Delta Neutral Strategy (Long Nifty @ Long Puts)

[amit_shriv]

Hi All,
For Option Tool I have also created 1 document so it will help user.
You can download it from http://www.megaupload.com/?d=02655ZBM
Please let me know in case of any help.

Thanks
Amit

 

[chheda]

Hi WasteJ , Vince , Nautilus and Joy ,

After going through the trade , I can't understand that - In the beginning when nifty moved upward we sell nifty futures at 2375 , 2390 , 2392 , 2405 and 2420 but we had not sold Nifty puts SP 2340 or any other SP or take any other actions during that trading day's, then how the delta adjusted to Neutral in that trading periods ?

I can't figure out that What If we started this trade by Selling Nifty puts and Nifty calls ? how the trade was develop and/or what action we can take to adjust delta to neutral ( Can we buy Nifty futures as market moving upward or sell nifty puts or buy nifty calls to adjust delta to Neutral ) and what will be the ending results ?

Regards

Harish Chheda

 

[vince]

Dear Harish,

Since we had gone long futures and bought puts, when the nifty moved north the delta of the futures remains constant while the delta of the puts increased so by selling/ booking profits on futures we reduce the delta of the futures to match the delta of the purchased puts.
Selling sp2340puts would amount to booking a loss on the purchased puts without balancing delta.
We could have sold other sp calls not puts to balance the delta but I feel the idea was to put a cap on margin requirements and the fact that you had a negative bias,unless Wastej had something else in mind.

As for the short strangle you are suggesting I feel it would be much simpler to take on a fresh trade to understand it better and avoid confusion.

regards,

Vince

 

[[email protected]]

Hi

I am back and would like to start another deltal neutral trade soon. Please provide your input, so that I can start something most traders want. If any one wants a particular delta neutral strategy, please do let me know. Whatever the concensus, that will be the trade.

If there are unanswered questions from the previous posts, please come forward now.

Wastej

 

[vince]

Welcome back wastej, long time no see. Ready to trade any time you are.

 

[AMITBE]

Hi Wastej...nice to see you back.
I do hope you have been able to resolve the bodily issues, and are in good health now.
Welcome back.

 

[chheda]

Hi WasteJ ,

Nice to see U back .
Welcome back .......

Regards
Harish Chheda

 

[keertimannan]

hi all,
i am a newbie and would like some comments on the following-please note that
i have limited knowledge on options and would appreciate someone pointing out my goof-ups.

Suppose i sell ranbaxy jan2005,360 straddle and collect premium of approx 20 rs on the call and let us say another 20 rs on the put.The point from where losses will start will be 360+40rs on the upside and 360-40 rs on the downside.

How do i protect myself from large losses?

the various options as i understand are

1.Buy back the option which is treading on the dangerous side-i.e call if ranbaxy is going up or put if ranbaxy is going down.However ranbaxy can first go up and then go down or vice versa -whiplashing me.

2.buy out of money options at either ends i.e 400jan call and 320jan put or maybe a little further than that -the idea obviously being to limit my loss and maybe even gain a little if the stock moves wildly in either direction.

3.i get the concept of selling an option and then buying a future of the undearlying to cover losses if the price movement is adverse - but if you have sold both a put and a call, how do you buy a futur e for protection-maybe a naive statement but plz adv.

4.is there any other way of preventing losses after writing a straddle.
please give this newbie an education.
thanks.

 

[gandhiadg]

Re: Delta Neutral Strategy (Long Nifty @ Long Puts)-Basic Clarifications requested

frm: gandhiadg

to: mr.wastej:

i am a novice to the concept of delta neutral trading and i would seek some basic clarifications on this strategy. i shall be obliged if you could enligten me on this basic fundamental concepts:

i. I have tried to follow the previous thread for delta neutral trading and tried to understand it conceptually but many doubts emerge

a. Is delta neutral trade sutiable for retail investor with limited resources as i have seen that there have been extensive b uying and selling of options as the time progresses

b. what are the type of returns one can expect by carrying out these series of transaction as has performed in the last delta neutral trade.

c. what is the logic behind making trade delta neutral after some reasonable movement of the underlying. Will it result in profit everytime or should the action be oriented to create credits and reduce the debits progressively and ultimately end up with the surplus at the end.

d. for retail investor investing in one lot future and two lot of option how would he have the flexibility to make trade adjustments everytime as the trade progresses. At all stages additional resources need to be made available to meet the required trade adjustments. How does a retail investor than can participate in the delta neutral trade or basically is it not suitable for the retail investor with limited resources.

Your esteemed clarifactions would be highly enligtening and would held to navigate better when the concept is clear .

thks in advance.

 

[keertimannan]

is nobody interested? should try my luck on moneycontrol.com