Picking up nickels in front of steamroller!!

[jvblogger]

Hello Experts,

Did you find any co-relation between having 5000 MAY PUT highest OI till 2/3 time of the series and ultimately NIFTY expired above it?

Of course many ran away towards the end when it lost OI (when we closed below 200 DMA).

Honestly I did not pay attention to OI of 5000 PE as 5000 CE or PE was not my focus. However if someone had bought 5000 PE for hedging purpose he would have made sound analysis but if someone has bought for profit he might have ended up with no profit.

 

[MaxX]

I have mentioned my risk management method in earlier post. However there is no harm in explaining it again.

If you have notice I enter into strangle. I sell put and call in pair. Therefore I collect premium from both the sides.

Ordinarily my risk management method is to wait until the premium of increased to the total of the premium collected from both the side.

Suppose I have collected premium (I just remember I have not posted the outcome of the May series) of Rs. 20-00 from May 5400 CE and Rs. 20-00 from 4900 PE. Then total premium collected is Rs. 40-00. So, I in case the premium of either of the option reaches around Rs. 40-00 I would square off the loosing option. And mostly the premium of the other side's option would be negligible , so I might square off the other side's option as well, if there is chances of such bounce back.

Last month I had square off 4900 PE @ Rs.38-00 as the market was moving down fiercely and at one time move below 4800, its another matter it did not close below 4900.

In volatile time option seller has to keep keen eye on the premium and should be able to make quick decision. It is always better to square off a doubtful option, as in option selling profit is limited and loss is unlimited. So when you square off a position you know you are waiving limited profit against the risk of unlimited risk.

Thanks for your interest!

Thanks for explaining again :thumb:

Your May trades are fantastic ! :clapping:

 

[jvblogger]

The volatility of May provided good opportunity to sell far out OTM puts ranging from 4000 to 4600 . However, sharp pullback created trouble in call option, but was able to square off using the buffer. Premium of 5300 call went as high as 89 but eventually I bought it back in Rs.30-00 while squaring off.

One lesson for this May-June series, to sell volatility when it is spiked high (not a thumb rule though).

While volatility is high, market panics and naturally that commands higher premium for far OTM puts. If one has observed, while volatility was high , the May series offered OTM as far as 4000, in July series offered 4200 as lowest put and in August series the lowest put available is 4400.

 

[alroyraj]

Nice strategy jvblogger. Simple and uncomplicated,with the rules stated well.
What is your opinion on July series? Nifty looks like it should head down but has too much support,so difficult to figure direction. Do you apply this for nifty too?

 

[jvblogger]

Nice strategy jvblogger. Simple and uncomplicated,with the rules stated well.
What is your opinion on July series? Nifty looks like it should head down but has too much support,so difficult to figure direction. Do you apply this for nifty too?

Thanks!!

As an option seller, I view NIFTY July series below 5600 and above 4700 and therefor I have sold and will try to sell OTM beyond that levels. As on today it is difficult to get decent premium on CALL options.

Your observation is correct as to direction, it is difficult to guess, but my view that the NIFTY has upward bias with slow movement.

 

[sadiq]

In fact, we are here discussing about selling options , instead of buying and I am concerned more with where NIFTY won't go instead where it will.



Best of luck!!

wonderful wordings !

 

[alroyraj]

Thanks!!

As an option seller, I view NIFTY July series below 5600 and above 4700 and therefor I have sold and will try to sell OTM beyond that levels. As on today it is difficult to get decent premium on CALL options.

Your observation is correct as to direction, it is difficult to guess, but my view that the NIFTY has upward bias with slow movement.

What minimum premiums you look at,since I am new to this. Is it typically say 15 but usually 20 .
What are the typical and minimum levels you look at?

 

[jvblogger]

What minimum premiums you look at,since I am new to this. Is it typically say 15 but usually 20 .
What are the typical and minimum levels you look at?

The premium I want , is calculated on the basis of the return I wish to get on the margin utilised.

For example, for 1 NIFTY lot margin around Rs. 16,000-00 is blocked. And after all these experience I have found that 4% monthly return is possible with reasonable risk. Therefore on 16000-00 , 4% would be Rs.640+50 (brokerage). So I need to fetch around 700-00 and which would convert into premium of Rs.14-00 per NIFTY lot. Ordinarily I eye for around Rs.15-16.

However, often during volatility one can get good premium anywhere from 25-30. Which helps in covering the risk.

Thanks for your interest!!

 

[rrmhatre72]

The volatility of May provided good opportunity to sell far out OTM puts ranging from 4000 to 4600 . However, sharp pullback created trouble in call option, but was able to square off using the buffer. Premium of 5300 call went as high as 89 but eventually I bought it back in Rs.30-00 while squaring off.

One lesson for this May-June series, to sell volatility when it is spiked high (not a thumb rule though).

While volatility is high, market panics and naturally that commands higher premium for far OTM puts. If one has observed, while volatility was high , the May series offered OTM as far as 4000, in July series offered 4200 as lowest put and in August series the lowest put available is 4400.

Hi,

Pls let me know if we can keep option open without squaring off at expiry?
I see you have sold many options but only few were baught back.
I was under impression that every option position should get squared off on last day of contract expiry.

Also let me know what was your investment for above trade? I mean how much capital was blocked at any given point?

 

[sadiq]

Hi,

Pls let me know if we can keep option open without squaring off at expiry?
I see you have sold many options but only few were baught back.
I was under impression that every option position should get sqared off on last day of contract expiry.

Also let me know what was your investment for above trade? I mean how much capital was blocked at any given point?

1) no need to square off if the options is OTM . means if it expires worthlessly.
2) i think to write all those options need minimum 7 lacks .