Future-Option Combo strategy for almost risk free profits.

[sandipandas2000]

Where the profit sir ?net reasult will be zero.plz tell me which point i earnd this meathod

 

[amit111sharma]

eah really.. this is really zero risk as well as ZERO PROFIT strategy...:thumb:

 

[register1803]

Isnt that equivalent to buying a CALL (or PUT)? In this case there is no margin to be paid on futures position!
There are lots of strategies. Some risk free ones are,

1. Buy Futures, Buy PUT and short CALL (Same Strike)

2. Sell Futures, Sell PUT and Buy CALL (Same Strike).

Your profit in the first case is, CALL - PUT - (Futures - Strike). You need to take the trade only when it's positive (You've to make profits, dont you?). You can work it out for the second one. Your profits are going to be limited (very limited), just better than interest, and, is for Very large volume players.

BTW, your option on indices cannot be exercised as they are Euro type. Exercising an option is normally a last resort, as selling the option in the market will give you time value premium in addition to just the intrinsic value which you would get by exercising.

www.cboe.com has (or had? I havent looked at it for quite sometime), some good learning material on Options (Chicago Board of Options Exchange).

kindly describe thoroughly

 

[Somatung]

@Register1803

A short put and a long call is a Synthetic Long Futures

A long put and a short call is a Synthetic Short Futures

Now we add the future leg on the side we suppose market will move. To understand it better you must understand about Delta is, as this is a Delta game.

Take care / Dan​

 

[register1803]

@Register1803

A short put and a long call is a Synthetic Long Futures

A long put and a short call is a Synthetic Short Futures

Now we add the future leg on the side we suppose market will move. To understand it better you must understand about Delta is, as this is a Delta game.

Take care / Dan​

Can you explain it with real time like the nifty of yesterday's and it's call and put It will be very helpful for me as I have tried to implement your strategy today but found huge loss in Banknifty

 

[Somatung]

Can you explain it with real time like the nifty of yesterday's and it's call and put It will be very helpful for me as I have tried to implement your strategy today but found huge loss in Banknifty

If you do not understand the strategy, then do not trade it. As simple as that. Such ways of trading are any way better for full time traders, as when traded, each leg has to be watched separately. Means: We can leg in and out with the different legs when ever needed according to what ever market does. But as told: Do not try to trade such strategies you do not understand in debt. You also can make money with other, more simple strategies.​

 

[gemat]

Isnt that equivalent to buying a CALL (or PUT)? In this case there is no margin to be paid on futures position!
There are lots of strategies. Some risk free ones are,

1. Buy Futures, Buy PUT and short CALL (Same Strike)

2. Sell Futures, Sell PUT and Buy CALL (Same Strike).

Your profit in the first case is, CALL - PUT - (Futures - Strike). You need to take the trade only when it's positive (You've to make profits, dont you?). You can work it out for the second one. Your profits are going to be limited (very limited), just better than interest, and, is for Very large volume players.

BTW, your option on indices cannot be exercised as they are Euro type. Exercising an option is normally a last resort, as selling the option in the market will give you time value premium in addition to just the intrinsic value which you would get by exercising.

www.cboe.com has (or had? I havent looked at it for quite sometime), some good learning material on Options (Chicago Board of Options Exchange).

is this absolutely risk free strategy? nifty future and spot nifty converge on expiry. from calculation there is no loss or profit.

 

[lokanathpai]

I dont trade in F&O's nor do I trade much in cash too.

I just struck with this idea and thought of posting it here to have all you guys' opinion on it.

Supose a certain stock or the market in general is in a certain trend, uptrend or downtrend, not moving sidewise. Lets assume its going upward. Now, you buy a future (of stock or nifty) at certain price, say Rs X and you buy same value (total value of future contract) of put option at strike price of Rs X and pay premium of Rs Y. Now, if the price moves up as predicted by you and you close your future position at price Z, then you make profit on your future contract and you lose preminum paid on put contract since it expires worthless. So, the effective profit will be Z-X-Y and you will brekeven at X+Y price of the future contract. In the unfortunate event of your predictions going wrong and your stock or nifty declines, so you will make a loss on the future contract, but you can exercise your put option and sell the stocks or nifty at Rs X effectively nullifying your loss in future contract. In this case, you would only lose the premium paid in put contract.

The reverse can be also true in case stock or markets is trending downward and you sell a future contract and buy a call option and protect yourself from increase in prices.


Could you guys please comment on this strategy. Are my assumptions correct?

Correct strategy. Execute this type of trade on index when top/bottom has reached. Wait for confirmation for trend change. Long ITM options for near 1 Delta value.

 

[sreekes]

I dont trade in F&O's nor do I trade much in cash too.

I just struck with this idea and thought of posting it here to have all you guys' opinion on it.

Supose a certain stock or the market in general is in a certain trend, uptrend or downtrend, not moving sidewise. Lets assume its going upward. Now, you buy a future (of stock or nifty) at certain price, say Rs X and you buy same value (total value of future contract) of put option at strike price of Rs X and pay premium of Rs Y. Now, if the price moves up as predicted by you and you close your future position at price Z, then you make profit on your future contract and you lose preminum paid on put contract since it expires worthless. So, the effective profit will be Z-X-Y and you will brekeven at X+Y price of the future contract. In the unfortunate event of your predictions going wrong and your stock or nifty declines, so you will make a loss on the future contract, but you can exercise your put option and sell the stocks or nifty at Rs X effectively nullifying your loss in future contract. In this case, you would only lose the premium paid in put contract.

The reverse can be also true in case stock or markets is trending downward and you sell a future contract and buy a call option and protect yourself from increase in prices.


Could you guys please comment on this strategy. Are my assumptions correct?

Dear Members,

For me also struck the as by Mr ravi_s_ghosh. I request any body to elaborate on the pros and cons of this strategy, when it is implimented.

Thanks to ravi for being ignited my thought.

Regards,

 

[TraderJunkie]

Dear Members,

For me also struck the as by Mr ravi_s_ghosh. I request any body to elaborate on the pros and cons of this strategy, when it is implimented.

Thanks to ravi for being ignited my thought.

Regards,

This is a classical covered call strategy and needs real time management as delta movements can cause losses in the end. So the way to do this in my view is.

1. Find overpriced options (ce/pe) and short them
2. Buy / sell futures to hedge
3. Ensure delta is always balanced as with market movement delta of the calls will change.

This is a very low risk and low returns strategy that needs to be watched and tweaked frequently.