 3100 levels.... i will be smiling.

if market goes to 2800, i'll hold on to my nifty shorts innitiated at 3100 levels....
if markets goes to 3300 levels, i'll hold on to nifty longs innitiated at 3100 levels....

either direction... i get to keep the net premium at expiry....

If market moves above 3100 2-3 times and moves down 2-3 times . How many times you will go long and reverse and go short and agiain long and short

 

[linkon7]

Where is the protection for Nifty futures ? Its a naked short now

Naresh

the objective of the short in nifty is to nullify the losses arising from selling the nifty puts. there is no intention of profiting from short in nifty.

as long as nifty trades below 3100...i am making money (my target is to keep the premium 29,500) and my only line of actin remains if nifty break 3100 on the upside. at that point i'll buy 2 lot of nifty to hedge against losses on 3100 call...


linkon7

 

[linkon7]

If market moves above 3100 2-3 times and moves down 2-3 times . How many times you will go long and reverse and go short and agiain long and short

i can afford to job around many times... at 3100. i got 295 points at hand remember... !