Low Risk Low Returns- Target 50 NF per month per NF Lot

[gmt900]

@GMT

How will go about managing a short strangle which is just shown a breakout of an important level and is threatening to move 300 points fast? Also, note that this breakout could be false, cuz 50% of them are, and reverse strongly too.

Jamit,
That is why I enter into short strangle at least one month before expiry.
Prepare a matrix or table ( manually ) for various scenarios for nifty expiring from say 5600 to 6400 and decide on action required to be taken depending upon the movement of nifty. I will have adequate time to keep adding positions to keep delta neutral to the extent possible. I will keep initial position size small, so that there is no issue of margin as I add positions.
For example, I have kept limit orders for my current short strangle so that I don't incur any losses due to sudden nifty movement in the adverse direction.
This is the process I am following for my current positions and so far I have been able to manage OK.
In engineering subjects we used to solve problems at the end of each theory lesson and if one's fundas are not clear it was difficult to solve problems. And the practice of solving problems using fundas made one confident of facing exam. Right now I am in practice problem solving phase.

 

[jamit_05]

Jamit,
That is why I enter into short strangle at least one month before expiry.
Prepare a matrix or table ( manually ) for various scenarios for nifty expiring from say 5600 to 6400 and decide on action required to be taken depending upon the movement of nifty. I will have adequate time to keep adding positions to keep delta neutral to the extent possible. I will keep initial position size small, so that there is no issue of margin as I add positions.
For example, I have kept limit orders for my current short strangle so that I don't incur any losses due to sudden nifty movement in the adverse direction.
This is the process I am following for my current positions and so far I have been able to manage OK.
In engineering subjects we used to solve problems at the end of each theory lesson and if one's fundas are not clear it was difficult to solve problems. And the practice of solving problems using fundas made one confident of facing exam. Right now I am in practice problem solving phase.

It has been my experience, from a time when I did some trades Buying Strangles, they did not give returns till there was a quick move.

So, looking at it inversely for shorting strangles, I am not threatened till there is a quick move of atleast 70 points, which is when it makes sense to adjust delta. Till then price will only bob up and down.

Although, I do not see how I can preplan by the help of a matrix because the delta cannot be pre-calculated because it depends on IV. Back testing and forward planning for Delta Neutral is not possible due to IV.

 

[jamit_05]

It is my unshakable belief that there is no easy money. Therefore, I tend to look around for major pitfalls and see if I can find solutions.

There are some monster months that move 500 plus points uni-directionally. These can use up capital pretty fast, even if delta is adjusted EOD.

I found, to adjust delta after a 100 point move, I will need around 30% more capital. In that progression, to cover a 600 point move I will need 5 times the initial capital. Now that is dicey.

The last months move from 5600 till 6100 would have spelled trouble !!

Must find a solution

 

[jamit_05]

It is my unshakable belief that there is no easy money. Therefore, I tend to look around for major pitfalls and see if I can find solutions.

There are some monster months that move 500 plus points uni-directionally. These can use up capital pretty fast, even if delta is adjusted EOD.

I found, to adjust delta after a 100 point move, I will need around 30% more capital. In that progression, to cover a 600 point move I will need 5 times the initial capital. Now that is dicey.

The last months move from 5600 till 6100 would have spelled trouble !!

Must find a solution

Turns out, it is indeed a major pitfall with no solution since there is no replacement for capital.

Short Strangles are only suitable when price is range bound. Like currently. During breakouts and fast moves, it will be very demanding.

 

[jamit_05]

If one has sold options of premium worth Rs. 1 lakh then he is going to earn, whether he likes it or not, Rs.3000 everyday !!

Yes, it is a very interesting proposition. And so is the technique required to run the show.

 

[DanPickUp]

If one has sold options of premium worth Rs. 1 lakh then he is going to earn, whether he likes it or not, Rs.3000 everyday !!

Yes, it is a very interesting proposition. And so is the technique required to run the show.

http://www.theoptionsguide.com/synthetic-long-call.aspx

http://www.theoptionsguide.com/synthetic-long-put.aspx

Have a nice weekend

 

[jamit_05]

Had sold strangle

6100 CE
5900 PE

for a total of 164. It went up to 172; Time decay covered up for my bad timing. Now is 145;

 

[jamit_05]

Apparently, shorting options by the way of strangles and straddles is restrictive. Selling options is better based on chart levels and trends.

Currently, I have a total theta of 1150 on the options I have sold, mostly PEs. Upon seeing a setup near spot 6200 will sell 6200 CEs as well. As of now, selling CEs feels like a lost cause. In that way, I hope to make Delta Neutral.

 

[jamit_05]

It is a great feeling.

Each morning I start my terminal, I see money added to my account. Theta is healthy. I really wish to learn managing a options portfolio. Right now, I am having difficulty increasing theta.

 

[jamit_05]

Volatility in the market has increased.

The total Theta of my portfolio was 1150;
Now it is 1230; at around the same Spot Price.

Quite clearly, it is a bad time to buy Options. Good time to sell.