Hello,
Holding the position for more than two days can be a loss due to time-decay.
Anyway, there are two strategies I have mentioned - First is openaing a strangle every 50 points and the 2nd one is opening a modified straddle according to some technical trading system bullish or bearish view in 15 min or 30 min chart. 5 min chart can be much noisy.
I shall try to refine the strategy, for example, for a bullish view, I shall buy 3:2 Call
ut, or 5:4 Call
ut (in lots) at different point of Nifty.
For this, I have divided the 100 point NF range in this way, say, from 5500 to 5600
5500, 5525, 5550, 5575, 5600
You will see most of the times, Nifty tests similar figure like 5512, 5547, 5582, 5485, 5626 etc. So I shall initiate or square-off trades close to that levels.
Now it is my study to determine which Call
ut ratio at those different level has the best risk-reward ratio for both bullish and bearish market.
The main beauty of this trade is very psychological, as far as this applies to me:
For example, take today’s trade.
When market opened and came down to at around 5550, I bought those options with a bullish view. – Instead, with the same money I could have bought 4 lots NF.
Now think of the time when trade goes wrong, and one time Nifty touches very close to 5500 – my maximum loss was less than 2000/-. But if I would have initiated the NF buy, it would reach a M2M loss of around 10,000/-. This is very serious.
At this point, any student trader like me shall either try to average the position by buying another 2 or 4 lots of NF with more money, with a hope that NF will rebound. But things can go wrong more, NF can go to 5485. God knows. So, the trader will face more loss and more psychological pressure. Fortunately today that did not happened.
But in this Strangle buy case, trader will remain worry free – for two reasons – 1. the loss is substantially less, and moreover – the trade can move into profit if NF moves even further below. And then again, at that low level, we can initiate another suitable trade
This is the point of interest.
Tomorrow, if the open position losses increases, accordingly I shall book the loss, and open a new fresh position accordingly at that point.
GG