Paper Trading Nifty Straddles

[bandlab2]

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.

thx AW10. yes, strategy 1 hit SL. Now lets watch stategy 2.

 

[nareshch]

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

Vineet ,

This a hedge strategy and with SL . The mantra for success in market is money management and following the SL correctly .


Naresh

 

[myvineet]

Vineet ,

This a hedge strategy and with SL . The mantra for success in market is money management and following the SL correctly .


Naresh

no naresh , i think you didn't get me here...i am certainly not against this strategy & paper trading this with all of you..

i am just reacting to some of our fellow friends here who said that option buying is never a good idea & people who buy options are not so intelligent & blah-blah....

i am always a keen learner of option & trying to get hold of this under guidence of AW10 ...

regards

vineet

 

[linkon7]

i am just reacting to some of our fellow friends here who said that option buying is never a good idea & people who buy options are not so intelligent & blah-blah....

i am always a keen learner of option & trying to get hold of this under guidence of AW10 ...

regards

vineet

with that attitude i am sure you'll learn a lot about options....:clapping:

 

[munde_77]

thx AW10. yes, strategy 1 hit SL. Now lets watch stategy 2.

SL Hit again

 

[nareshch]

no naresh , i think you didn't get me here...i am certainly not against this strategy & paper trading this with all of you..

i am just reacting to some of our fellow friends here who said that option buying is never a good idea & people who buy options are not so intelligent & blah-blah....

i am always a keen learner of option & trying to get hold of this under guidence of AW10 ...

regards

vineet

The common myth is stock market is Option buyers are loosers . Its true if you hold a call / put /long straddle /Long strangles till expiry .But by following the trend and a careful study of the market will fetch you fantastic returns with less rick .

The main problem with many of traders who jump in to options is they think that options make them Rich overnight . They forgot that with out good money management , options can make them overnight Poor .

I did experience that phase and luckily i learnt my lesson too early .

I bought some 4750 calls last year . we have Fed announcement on that day and i wanted to take some risk and bought these . Got a good announcement and Nifty Runs till 5000 on that expiry . ( I bought the calls for 15rs which fetched me 250Rs ) What a reward .

And the bull run continues .And you know what , my portfolio is almost 400% in 2 months . Thanks to calls . I was under the impression that i will be the next creoreapti in 2009

On one day , the market opened Lower circuit . I didnt even dare to see my port folio value at that time and depressed . God favopred me here and markets went up from that lower circuit to make a new high .I exited all there with profit .

Then i started thinking the way i am trading and made some changes to my aggressive option trades . My job profile is also changed so that I can not be informnt of terminal all the time .
Now i use these straddles /strangles to earn some money .

No strategy is 100% rewarding but making some changes to your strategies , you will win most of the time .

In this strategy , i did actually reverse the trade . Instead of selling the straddle , i bought the straddle once 2800 is comfirtably taken out . exited in profit at 3130 . and above 3200 I entered a short strangle . ( I will use LInkons method to do some futures trades to get more reward )

Just listen to the market before entering a trade and you will be rewarded.

Note: Short straddle/stranlges are winners in 9 out of 12 months in 2007 and 2008 . And with out a proper SL , you will be washed out in the other 3 months



Naresh

 

[AW10]

Well said Naresh.

Your comment about naked short options is bang on the dot. I know traders in the market who made consistent money selling puts during bull market.. but lost 1 to 2 yrs of earning in a month when market went against them.

I do believe that there are different strategies required at different times in the market. There are times when option buying has better risk reward. When volatility is down, market is in dull phase, premium also comes down. In my view, that is not the time to sell options and collect small premium for bigger risk.
At the same time, when volatility is high, people are chasing the price and ready to pay high premium, time value goes up more then normal.. and that is the perfect time to be Option seller.

There is no one single way to play in the market. It is finally upto what suits the individual and how they manage the risk. By nature, we all have different personality and different attitude towards risk. So be flexible, listen to the market and trade your plan.

Happy Trading

 

[AW10]

For every buyer, there has to be a seller. So, it is misnomer that there are more buyers or more seller.. They are always equal.
Yes, there desperation level varies.. There are time when sellers are desperate to sell (and hence they compromise on price and ready to sell at lower price). Basically downtrending market.
This is the time, when Buyers have control and keep biddng lower price and keep pulling sellers to lower levels continuously.

Exactly opposite happens in uptrend, when buyers are desperate to board the bus and hence they ready to buy at any price ie. even at higher price. Thats when sellers are smart and keep asking more higher money.

This desperation gives us the feeling that there are more seller or more buyer.. but bottomline is, for every trade - there is 1 buyer and 1 seller. Others are only the orders that are waiting in the queue.
It is difficult to identifty the intention behind these pending orders. Many of them are there to fool novice traders or to hide the real intention of the big player.

Both parties make wrong decision as well as right decisions. Key it so know, when to join which side. There is no single answer.

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

3000 Call is going at 295 Rs. on 6-April. That is perfect case where we had a poor option seller who sold 3000 CA at 13rs on 9-March.. (hope he has covered it later) and smart buyer.

But look at the other side of it. On 9-March, 3000 put was sold at 450 rs. So there was some fool put buyer who paide 450 rs for the put..which is now 38rs. Certainly, the put seller has the winning hand here.

Happy Trading

 

[munde_77]

My average return is 3% per month for the last 12 months. Earned around 40% per year . Is this average good . Can some one comment on this. I am not an aggresive option trader. I made profit by selling short straddle only. properly managed risk , reward, money and position size also adjusted short straddle following the market. I never bought calls and puts.
Can anyone tell me is this strategy is good. Can someone tell me what isthe average return of professional traders. I think they make 100 to 300 % on annual basis. Should I try something more .Please comment

 

[linkon7]

My average return is 3% per month for the last 12 months. Earned around 40% per year . Is this average good . Can some one comment on this. I am not an aggresive option trader. I made profit by selling short straddle only. properly managed risk , reward, money and position size also adjusted short straddle following the market. I never bought calls and puts.
Can anyone tell me is this strategy is good. Can someone tell me what is the average return of professional traders. I think they make 100 to 300 % on annual basis. Should I try something more .Please comment

3% per month consistently for the past 12 months is excellent track record. being aggressive is not a quality of a good trader. most traders have only risk management and capital preservation in mind. and u seem to handle both perfectly. :clapping: :thumb: