Low Risk Options Trading Strategy - Option Spreads
- Thread starter AW10
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Hi
I hope that every body recognizes that the above trade is a directional trade. A directional trade of high risk. If a trade is token like that, we anticipate that the market must move down.
Now trend is down. So why is this a high risk trade ? Look at the market moves. Swings up and down. Now we are in a valley from a TA view and this trade is token in a valley.
In a valley we suppose market to move up and on mountains we suppose market to move down. In a valley we prefer puts and on the mountains we prefer calls. If you toke the mentioned credit spread, you have to watch it daily to not get under water. Protect your self even with that situation with a stop loss.
What kind of stop loss system did you take in case you implemented the above mentioned trade in the market ?
DanPickUp
I hope that every body recognizes that the above trade is a directional trade. A directional trade of high risk. If a trade is token like that, we anticipate that the market must move down.
Now trend is down. So why is this a high risk trade ? Look at the market moves. Swings up and down. Now we are in a valley from a TA view and this trade is token in a valley.
In a valley we suppose market to move up and on mountains we suppose market to move down. In a valley we prefer puts and on the mountains we prefer calls. If you toke the mentioned credit spread, you have to watch it daily to not get under water. Protect your self even with that situation with a stop loss.
What kind of stop loss system did you take in case you implemented the above mentioned trade in the market ?
DanPickUp
Thanks DAN for your valuable input ,stop loss i.e will close the trade if the value of the spread becomes 70 . currently it is 40.
As per option oracle loss amount will be 1300-1400 , if nifty crosses 5100 during next 7 days. I do not want to continue till expiry if nifty goes against my trade. Please help me to identify my mistake if any ,looking forward your guidance .
As per option oracle loss amount will be 1300-1400 , if nifty crosses 5100 during next 7 days. I do not want to continue till expiry if nifty goes against my trade. Please help me to identify my mistake if any ,looking forward your guidance .
Bear spread is done better with calls as you keep the spread profit in advance...
dan, already explained your query
normally i never keep my positions over night...but this time i just tried for some new...that's why i hedged that my P/L is limited...
when market open low, i exited from short one and i waited for good time to exit the long one...( of-course, i didn't wait for 12 noon, exited at near 10 only) this is a good way to keep a position over night.
You always find just gold mine . Thanks for sharing. Around 15th, there is no other way I am aware to find +/- 300 points protection.
Please consider the margin required, as we are shorting 4 lots here. That will have considerable impact on the P/L calculation.
A slightly different question Swamy. Strangles (100 points +/- current market price) will give similar protection, but much better profits right? A month timeframe is huge and Nifty can move beyond the protection, but that is more or less same here also, we have 15 days left. (Risk part), and anyway we will be ready to manage that risk by coming out or adding protective legs etc.. To keep it simple, to me, risk or exit strategy looks same, while profit/returns looks much different between the strangle and this one, hence my question.
. Thanks for sharing. Around 15th, there is no other way I am aware to find +/- 300 points protection.Please consider the margin required, as we are shorting 4 lots here. That will have considerable impact on the P/L calculation.
A slightly different question Swamy. Strangles (100 points +/- current market price) will give similar protection, but much better profits right? A month timeframe is huge and Nifty can move beyond the protection, but that is more or less same here also, we have 15 days left. (Risk part), and anyway we will be ready to manage that risk by coming out or adding protective legs etc.. To keep it simple, to me, risk or exit strategy looks same, while profit/returns looks much different between the strangle and this one, hence my question.
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