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

[jamit_05]

Next Trade will look something like this:

Sell 4July 11800 CE+PE 134+55=189 (almost same as last week)

Buy 25July 11900CE 184
Buy 25July 11700PE 112
-----------------
Paid: 184+112 = 296


189 will completely decay, whereas 296 will lose around 65 points. Minus 80 approximate points for ITM and 4 points for expense. This leaves us with around 40 points. (189-65-80-4 = 40)

So, ideally 40 points should be the profit at expiry. Lets see how much of it we can retain.

If one were to set his expectation of earning 4% a month on his invested capital, then he must earn a minimum of net 35 points per week on such a spread.

 

[jamit_05]

Sold 27June 11700 CE+PE 98+90 = 188 - 141.55= 46.45 (gain)
Bought 4July 11800 Ce +11600 Pe 68+90 = 158 CMP 128+10=138 Net: -20 (loss)
------------
Gain : 26.45

Bought 27June11800 CE 68 --- Auto Squared at Expiry 41.55
Sold 27June11900CE 20
------------
41.55+20-68= -6.45 (loss)

Net Gain: 26.45-6.45 = 20 points.

A small change. I have still not squared off the 4July 11600PE which is worth 10 points. Will get out after a down day.

 

[jamit_05]

There is no loss on the upside.

11700 and 11900 are the two peaks where there is profit.

 

[jamit_05]

Sold 27June 11700 CE+PE 98+90 = 188 - 141.55= 46.45 (gain)
Bought 4July 11800 Ce +11600 Pe 68+90 = 158 CMP 128+10=138 Net: -20 (loss)
------------
Gain : 26.45

Bought 27June11800 CE 68 --- Auto Squared at Expiry 41.55
Sold 27June11900CE 20
------------
41.55+20-68= -6.45 (loss)

Net Gain: 26.45-6.45 = 20 points.

A small change. I have still not squared off the 4July 11600PE which is worth 10 points. Will get out after a down day.

The 4July wing did not contribute to the profit, but was an expense instead. If I had bought current week wings, then it would have been even more of an expense, of around 80 points. That would hv been devastating. So, we conclude that buying wings with lesser decay is good, and hence lets buy monthly expiry wings, which have good liquidity but much lower decay.

 

[jamit_05]

Fresh Trade:

Sell 4th July 11800 CE+PE 99.50 + 62.50 = 162 CMP 80+65 = 145
Buy 25th July 12000 CE + 11600 PE 107 + 92.35 = 200 CMP 107+96=203

Within a day there is good profit because the trades were legged in, and got the days direction right.

This time around I have made two modifications:

1. Have taken the monthly expiry as the wings. These will have much less time decay. The one important purpose these wings serve is that the protect you from "unlimited" loss, which I do not understnd. I say this because I am mostly always adjusting this spread.


2. Wings are now 200 points apart, to further reduce time decay.

This means, beyond 100 points I will have to make adjustments.

 

[jamit_05]

ATMs: Sell 04th July 11800 CE + PE 99 + 62 = 161
Wings: Buy 25th July 12000 CE + 11600 PE 107 + 93 = 200

Wings will decay by 100 points in next three weeks. But, ATMs will lose the entire amount of 161 points, every week. Now, our strategy:

We want ATMs to expire where they started, this is our best case. However, statistically Nifty displaces an average of 120 points each week. But the displacement can go as high as 600 points. So, we need to buy cover in the direction that nifty starts to move. We will limit this to 50 points.

Meaning, if Nifty touches 11850 or 11750 we will buy cover in the form of 4July 50 points OTM. If prices recede, will square it at a cost of 15 odd points. We have 160 points to spare, lets see how many points we can retain at expiry.

July 5 is the budget week, so we'd better have a well thought out plan for the sold ATMs. Price swings are going to be large, 300+

 

[jamit_05]

ATMs: Sell 04th July 11800 CE + PE 99 + 62 = 161 cmp 104+27 = 131
Wings: Buy 25th July 12000 CE + 11600 PE 107 + 93 = 200 cmp 122+73 = 195

11900 CE bough at 57 CMP 47;


Market is grinding very slowly. It appears there is going to be a huge move in this week. 200 to 300 point movement in a day types.

 

[jamit_05]

Purchased 11900CE at 57, will hold till the trend looks okay

Purchased 11900CE at 57 CMP 47 lost ten points in a matter of a few hours !

 

[moneymanager1980]

Purchased 11900CE at 57, will hold till the trend looks okay

Purchased 11900CE at 57 CMP 47 lost ten points in a matter of a few hours !

tomorrow might be in good profit ..

 

[jamit_05]

ATMs: Sell 04th July 11800 CE + PE 99 + 62 = 161 cmp 83+32 = 115 gain 44
Wings: Buy 25th July 12000 CE + 11600 PE 107 + 93 = 200 cmp 110+78 = 188 loss 12

Squared off 11900 CE bough at 57 CMP 35 LOSS 22 !!

NetGain: 44-12-22 = 10 points.
The Hedge proved expensive.