Picking up nickels in front of steamroller!!

[rama_1000]

Any one alive here ?

jvblogger had sold CE 30-Sep 5800 100 Nifty at Rs. 33.25 and PE 30-Sep 4700 100 Nifty at Rs. 29.3. So, the total becomes Rs. 62.55. However, the market closed on 30.09.2010 at 6029 Nifty Index level. This means that Sept 5800 Call was about Rs. 229 at which jvblogger might have had to buy to reverse the short-sell transaction.

Accordingly, jvblogger appears to have lost heavily even including the cushion of lower level put option on the opposite side. The small profits earned in previous months might have been eaten in one go.

"sau sonar ki, ek lohar ki".

So, always be cautious in shorting calls / puts. Do it but with care and always plan for the extreme situations in advance. Every year, the market surprises sometimes by going very high or low suddenly.

 

[Vector]

Yup, the steam roller gets u eventually...

 

[comm4300]

jvblogger had sold CE 30-Sep 5800 100 Nifty at Rs. 33.25 and PE 30-Sep 4700 100 Nifty at Rs. 29.3. So, the total becomes Rs. 62.55. However, the market closed on 30.09.2010 at 6029 Nifty Index level. This means that Sept 5800 Call was about Rs. 229 at which jvblogger might have had to buy to reverse the short-sell transaction.

Accordingly, jvblogger appears to have lost heavily even including the cushion of lower level put option on the opposite side. The small profits earned in previous months might have been eaten in one go.

"sau sonar ki, ek lohar ki".

So, always be cautious in shorting calls / puts. Do it but with care and always plan for the extreme situations in advance. Every year, the market surprises sometimes by going very high or low suddenly.

Disagree. Please read the entire posts...There is mention of Stoploss [in fact, he goes on to mention keeping daily stop loss] to protect capital.

Assuming how the trade would have gone is not sensible.

I personally do not know what happened to the trade or trader., but i appreciate jvblogger for sharing this strategy.

Easy to say "sonar and lohar"....that happens only when you let discipline slip out....

cheers.

 

[rama_1000]

Disagree. Please read the entire posts...There is mention of Stoploss [in fact, he goes on to mention keeping daily stop loss] to protect capital.

Assuming how the trade would have gone is not sensible.

I personally do not know what happened to the trade or trader., but i appreciate jvblogger for sharing this strategy.

Easy to say "sonar and lohar"....that happens only when you let discipline slip out....

cheers.

I don't deny that jvblogger shared a lot of insights. But, his basic strategy was flawed. He was shorting one out of money call and one out of money put at low prices; the total of the two was not very big. Normally, his exit or firefighting strategy would work when the market approach one side in a slow manner giving him opportunity to exit since in such a case the option prices changes slowly and the increase in one side is compensated by decrease in other side. But, when market charges suddenly and drastically, the decrease in option price on one extreme cannot compensate increase in option price on the other extreme.

This is what happened in September, 2010, when Nifty increased by about 600 points from August F&O closure to Sept F&O closure (from 5400+ to 6000+ levels). This meant that the far end out of money call option will increase suddenly by about Rs. 300 in value, while the total put option sold by him was on in rage of 20-30 rupees which cannot compensate the former. THus, the exit strategy of jvblogger cannot work in such a scenario.

That is why i said that "sau sonar ki, ek lohar ki", because you keep earning 20-30 rupees each month with this strategy but suddenly you may lose 200+ in one month.

I have practically experienced these problems in such options strategies during my options experience of last 8-9 years since they were introduced on NSE.

Why should jvblogger suddenly disappear after Sept 2010, otherwise, since he was regularly updating in this thread before that month?

Again, I reiterate that I don't deny that jvblogger rendered tremendous help to others by sharing his experience. In fact, I found his posts very informative and with full of insights. I have read all his posts in this thread. But, the problem was with his strategy. Everyone learns by committing mistakes. There is nothing against jvblogger or any other person when one criticizes the strategy.

Of course, you may still disagree since it is your prerogative.

 

[mukeshpatil82]

Hi every1,

Im sure Rama has never shorted options...

JVBlogger starts with a delta neutral( or near zero delta) short strangle..

If the calls are pressured, the net deltas must be adjusted to zero with long futures,synthetic long futures,bull call spread or rolled short strangle..

The short puts will be worthless at this point due to the adverse delta movement, gamma(near to but not 0) and increase in volatility..just no hedge...

JVBlogger definitrly knows this from his posts..he gave a very unique money management method based on the premium received..I never knew about this...

Ofcourse a 600 pt move is a bloody tsunami for writers...in hindsight only futures or synthetics was the correct adjustment here if I had not been stopped out with a hole in my pocket..but I would have more than made up for it since November...and Im sure JVBlogger did it to..

 

[mukeshpatil82]

I was not short then ..I had a ratio put spread a 5400-5300...felt market wud go down..got away with a small loss...

Iam not sure if volatility increase or decreased for the calls and puts..

Wish I was long calls..delta + vega combo would be hugh..

Did call and put volatitly increase or decrease..just curious to know...:annoyed:

This is not to argue with anybody..but shorting is not bad in itself u only must be very careful with it..and very profitable if u knw hw 2 deal with it..right JV?

 

[AW10]

Plz don't attack the thread owner specially when he is not active here.
If you want to discuss "Selling OTM options" to earn steady income, than I can share my views on it.

As an pro option seller (specially if you are selling naked options), then sell and forget is not a strategy. Option seller has to be on toes to monitor the risk. If he is prudent enough, then he would not be sitting idle to see market move 600 points against his position.

This strategy can hit you only when we have unexpected, sharp move which doesn't not give time to manage the risk. When mkt is gradually moving against the position, generally there is enough time to cut the loss, or atleast book some loss and bite the bullet.

Risk mgmt was crucial for this strategy, which jvblogger was doing nicely. So when looking at the strategy, better to take complete picture. Ofcourse one can always develop their own risk management strategy to address the weakness of this strategy.

Happy Options Trading.

 

[comm4300]

If you want to discuss "Selling OTM options" to earn steady income, than I can share my views on it.

Please do. Eagerly awaited.

:thumb:

 

[Talon]

This is the best strategy for creating wealth.
There's a solution to the unexpected movement which in case of wild movement can make you good money.
I am doing that and making money.Please dont ask me, do your home work, all I can say is 'There's a way'

 

[OptionQuant]

If you want to discuss "Selling OTM options" to earn steady income, than I can share my views on it.

AW10 Saheb,

Plz do. I am eagerly waiting for it.