Staring At Massive MTM Losses - What Should I do Now?

[trade4putuval]

My next question on option strategies to the experts (and beginners!) :

HUL doesn't seem to move much. Does selling HUL straddle sound like a good idea? I'll make a payoff diagram and see when the position enters loss making territory on both the put side and call side. At that point, I'll buy (or sell) HUL future to hedge the position.

What are the disadvantages of the above strategy?

My personal view. Options works best on high volume stocks only. HUL is once in a blue moon stock that rises at its will. Options will not work for such stocks.

I had traded once Ashok Leyland when the price was 32. I purchased 35 call option at 1.35. I covered that call at 2.85. The price again fell to 31.75, the value of the option fell to 0.75 paise. But then again the next day the price went back to 35, but the option price stayed below 1Re. So you cannot guarantee that an option will work fine for all the stocks.

 

[sanjosedesi]

My personal view. Options works best on high volume stocks only. HUL is once in a blue moon stock that rises at its will. Options will not work for such stocks.

I agree. I tracked HUL for a couple of months. Eventually I got so bored that I gave up watching, and it finally moved !!

To see a last 12 month history of volatility, beta etc., please check out
http://www.nseindia.com/archives/indices/update/indup.pdf

HUL is not at the bottom of the list, but almost there.

 

[TheDreamer]

My personal view. Options works best on high volume stocks only. HUL is once in a blue moon stock that rises at its will. Options will not work for such stocks.

I had traded once Ashok Leyland when the price was 32. I purchased 35 call option at 1.35. I covered that call at 2.85. The price again fell to 31.75, the value of the option fell to 0.75 paise. But then again the next day the price went back to 35, but the option price stayed below 1Re. So you cannot guarantee that an option will work fine for all the stocks.

This might be a situation near expiry... Otherwise it's high unlikely to be like that...