Regular Income From Markets. Risk Free. Takes no Time

[jamit_05]

super... no action today... market sideways.

Premium is now 172...

 

[jamit_05]

I do not expect sideways to last for a long time. Down the line we will be required to use our skills.

If anybody is well versed with this method and would like to participate then I am more than willing to share my profit with him.

Amit.

 

[PartTime_Trader]

A un-hedged short option carries risk equal to the future position, having a short strangle increases this risk exposure on the both side of the market. . . All it takes is one extreme move on either side to wipe out profits from premium that you would have taken months to accumulate . . .

One simple way to manage this is buy wings {far out of money options} for e.g. with 5.1/5.2 you can look at CE5.4/PE4.9 or CE5.5/PE4.8, this way you will protect yourself from black-swan events and limit risk to 200/300 points max

You can use the intraday/swing movement to bring down the cost of buying wings, the plan/objective can be to make it free . . .

 

[gurmy.]

One simple way to manage this is buy wings {far out of money options} for e.g. with 5.1/5.2 you can look at CE5.4/PE4.9 or CE5.5/PE4.8, this way you will protect yourself from black-swan events and limit risk to 200/300 points max

You can use the intraday/swing movement to bring down the cost of buying wings, the plan/objective can be to make it free . . .

perhaps if u can explain it little bit more...........
thanks

 

[jamit_05]

A un-hedged short option carries risk equal to the future position, having a short strangle increases this risk exposure on the both side of the market. . . All it takes is one extreme move on either side to wipe out profits from premium that you would have taken months to accumulate . . .

One simple way to manage this is buy wings {far out of money options} for e.g. with 5.1/5.2 you can look at CE5.4/PE4.9 or CE5.5/PE4.8, this way you will protect yourself from black-swan events and limit risk to 200/300 points max

You can use the intraday/swing movement to bring down the cost of buying wings, the plan/objective can be to make it free . . .

A good suggestion. CE5.5 and PE4.8 is costing around Rs.30... A justified cost for safety.

 

[jamit_05]

A un-hedged short option carries risk equal to the future position, having a short strangle increases this risk exposure on the both side of the market. . . All it takes is one extreme move on either side to wipe out profits from premium that you would have taken months to accumulate . . .

We intend to neutralize delta after 1% move, in spite of that a black-swan type situation could arise? Pls explain.

 

[PartTime_Trader]

perhaps if u can explain it little bit more...........
thanks

We intend to neutralize delta after 1% move, in spite of that a black-swan type situation could arise? Pls explain.

How will you "neutralize delta after 1% move"?


Work with different scenarios and its impact on your strategy

for e.g.

What if?

1. Opens Gap-Up 3%
2. Opens Gap-Down 3%
   
   
3. Opens Gap-Up 5%
4. Opens Gap-Down 5%
   
   
5. Opens Gap-Up 10%
6. Opens Gap-Down 10%

Maybe you already have a plan for if the markets keeps trending downwards and we see levels of 4800-4900 in August expiry, or maybe if markets reverse and we see levels of 5400, and whatever else you can think of . . .

Be ready with the actions that you will take (plan) for all the eventualities that can happen.

 

[jamit_05]

First things...

How will you "neutralize delta after 1% move"?


Work with different scenarios and its impact on your strategy

for e.g.

What if?

1. Opens Gap-Up 3%
2. Opens Gap-Down 3%
   
   
3. Opens Gap-Up 5%
4. Opens Gap-Down 5%
   
   
5. Opens Gap-Up 10%
6. Opens Gap-Down 10%

Correct thing to say... why take up infinite risk when there are other ways? With that said, the first thing that one needs to do is to cover the shorted options by shorting NF with equal lots...

 

[PartTime_Trader]

Re: First things...

Correct thing to say... why take up infinite risk when there are other ways? With that said, the first thing that one needs to do is to cover the shorted options by shorting NF with equal lots...

Try that for a few months and see how it goes.

This is a very good way of doing things for someone who understands and can trade trends very well . . . but then the question is why go for smallish gains from trying to eat time value from shorted options . . . why not just focus on Futures and max it

In my view options trading will be primarily done for Hedging Risk or for regular small gains with very limited risk, if we cannot (or don't want to) limit the risk, then trading with futures would be much better.

 

[jamit_05]

Re: First things...

Try that for a few months and see how it goes.

This is a very good way of doing things for someone who understands and can trade trends very well . . . but then the question is why go for smallish gains from trying to eat time value from shorted options . . . why not just focus on Futures and max it

In my view options trading will be primarily done for Hedging Risk or for regular small gains with very limited risk, if we cannot (or don't want to) limit the risk, then trading with futures would be much better.

I will opt "for regular small gains with very limited risk". To make that possible I must mostly keep the shorts covered and trade a smaller qty. Focus is on risk. "Wing-ing" them is also an apt option... it eliminates infinite risk factor in one go.