Possible step/s...
1. sell future if believe further downside.
1a. sell call in addition to future if I am believe that the stock would not recover soon.
2. buy next step put if I believe further downside
3. buy ATM call if I believe a bounce back in stock
There can be more strategies , and that too can go wrong as well !!
1. sell future if believe further downside.
1a. sell call in addition to future if I am believe that the stock would not recover soon.
2. buy next step put if I believe further downside
3. buy ATM call if I believe a bounce back in stock
There can be more strategies , and that too can go wrong as well !!
but no way gonna limit the potential loss in option writing due to the unexpected swing in the underline ..
As Liquidity will be an issue.. and even at loss... it would be difficult to square off the position... Think abt a situation when... the option u have writen went in to ITM for the buyer.. and the buyer prefers to execute the RIGHT and you being the obligator... bound to oblige.... so then, the option wiriter is completed screwed !!!.....for instance if RNRL option expires at spot 45 ( with strike 50 ) executed, option writer need to bear the loss of amt. 5 * 3500 = 17500 Rs,...!!!!
Isn't it way to risky.. can we really leave it to fate... that this kinda swing is rare... i can understand, in reality... this inda swiing is rare... but what IF... i mean.. trading is abt to manage ur risks.... isn't it ?