Set-Ups disscused & practised @ Nifty Futures Trading Thread.

[arnav_rulz]

Nice Strategy Alex..

Here some of the points that have come to my notice are :-

1)I agree you Don't want to take a lot of risk... But your Profits will be Very very Limited in this case lyke if you sold a 3100 Call and brought the 3200 call.. then according to me the MAX that you will have will be a mere 60 points although i think you wont be able to make even 30-40 points in most cases.

2)This Strategy Will actually Really Pay off if there is a Gap up opening(when you are short ie), But Below your Sar level and after that the market actually slides down...

3)Third is what i want to ask you..
What will you do if the market opens Flat ?

a)Do you sell the 3200 call or
b)still hold it ?

Cause this will tell us the real reason behind your buying of the call i.e

a)If you want to Limit your overall risk or
b)Just Protect yourself from the Gap up opening...

cheers

 

[orderflow13]

Nice Strategy Alex..

Here some of the points that have come to my notice are :-

1)I agree you Don't want to take a lot of risk... But your Profits will be Very very Limited in this case lyke if you sold a 3100 Call and brought the 3200 call.. then according to me the MAX that you will have will be a mere 60 points although i think you wont be able to make even 30-40 points in most cases.

2)This Strategy Will actually Really Pay off if there is a Gap up opening(when you are short ie), But Below your Sar level and after that the market actually slides down...

3)Third is what i want to ask you..
What will you do if the market opens Flat ?

a)Do you sell the 3200 call or
b)still hold it ?

Cause this will tell us the real reason behind your buying of the call i.e

a)If you want to Limit your overall risk or
b)Just Protect yourself from the Gap up opening...

cheers

Thanks Arnav for interest…well Strategy is basically for protecting gap up openings, that’s why we concern about buying call at day closing ( not at the time when we write the call ), here what in practice happened is, I wrote 3100 ce at morning time as day progress market went down n at day closing i am sitting on mild profits n then to protect gap ups I brought call of 3200.Next day wd be lot of variations ..market gaps up, market gaps down, market opens flat, market remains in tight range ..whatever happens I will only sell3200call when market moves up least by 5 points ( so I could cover the brokerage n other expenses ).
Well profits will be always limited as we enter in to option selling era n we hedging written option at day closing we also automatically limiting risk, so as per market movements next day our profits wd vary
One more thing some times we wrote call as short sar triggered n market moved way down b4 it closes, at that time I didn’t hedge the position as nifty is already 100 odd points down on my original call writing , so considering premium I earned by writing call n adding 100 odd points I hv big cushion to play with. And when add triggers say at 2960we write 3000 call and at day closes if our sar is still 3160 we buy another 3200 call, n if sar moved down to 3100 we sq off 3200 ce n buy 3100 calls ..
Regards
Alex

 

[arnav_rulz]

Thanks Arnav for interest…well Strategy is basically for protecting gap up openings, that’s why we concern about buying call at day closing ( not at the time when we write the call ), here what in practice happened is, I wrote 3100 ce at morning time as day progress market went down n at day closing i am sitting on mild profits n then to protect gap ups I brought call of 3200.Next day wd be lot of variations ..market gaps up, market gaps down, market opens flat, market remains in tight range ..whatever happens I will only sell3200call when market moves up least by 5 points ( so I could cover the brokerage n other expenses ).
Well profits will be always limited as we enter in to option selling era n we hedging written option at day closing we also automatically limiting risk, so as per market movements next day our profits wd vary
One more thing some times we wrote call as short sar triggered n market moved way down b4 it closes, at that time I didn’t hedge the position as nifty is already 100 odd points down on my original call writing , so considering premium I earned by writing call n adding 100 odd points I hv big cushion to play with. And when add triggers say at 2960we write 3000 call and at day closes if our sar is still 3160 we buy another 3200 call, n if sar moved down to 3100 we sq off 3200 ce n buy 3100 calls ..
Regards
Alex

Right... You summed up the Strategy pretty nicely and the R:R is also pretty good.
To convert it into lyke a proper System kindly answer two of my other queries...

1)Say wrote the 3100 call when sar triggered @ 3100 but Nifty after that closed @ 3150 with SAR @ 3200. What will you do now ?
2)I know this can be as per our discretion.. But still Say you brought the 3200 Call @ 50 and the next day it opened @ 47.. Now What will YOU like to do..

a)See the intraday Pattern and sell the call accordingly ? Or
b)Just put a sell order @ 52(i.e which covers your brokerage) ?

Sorry for asking these random questions.. just want to get the EXACT strategy in my mind..

 

[orderflow13]

Right... You summed up the Strategy pretty nicely and the R:R is also pretty good.
To convert it into lyke a proper System kindly answer two of my other queries...

