Paper Trading Nifty Straddles

[AW10]

Munde,
I think, strategy 1 trade for April contract is closed with losses.
And there is no new trade open at this moment.

As per the rules of strategy 2 (to buy straddle after 5 days into current series), we should have opened a straddle on Thrusday. To continue this thread, I am opening this paper trade by closing price of Thursday 2-Apr. I am using 3200 strike to buy April straddle as it is the closest price to the spot.

Executed on close of 2-April -

Strategy 2 trade - Buy 3200 Straddle, April series
3200 Call bought at 131
3200 Put bought at 105

Total premium paid = Rs 236.

Lets see, how it turns out.

Not sure, if Bandlab wanted to execute second strategy only when 1st trade is open.
Hope he comes back to the thread. Till then, we can continue with it.

Happy Trading.

 

[munde_77]

Actually we should sell short straddle not buy, if i am wrong correct me

 

[prasadam]

Actually we should sell short straddle not buy, if i am wrong correct me

strategy 1 is short straddle,to be entered in the last week of previous series and strategy 2 is long, to be entered in first week of current series.

 

[linkon7]

Munde,
I think, strategy 1 trade for April contract is closed with losses.
And there is no new trade open at this moment.

As per the rules of strategy 2 (to buy straddle after 5 days into current series), we should have opened a straddle on Thrusday. To continue this thread, I am opening this paper trade by closing price of Thursday 2-Apr. I am using 3200 strike to buy April straddle as it is the closest price to the spot.

Executed on close of 2-April -

Strategy 2 trade - Buy 3200 Straddle, April series
3200 Call bought at 131
3200 Put bought at 105

Total premium paid = Rs 236.

Lets see, how it turns out.

Not sure, if Bandlab wanted to execute second strategy only when 1st trade is open.
Hope he comes back to the thread. Till then, we can continue with it.

Happy Trading.

you buy a straddle when nifty is trading in a very narrow range and threatening to break out or down. specially if there is a news based event that can make or break the market.

you paid 236 points, that mean unless you job the positions very well, series close between 2964 and 3436 is a loss for you.

you are risking 23,600 on a wasting asset that is going to end on 30th of this month, loaded with holidays.

not a good risk reward ratio...

better still is to buy a OTM strangle, if you expect nifty to move beyond the range you are targeting. at-least the investment (or potential max. loss) is relatively less.

this are my views, and i reserve the right to be wrong.


linkon

 

[nareshch]

you buy a straddle when nifty is trading in a very narrow range and threatening to break out or down. specially if there is a news based event that can make or break the market.

you paid 236 points, that mean unless you job the positions very well, series close between 2964 and 3436 is a loss for you.

you are risking 23,600 on a wasting asset that is going to end on 30th of this month, loaded with holidays.

not a good risk reward ratio...

better still is to buy a OTM strangle, if you expect nifty to move beyond the range you are targeting. at-least the investment (or potential max. loss) is relatively less.

this are my views, and i reserve the right to be wrong.


linkon

Linkon ,

This thread is intended to trade only on the strategies mentioned( Paper or test what ever you think ) . So No variations will be adopted.

I didnt Understand your words , Nifty trading in a narrow range .

I think ,It broke out from the range as of now and next week we may see some violent moves either Short covering or panic prfoit booking . A Long straddle /strangle is good at this point ( Hope this trade will go in profit ..as the last 2 Long trades gave 50% loss)

Naresh

 

[linkon7]

Linkon ,

This thread is intended to trade only on the strategies mentioned( Paper or test what ever you think ) . So No variations will be adopted.

I didnt Understand your words , Nifty trading in a narrow range .

I think ,It broke out from the range as of now and next week we may see some violent moves either Short covering or panic prfoit booking . A Long straddle /strangle is good at this point ( Hope this trade will go in profit ..as the last 2 Long trades gave 50% loss)

Naresh

Nifty has to exceed the range 2964 and 3436 for it to generate profit. Money risked is too high compared to the profit target.

unless you review your strategy and find faults with it, you'll never have the confidence to back your strategy with real money.

its just a suggestion to people studying the progress of a long straddle. you cannot have the same weapon for all situations.

 

[AW10]

you buy a straddle when nifty is trading in a very narrow range and threatening to break out or down. specially if there is a news based event that can make or break the market.

you paid 236 points, that mean unless you job the positions very well, series close between 2964 and 3436 is a loss for you.

you are risking 23,600 on a wasting asset that is going to end on 30th of this month, loaded with holidays.

not a good risk reward ratio...

better still is to buy a OTM strangle, if you expect nifty to move beyond the range you are targeting. at-least the investment (or potential max. loss) is relatively less.

this are my views, and i reserve the right to be wrong.


linkon

Linkon7, appreciate your views on Long Straddle strategy.
I was just following the defined rules for 2nd strategy of this thread and executing the trade.
We are paper trading these 2 strategies..and certainly at some point of time, the owner (Bandlab) or someone else will summarise the learnings from experience.

I do agree with you, that timing for buying a straddle should have different parameters.
When you say - "Nifty in trading in a narrow range". What do you mean by Narrow ? How do you define it ? How do you monitor it ?
Can u plz your views on this so that it helps in redefining "Long Straddle" stregey.

Happy Trading.

 

[linkon7]

Linkon7, appreciate your views on Long Straddle strategy.
I was just following the defined rules for 2nd strategy of this thread and executing the trade.
We are paper trading these 2 strategies..and certainly at some point of time, the owner (Bandlab) or someone else will summarise the learnings from experience.

I do agree with you, that timing for buying a straddle should have different parameters.
When you say - "Nifty in trading in a narrow range". What do you mean by Narrow ? How do you define it ? How do you monitor it ?
Can u plz your views on this so that it helps in redefining "Long Straddle" stregey.

Happy Trading.

when we hit 2800 last month after rebounding from the lows and we remained in a narrow range plus minus 50 points for about a week. at that time, we could be sure that the next move would make or break the market. that was the time to play a long straddle. but the buying had to be staggered. i.e. if the market is moving up, then we buy the call first and then buy the put.

the best way to monitor the narrow range is by keeping a track of OI at various strike levels

personally, i dont like buying options. the word "wasting assets" and the fact that 90% of all options expire worthless, are the main reason. i like to have time on my side. spells a better risk reward ratio.

most of the options trader i know never buy straddle. they buy a OTM strangle instead. you get to reach break even faster that way. again risk reward ratio looks better then.

 

[AW10]

Value of straddle at close of 6/April

3200 Call = 147
3200 Put = 91
Total = 238

Buying price was = Buy 3200 Straddle, 131+ 105 = Rs. 236

Net P&L = 238-236 = +2 points

Happy Trading.

 

[myvineet]

AW sir..i heard so many voices about option buyings that it give me impression that there are only option sellers in the market ...how quickly people forget 3800 put writer's fate when market melts in oct...now call writers heart sinks when market opens gap up at 3150+....

just one stat ...3000CA (30 APRIL 09) closes at 13 rs at 9/03/09...& what is its rate today morning ???????

thanx & regards

vineet