Weekly Bank Nifty Options strategy

[Square]

No harm in paper trading it for a while and you will find out . . .

Even if you are hedged the risk is limited, . . . its not zero

In the above cases of nifty options spreads that you have listed
you would be risking Aprox 70 points to gain 30 points . . .

So your win/loss should be more than 80% . . .
now here comes in a need for directional calls/choice . . .

No harm in trying for yourself, good for learning . . .

but it is Not a Fill it, Shut it, forget it Strategy
you will have to monitor and adjust (for the greeks) frequently


Happy

The risk can never be zero
But since weekly expiry the time value reduces fast, the probability of profit in credit spread increases, basically you have to predict the direction of bank nifty not going towards. So 2/3 probability of being right will also yield profit (30) only 1/3 probability will generate loss (70).

 

[travi]

With options, most of the good "working" strategies require selling options whether its a debit or credit spread.

1. The problem with Indian brokers is that your margin requirement doesn't calculate it as a spread, it'll be as per individual legs.

2. Most ppl don't have or don't want to employ that much capital.

3. Option selling trade-offs in higher vola instruments like BN are not liked by average retail traders.
You can collect small profits for months and wipe everything out with one black swan event.
A recent event like that was surgical strike announcement day.

4. As happy said, there is nothing like "no attention", greeks have to be managed, and sometimes if not all, in real-time.

If your strategies consists of only buy legs, I suggest you do more research.

 

[Happy_Singh]

The risk can never be zero
But since weekly expiry the time value reduces fast, the probability of profit in credit spread increases, basically you have to predict the direction of bank nifty not going towards. So 2/3 probability of being right will also yield profit (30) only 1/3 probability will generate loss (70).

That's theory, practically it will be 50/50% . . .

But even for a while lets say the theoretical come out good . . .

66% * 30 - 33% * 70 - (Cost + Taxes)
gives you No profit / Small loss . . .


Are you trading for Small loss ???


Anyway, please try it out, in one months time you can do 4/5 trades,
and only then will have good experience to maybe come up with something that may work for you.


Happy

 

[vagar11]

With options, most of the good "working" strategies require selling options whether its a debit or credit spread.

1. The problem with Indian brokers is that your margin requirement doesn't calculate it as a spread, it'll be as per individual legs.

2. Most ppl don't have or don't want to employ that much capital.

3. Option selling trade-offs in higher vola instruments like BN are not liked by average retail traders.
You can collect small profits for months and wipe everything out with one black swan event.
A recent event like that was surgical strike announcement day.

4. As happy said, there is nothing like "no attention", greeks have to be managed, and sometimes if not all, in real-time.

If your strategies consists of only buy legs, I suggest you do more research.

Regarding your 1st point, it's not a problem from brokers side. It's a problem from regulating agencies side. They require enough margins to be deposited for selling a option. Plus, who knows when u will cover one position and leave other position open.

 

[Square]

With options, most of the good "working" strategies require selling options whether its a debit or credit spread.

1. The problem with Indian brokers is that your margin requirement doesn't calculate it as a spread, it'll be as per individual legs.

2. Most ppl don't have or don't want to employ that much capital.

3. Option selling trade-offs in higher vola instruments like BN are not liked by average retail traders.
You can collect small profits for months and wipe everything out with one black swan event.
A recent event like that was surgical strike announcement day.

4. As happy said, there is nothing like "no attention", greeks have to be managed, and sometimes if not all, in real-time.

If your strategies consists of only buy legs, I suggest you do more research.

You are on the wrong track, for weekly bank nifty options the strategy I mentioned is credit spread, put or call, depending on whether you are bullish or bearish. So certainly it includes Selling of option and this selling leg it self will be the source of profit. This leg is protected by simultaneous buying of one strike OTM option. So this strategy is not at all of buying options to profit, it is buying options to limit the loss.
Coming to black swan event, there is no way any credit spreads (put or call) will ever have any problem, irrespective of bank nifty touching circuit levels in extreme cases too. At worst the broker will close you Sell leg for want of additional margin, but your buy leg is in profit. So whatever the case be, max loss will be difference between the strike price and the net premium received.

 

[travi]

You are on the wrong track, for weekly bank nifty options the strategy I mentioned is credit spread, put or call, ...

I thought you're the same guy who said "Hedging is a Myth".
Now you're wrapping hedging in different words.

Today's buy strangle in morning ATM was 40% gain at 3PM when position was exited.
All I was saying is be cautious, esp. with options, ppl tend to learn hard way and back-testing and paper trading isn't the path to Holy grail.
Anyway, you can post your paper trades and all the best.

 

[travi]

An older post for a fellow learner
http://www.traderji.com/options/103300-premium-decay-nifty.html#post1184228

 

[Square]

I thought you're the same guy who said "Hedging is a Myth".
Now you're wrapping hedging in different words.

Today's buy strangle in morning ATM was 40% gain at 3PM when position was exited.
All I was saying is be cautious, esp. with options, ppl tend to learn hard way and back-testing and paper trading isn't the path to Holy grail.
Anyway, you can post your paper trades and all the best.

Hedging is a myth unless you are trading options.

Again strangle is a different ball game, do not get other strategies mixed up. In short strangle, the risk is unlimited, here I am exclusively stating that credit spreads, call or put only has to be played when trading bank nifty weekly options. In spreads, the risk is LIMITED. So when you say be cautious, means what, cautious about what? If you can elaborate further, since in credit spread, the risk and profit both are limited, the only focus is on getting the direction right on a weekly basis. So effectively if the direction of bank nifty movement is massively right on the very first day after taking credit spread is there than the profit begins immediately, if not then we have time till expiry or 5 days to get the direction in our favour. So anytime from day 1 to day 5 the direction or closing has to be in our favour or flat, in all the scenarios we gain. Only if the direction is opposite, small or massively we lose that limited amount, equalling difference between the strike price and credit of premium received.

 

[NoviceStockTrader]

Deleted post

 

[Happy_Singh]

Hedging is a myth unless you are trading options.

Again strangle is a different ball game, do not get other strategies mixed up. In short strangle, the risk is unlimited, here I am exclusively stating that credit spreads, call or put only has to be played when trading bank nifty weekly options. In spreads, the risk is LIMITED. So when you say be cautious, means what, cautious about what? If you can elaborate further, since in credit spread, the risk and profit both are limited, the only focus is on getting the direction right on a weekly basis. So effectively if the direction of bank nifty movement is massively right on the very first day after taking credit spread is there than the profit begins immediately, if not then we have time till expiry or 5 days to get the direction in our favour. So anytime from day 1 to day 5 the direction or closing has to be in our favour or flat, in all the scenarios we gain. Only if the direction is opposite, small or massively we lose that limited amount, equalling difference between the strike price and credit of premium received.

Ok, Start na bhai, Paisa Kamo, there is no need to convince anyone else . . .

many will follow you if you start a dairy and log your real or even paper trades . . .

best :thumb:



Happy