Would like to put the entire portfolio in proper light.
The
base of this portfolio is:
BUY 15 Lots NF @ 7570
BUY 30 Lots 75PE DEC @ 185
They give me a decay cost of around 50K a month. 50K and profit I have to recover from making low risk sensible adjustments against the initial stock.
For ex. when I sold 79CE OCT, I saw that market won't go above 7900. And if it did I have NF to cover for it. This is now in a M2M profit of 15K. Similarly, I have already collected a profit of 102K in days of August.
In this strategy, I seek such opportunities, where each sold option leg is completely covered. There is not a single naked SOLD option.
Even the purchased 15 lots of NF are covered by twice as many DEC puts from day 1. If market tanks and NF go into a loss, one DEC put will cover NF lot, and other DEC put will be used to make adjustments and extract decay cost and profit each month.
Point I am trying to make is, this method is low risk from day 1. However, it becomes VERY risky if I sell too much too early!
If I sell all NF at an average 150 points profit (150*15*50=112K), then how will I ever recover the cost of buying DEC PEs (184*50*30=276K) if market continues up.
Therefore, I have to sell in a staggered way. Sell a little, then watch for momentum and calculate.
The above is my approach. Please fell free to point out if there is a blind-spot.