1)Say wrote the 3100 call when sar triggered @ 3100 but Nifty after that closed @ 3150 with SAR @ 3200. What will you do now ?
2)I know this can be as per our discretion.. But still Say you brought the 3200 Call @ 50 and the next day it opened @ 47.. Now What will YOU like to do..

a)See the intraday Pattern and sell the call accordingly ? Or
b)Just put a sell order @ 52(i.e which covers your brokerage) ?

Sorry for asking these random questions.. just want to get the EXACT strategy in my mind..

Considering we now wrote 3100 ce & brought 3200 ce n market closed at 3150, so what will I do next day? I will simply put my sell order of3200 ce at 55 to cover the cost if order hit fine enough if market moves further up n hit my sar then I cover my written call n will write 3100 put ( another variation which I hasnt tried yet is- wait for first 5 min bar to form and if the break out of first 5 min bar on upside then I will not sell 3200 ce n if break of first 5 min bar on downside then I will get rid of 3200 ce with loss), since i only brought 3200 ce for reducing overnight risk nothing more than that, one can also trade using nifty instead of writing options n at day close buy call/put as per sar to hedge nifty position. Here by writing options I am also betting on small range moves n earn premium, one thing I experienced that overlooking small doubtful pivots n only considering very imp pivots, I managed to avoid lot of whipsaws, I might able to trade big range moves as I hedged call/puts along with premium earned which gave extra liberty to manage my personal money management
p.s.plz feel free to ask qs. As this method can best described by qs n answer sessions instead of one single monologue

 

[arnav_rulz]

Considering we now wrote 3100 ce & brought 3200 ce n market closed at 3150, so what will I do next day? I will simply put my sell order of3200 ce at 55 to cover the cost if order hit fine enough if market moves further up n hit my sar then I cover my written call n will write 3100 put ( another variation which I hasnt tried yet is- wait for first 5 min bar to form and if the break out of first 5 min bar on upside then I will not sell 3200 ce n if break of first 5 min bar on downside then I will get rid of 3200 ce with loss), since i only brought 3200 ce for reducing overnight risk nothing more than that, one can also trade using nifty instead of writing options n at day close buy call/put as per sar to hedge nifty position. Here by writing options I am also betting on small range moves n earn premium, one thing I experienced that overlooking small doubtful pivots n only considering very imp pivots, I managed to avoid lot of whipsaws, I might able to trade big range moves as I hedged call/puts along with premium earned which gave extra liberty to manage my personal money management
p.s.plz feel free to ask qs. As this method can best described by qs n answer sessions instead of one single monologue

Well again Perfect Planning... Just what i was thinking about Trading in nifty and buying call/put at the close.. But uve given the example of Why sometimes you will prefer Written Call/Put at othertimes as well.
So what i have Finally understood is -->

1)When We are considering market to be in small ranges or when we think we might have some weak Pivot points then to avoid small whipsaws and to earn the Premium from time decay.. we will prefer to Sell At the Money Call/put and take home Call/put near Sar when the market is about to close..

2)If we see the market breaking some strong pivots or We expect bigger movements.. Then We will trade in Nifty and at the Day end take home a Put/call as the case may be.

In both Cases are Main aim is to protect our Overnight risk Thus @ the day's end we buy a Put/call and the next day we will try to sell it when the Market opens @ the Price which covers our broker + extra charges.

I hope i have correctly interpreted your strategy and looks pretty good to me as i said earlier also. Thanks a lot

 

[uasish]

Buying a Future and selling a Call doesnt negate each other as we can still have unlimited losses if the Price of Future falls and overall we have Limited Profit if the Future manages to stay above a certain Level.. Which is EXACTLY What Selling a Put does.

I posted this in Nifty Futures thread... i hope this will make it more clear.







Sir, First Lets See the Example that i gave...

1)We short Nifty Future trading @ 3000
2)We Buy Nifty 3200 Call @ 50
3)We Sell/Write 3200 Put @ say 250+10(that will be profit) = 260

Now If it is Completely hedged... then as i said our profit should be (10 points) regardless of where the market closes ..

Lets see... Say --->
1)Nifty Closes @3000 - a)Now we Earn nothing from the Future we shorted.
b)We lose the 50 we invested in the Call
c)We gain 260-200 = 60 from the Put we Sold.
So Overall we earn 10 points.

2)Nifty Closes @ 3500 --->a) We Lose 500 from the Future Shorted
b)We earn 300-50(premium paid) = 250 from the call
c)And again We earn 260 from the Put sold
Thus Overall we earn 10 points.

