Low Risk Options Trading Strategy - Option Spreads

[DanPickUp]

dear,
yesterday i read a article somewhere in net which the name fo the strategy is " Multiple covered put with call hedge"
actually i haven't deep knowledge abt it. as per the strategy
of course my view was negative abt NF ( traded time = 2:16 PM)

i sold one NF @5250 ( spot was around @ 5227)
sold 5 lots 5200PE @ 85
buy 5 lots 5400CE @ 42
buy 1 lot 5000CE @ 275

but the nifty went against my view and at the end of the day i closed the trade.
NF @ 5270, 5200PE@ 75, 5400CE @ 46 and 5000CE @ 290

my profit and losses are

1) profit in NF is= -20*50= -1000
2) profit in 5200PE is = 10*50*5 = 2500
3) profit in 5400CE is = 4*50*5 = 1000
4) profit in 5000CE is = 15*50 = 750

total profit = -1000+2500+1000+750 = +3250

i wonder, it went against my view and my profit is this much, if it goes in my view what could be my profit.... so where is loss...is it called zero risk strategy...

dan, awaits for your reply...

Dear Vssoma

Some question from my side:

I do not use your software. Doe's your software shown nifty cash or nifty future? As far as I remember, that was the case in the past with an other trade shown with the same software.

Next point: Are this figures you show life filled positions or is the whole idea you show just an academic test?

Third point: Did you leg in or did you do the trade at once. If you did it at once then my comment is: Not possible.

DanPickUp

 

[TheDreamer]

... ... ...

i sold one NF @5250 ( spot was around @ 5227) short, delta=-1
sold 5 lots 5200PE @ 85 long, delta=0.4
buy 5 lots 5400CE @ 42 long, delta=0.3
buy 1 lot 5000CE @ 275 long, delta=0.8

... ... ...

You were long in 11 lots (delta=3.3 of total position) and short in 1 lot... still asking why did u make profit!!!
:rofl::rofl::rofl:

Just check the net delta of your whole position while taking these sort of trades... What would have majorly hurt your position is the 5 lots of puts you have sold. Below 5150 you could have lost more than 15,000 even today... Best of luck...

 

[vssoma]

Dear Vssoma

Some question from my side:

I do not use your software. Doe's your software shown nifty cash or nifty future? As far as I remember, that was the case in the past with an other trade shown with the same software.

Next point: Are this figures you show life filled positions or is the whole idea you show just an academic test?

Third point: Did you leg in or did you do the trade at once. If you did it at once then my comment is: Not possible.

DanPickUp

dear dan,
yes, you are right...my software uses index prices but not Future price.

the prices shown here are filled prices...and real time prices.

finally you are right they are not filled at once....the difference is maximum 3 min.

before explaining the strategy's introduction is " Here my view point is the stock or the index will fall from the current level at least by 10 to 15%. The main idea for forming this strategy is I want to participate in a wild market in a limited extent with reduced risk mechanism."
Multiple covered put with call hedge: Form 5 covered put with equal depth call option and buy deep in the money call option.

 

[DanPickUp]

Dear Vssoma

Sorry to tell you that: The idea your present here is not makable the way you explain it. Even implemented in three minutes is called: At once and for this my comment again: Not possible.

The idea can only be traded by leg in on different support and resistance levels. In that way you can control and adjust the delta.

Your software is not able to show you the right analyzing picture. So do not use this software for more complex hedge strategies for future and options.

Good trading

DanPickUp

 

[jain.er]

how exactly to trade options profitably...

 

[vssoma]

Dear Vssoma

Sorry to tell you that: The idea your present here is not makable the way you explain it. Even implemented in three minutes is called: At once and for this my comment again: Not possible.

The idea can only be traded by leg in on different support and resistance levels. In that way you can control and adjust the delta.

Your software is not able to show you the right analyzing picture. So do not use this software for more complex hedge strategies for future and options.

Good trading

DanPickUp

dear dan,
if i increase the NF lots to 5 will it work? if we want to repair this strategy...

 

[DanPickUp]

dear dan,
if i increase the NF lots to 5 will it work? if we want to repair this strategy...

Dear Vssoma

1. Start to know how to trade simple options permanently successfully.

2. If you manage to trade one option successfully, then you concentrate on trading two legs one by one or by implementing them at once successfully. At that level you have to start to be interested in the option greeks and you have to understand them.

3. If you manage that levels in the real option trading market with real money, then you have to buy option software which will be able to make the right calculations for more advanced option strategies.

At that level, you will no more need my answers, as you will stand on your own feeds and you will start to understand your questions.

Until then any thoughts of you on such complex ideas are lost time which you better would spend for being perfect with point one and two.

Good trading

DanPickUp

 

[Novice-Trader]

Hi All,

This is possibly a unrelated query from a beginner, apologize for deviating the discussions here.

Request the experts to kindly share a relevant link or explain with examples my query below:

How to determine SLs for Options -
I understand different Strikes at different times of expiry react differently to the market movement.

Setting SLs in Equity or Futures seems straight forward using ATRs / support and resistance etc based on one's style.

However, the same could not be applied directly to options. I understand ATM / ITM / OTM options react differently based on the greeks and the time to expiry.

Would be of great help if someone could assist explain this.

 

[sunny_ndl]

Dear Dan sir
Thank you for ur suggestion on selecting Higher Timeframe, so that frequent order placing can be avoided. My biggest problem is , not sticking to one TF. I frequently switch between 1min,3min,5min,10min,15min,30min ,1Hr etc with out clarity. After introspecting , i realised that, iam suffering with the problem of preoccupied opinion on market direction. For example, on 30/04/2012, i formed opinion of going long , US markets are trading 4 years high, then our Nifty also follows, so better go long. Accordingly i Bought Nifty 5200Ce and sold 5400CE. Despite of Amibroker showing sell signals, i neglected them. I filterd for buy signals among different TFs. This is just to fulfil my bias to go long. After market hours, again iam worrying why i failed to be objective. I am critisising myself and iam taking Oath , not to repeat again. But next day i repeat the same mistake. I am really struggling to be objective. kindly help me how to overcome this . I read mark douglas book Trading in the Zone, Van tharp book also. But at functional level iam struggling. Kindly guide me

 

[DanPickUp]

Dear Novice-Trader

Here your answer: http://www.traderji.com/options/66266-option-trading-danpickup-10.html#post675560

Dear Sunny ndl

Here your answer: http://www.traderji.com/options/66266-option-trading-danpickup-10.html#post676010

DanPickUp