K gr8, Just sharing my inputs.
NIFTY at 7353.00
The danger with buying 7200 pe @ 58
1) Nifty runs up in this case 58 will come down quickly
2) Nifty stays where it is for a week. IVs go down marginally and theta eats up premium
Assuming nifty stays at 7353 for 4 days with 20 days to expire and vega goes down marginally it would be worth 48.
How do u plan to deal these scenarios as and when if it arises
How about buying 7200 pe and selling 7100 pe at 36.
In this case if Nifty stays where it is for a week. IVs go down (even if it stays same) and theta eats up premium
our 58 would go down to 48 but 36 becomes 28. So a loss 2 points in this scenario Max loss again would be capped to of course 22.
Positive scenario Lets say if nifty touches 7200 in 4 days our 58 becomes 100 and 36 becomes 63.
Total profit 42- 27 = 15
Sure this can be done at runtime too but would be good if we can list how do we tackle the above 2 scenarios
NIFTY at 7353.00
The danger with buying 7200 pe @ 58
1) Nifty runs up in this case 58 will come down quickly
2) Nifty stays where it is for a week. IVs go down marginally and theta eats up premium
Assuming nifty stays at 7353 for 4 days with 20 days to expire and vega goes down marginally it would be worth 48.
How do u plan to deal these scenarios as and when if it arises
How about buying 7200 pe and selling 7100 pe at 36.
In this case if Nifty stays where it is for a week. IVs go down (even if it stays same) and theta eats up premium
our 58 would go down to 48 but 36 becomes 28. So a loss 2 points in this scenario Max loss again would be capped to of course 22.
Positive scenario Lets say if nifty touches 7200 in 4 days our 58 becomes 100 and 36 becomes 63.
Total profit 42- 27 = 15
Sure this can be done at runtime too but would be good if we can list how do we tackle the above 2 scenarios
1st you are capping the trade potential
2nd you are not avoiding the loss you are just reducing it by margin
lets fine tune it....
if the upper direction is confirmed to you then lets sell one higher strike like if you bought 7200 PE write 7300 PE & 74PE for 73PE...
Now can pull out the prices for the same and tell us what would be the situation if market expired higher?