Shorting Butterflies
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Wing: SP 11000 CE 77.50
Body: SP 10900 @ Spot 10893 174 + 161 = 335
Wing: SP 10700 PE 97
Net Credit: 335 - 97 - 77.50 = 160
Expect to see it reduce to 130 in last two weeks.
Will Exit because Nifty has probably broken out of a long held trading range. And hence our profit will disappear if market keeps going upside. Therefore, shall book profit on this spread
Exit at:
Wing: SP 11000 CE 188
Body:
SP 10900 @ Spot 10893 255+80 =
Wing: SP 10700 PE 42
Net Credit: 335 - 188 - 42 = 105
**Note how 335 is constant
New Spread: Buying a Butterfly, but without selling the CE wing, since I am bullish.
Buy CE 11100 128
Buy PE 11000 110
Sell 10800 58
Net Debit: 180
This spread, because I expect the price to trend, and close above 11100.
Pending action: As soon as price reaches 11300 I will sell ATM CE, and drastically bring down the cost of the spread.
CMP: 66 + 165 - 87 = 144
loss 36 points.