3)Nifty Closes @ 2500 -->a)Earn 500 from Future
b)Lose 50 from call brought
3)Lose 700-260 = 440 from the Put sold
Overall We again earn 10 points.


Thus it is very clear That We are Completely hedged here ... But HOW >?

Now for that lets get that to basics and take another example.
Short Nifty future @ 3000
Short Put of 3000 @ 150
Buy Call of 3000 @ 150

Now.. Lets take 1 thing at a time.

1)Short Future-->From Shorting the Future @ 3000... it is clear that any point above 3000 is our loss and below that it is our profit.

2)Short Put 3000 @ 150---> From this we can say that any point Below 2850 is our loss and any point above 2850 till 3000 is our profit therefore our maximum profit is 150.

3)Call of 3000 @ 150 --->Any point above 3150 is Profit and below it is our loss till 3000... i.e max loss = 150.


A)NOW Combine 1&2 i.e Short the Future & Short the Put.

Q. If we do only these two transactions... What will be the end result ?

A. Shorting Future @ 3000 will give us unlimited gains if Nifty falls down but due to our shorting of Put we will start losing below 2850 therefore the gains of Future will be set off from the losses of Put BELOW 2850 therefore Our Max profit = 150 (@ any level between 2850-3000)

Now above 3000 we will start loosing from the Nifty Future we Sold BUT as above 3000 we will gain the 150(we received from the Put) therefore our losses will actually start above 3150...

SO Overall the Situation is... @ a close of 3000 and below we earn 150 and as we go above 3000 we start losing one one point from the 150 and can have unlimited losses.

Doesnt this Sound familiar ? Doesnt this look As if what we have actually done is nothing but Shorted a Call of 3000 @ 150 ? Yes It does.
Shorting a Call 3000 @ 150 also have the result ie Max gains till 3000 and below = 150 and losses starts after 3150.

Thus To hegde this... We BUY a 3000 Call @ 150 And nulify/hedge our positions Completely !!

What we did was -- > (Short the Future + Short the Put) i.e = Short a Call and to hedge it completely we brought a Call.
Thus we did 3 transactions to completely hedge our positions.


Similarly in the same example we could have looked it in another way.. i.e
Shorting the Future And Buying a Call = Buying a Put... therefore to completely hedge we have Sold a Put..


*I hope it is a bit clear now and also i hope this is what you were actually asking.. hehe

Thks,i some times envy you guys about how smart you are all in Options,i am not so comfortable in this 'GreeK' thing and trying to understand.For years trading in Futures some times venture in Options and those % coloum in PIB when shows (-) 60 % or (+) 40 % in case of Options looks very interesting hence trying to understand this,Thks once again.

 

[Capricorn]

Now for that lets get that to basics and take another example.
Short Nifty future @ 3000
Short Put of 3000 @ 150
Buy Call of 3000 @ 150

Whats the point of this trade unless all u want to do is arbitrage in simple words.

How much in percentage terms can be made after commissions?

 

[arnav_rulz]

Whats the point of this trade unless all u want to do is arbitrage in simple words.

How much in percentage terms can be made after commissions?

Again as i mentioned earlier... this write up was not about one can earn from arbitrage... But to Explain the Reality behind Calls and Puts.

It was just an answer to asish Sir's Question of Why dont we have an open position When we made 3 different transaction... You would know more if you went through the whole page ..

 

[orderflow13]

Whats the point of this trade unless all u want to do is arbitrage in simple words.

How much in percentage terms can be made after commissions?

Hope u read all posts preceding to that one, that particular sentence u quoted was not a trading strategy but was a explanation to Asish da's query on diff btwn nifty selling and option writing .
edit n add.. oops i didnt see arnav's post before mine, we almost mentioned the same thing lol

 

[orderflow13]

Well again Perfect Planning... Just what i was thinking about Trading in nifty and buying call/put at the close.. But uve given the example of Why sometimes you will prefer Written Call/Put at othertimes as well.
So what i have Finally understood is -->

1)When We are considering market to be in small ranges or when we think we might have some weak Pivot points then to avoid small whipsaws and to earn the Premium from time decay.. we will prefer to Sell At the Money Call/put and take home Call/put near Sar when the market is about to close..

2)If we see the market breaking some strong pivots or We expect bigger movements.. Then We will trade in Nifty and at the Day end take home a Put/call as the case may be.

In both Cases are Main aim is to protect our Overnight risk Thus @ the day's end we buy a Put/call and the next day we will try to sell it when the Market opens @ the Price which covers our broker + extra charges.

I hope i have correctly interpreted your strategy and looks pretty good to me as i said earlier also. Thanks a lot

yes Arnav got it right.Only thing to look out for big ranges and i rather always prefer going with option selling instead of nifty, end of day its individual comfort n trading style.