Low Risk Options Trading Strategy - Option Spreads

[sriugdh]

AW10,

Sir, please suggest a strategy for nifty options trading to be carried before Budget day!!

Best Regards,
Sriram

 

[MOka]

Hi Dear,

While you are trading option and putting Vertical Spread/ Calendar Spread - You execute legs separately or at once.

Does NSE is accepting these spread orders as a single execution and Which broker is offering. These 2 - 4 legs option order in a single execution are common in NSE or not. (Order = Simultaneously execution of all the legs of strategy).

Please clarify these.

Thanks
Vikas Panwar

Vikas Did you get an answer to your question from anybody? any brokers

I am also interested in Indian stock-option market for Covered call writing but it is very difficult to get an answer to a simple question
Will a broker cross margin in case of
- Covered call writing
- Protective Put
- Collar

 

[ajoydc]

Thank you AW 10 for this useful thread.

 

[tejaswini1403]

If you rearrange the positions then this trade will end up in 2 positions of
1) long feb call+ short feb put (bullish position for feb)
2) long mar put+ short mar call (bearish position for mar)

As feb series will expire before the budget event, I think, it will pass the high volatility to march series for somedays and then volatlity of march series will drop.

So if you are planning to close calender spreads, on feb expiry, then probably march options will not be cheap at that time.

I would rather construct a position for each month instead of calender position.

Maybe your strategy will workout with march/april calender, but not sure if April series is correctly priced and has sufficient liquidity at this moment.

note - above are based on my views, i have no fact or backtesting to support it. So please validate them before you take decision.

happy trading

-----
hey hi AW10..
i m new to options trading...I m finding all ur posts very useful for learning..i wanna know if u aware of any good option class in pune..BTW whr u do stay?

 

[AW10]

Thanks Tejaswini1403. Good to know that you find the thread helpful in your learning. I don't know of any options class in Pune/India. Hope you have checked this post in start of this thread where I have given draft learning path and few good links for free education on the net.

http://www.traderji.com/options/305...ading-strategy-option-spreads.html#post333547

Personally I will suggest to goto CBOE.Com or 888options.com site for free learning.
Feel free to post your doubts / questions here and I (or other memebers) will try to answer them. If you are going for a class, then better to ensure that you learn from real profitable option trader, otherwise, you will be struggling in translating option theory into practice.

Happy learning and trading.

 

[AW10]

duplicate post

 

[tejaswini1403]

to AW10,
thanks..
i will follow up Ur suggestions and this thread as well..
will keep posting doubts here ,i m sure i will have many

 

[comm4300]

Require help from Senior options traders:

what would be the appropriate [best] time to initiate far OTM Iron Condor ?

did some homework and found that writing far OTM [+-400points] on day 1 of option series fetched the max. benefit rather than writing after significant move in the next few days...
I observed that far OTM just kept decreasing in value despite a change of NIFTY 2%+ towards its direction....

could i become a little greedy and write far OTM for the next series so that i get more premium? [ex. June 5300PUT on 02-05-2011]

anyways, my intention is not to take my trades through to the expiration but the target Rs.15-20 premium. Two sideways days can achieve the target for me....at least that's what i could figure from nse option historical data....

you comment and advice please.

 

[AW10]

Iron Condor is market neutral strategy so anytime should be best time. Why is it the first day of the series ? Does option pricing depend on what day of the series or does it depend on factors like volatility, remaining life, probablity of underlying reaching the strike price during remaining life ?
IMO, if you right 400+ points otm when 1 week is left, than u are taking a chance of almost 98% in your favour. What is the probabilty that nifty will move by 400 points in 1 week.. Becuase it is low risk, high certainty of keeping the money, your rewards will also be less.
But if you right the same 400 points OTM with 4 weeks to left, the odds are much higher that nifty might make a 400 points move in 4 weeks and hit your strike level. Hence risk is higher, low certainty of keeping money hence rewards will be high.

If you are giving the life of 8weeks for 400 points move than odds will be even less in your favour. Bottomline, each of this scenario has different probablity factor attached to it and hence your rewards are also different.

Better to consider typical move of nifty in remaining life and then construct iron condor beyond the reach of nifty. Depending on mkt sentiment, you can think of skewing it a bit on bullish or berarish side.. eg - if current trend of nifty is down, than create call spread a bit closer to spot, and create put a bit farther away to increase return.
Beauty of IC is that one leg is guranteed winner, and risk on second leg is limited hence you will not blow your account. If one can select strike price correctly than it is nice income generation strategy.

Hope this helps. All the best and happy trading.

 

[DanPickUp]

Hi comm4300

If you not want to leg in, like AW10 has mentioned, you have to consider, how you want to adjust your iron condor in case the underlying moves largely against any of your short positions. The delta would suddenly be imbalanced and that scenario you should include in your trading plan, before you implement the trade.

Probability makes people feel save in a wrong way, as this probability is only a mathematical calculation. It doe's not include other facts, which some times occur. So never take a trading decisions only build on the probability math. All the time go one step further and check the adjustment possibility before you really have to adjust live under full pressure.

Tc

DanPickUp