TARGET :500 Nifty points per month...!

[ksesha]

premium received = 167 + 70 = 237
premium paid = 1.65 + 2.65 = 4.3

net = 237 - 4.3 = 232.7

So you are protected only till 5300 + 233 i.e. 5533 on the upside and
5300 - 233 = 5067 on the downside


6000 -46730
5950 -41730
5900 -36730
5850 -31730
5800 -26730
5750 -21730
5700 -16730
5650 -11730
5600 -6730
5550 -1730
5500 3270
5450 8270
5400 13270
5350 18270
5300 23270
5250 18270
5200 13270
5150 8270
5100 3270
5050 -1730
5000 -6730
4950 -11730
4900 -16730
4850 -21730
4800 -26730
4750 -31730
4700 -36730
4650 -41730
4600 -46730
4550 -51730
4500 -56730
4450 -61730
4400 -66730

regards

RESPECTED SIR,

I AM NEW TO THE WORLD OF OPTION TRADING, HAVE BEEN FOLLOWING UR THREAD FOR SOMETIMES NOW. I IMMEDIATELY NEED UR EXPERIENCED OPINION REGARDING AN OPTION STRATEGY WHICH IS PROBABLY A VARIATION OF IRON BUTTERFLY SPREAD [WHICH IS ALSO A COMBINATION OF SHORT STRADDLE & BEAR CALL & BULL PUT SPREADS] .

A REAL TRADE I HAVE TAKEN SHOWN HERE: -

ON THE 29TH OF JULY 2010, IVE

SOLD NIFTY 5300CE 2LOTS AUG@167 + SOLD NIFTY 5300PE 2LOTS AUG@70

RECVD PREM = 237*2

FOR PROTECTION, I

BUY NIFTY 6000CE 2LOTS [email protected] + BUY NIFTY 4400PE 2LOTS [email protected]

PAID PREM = 4.30*2



IVE ALREADY CLOSED THE POSITIONS EARLY FOR A PROFIT OF 50 RS, SINCE I HAD TO GO OUT OF STATION. THE CONFUSION, HOWEVER REMAINS

1. WAS MY SHORT NIFTY CALL PROTECTED TILL 6000 [EVEN IF THE PROFIT WOULD BE VERY LESS]?

2. WAS MY SHORT NIFTY PUT PROTECTED TILL 4400 [EVEN IF THE PROFIT WOULD BE VERY LESS]?

MY UNDERSTANDING OF THE THEORIES OF OPTION STRATEGIES SAYS SO, PLS CORRECT MENTIONING DETAILS IF I AM WRONG. DESPERATELY NEED UR HELP. PLS RESPONSE AT UR POSSIBLE EARLIEST. KEEP IN MIND MY UNDERSTANDING OF THE OPTION MARKET IS AT THE STAGE OF INFANCY.

THANKING U

andiemusik

 

[andiemusik]

SIR,

THANK U 4 AN EARLY RESPONSE, I AGREE TO UR LOGIC. ACTUALLY THE CONFUSION WAS CREATED BY A TUTORIAL ON " IRON BUTTERFLY SPREAD" BY "OPTIONTRADINGPEDIA". I AM QUOTING THE EXACT LINES OF THE TUTORIAL WHICH CREATED THE CONFUSION -

1. Veteran or experienced option traders would identify at this point that the Iron Butterfly Spread actually consists of a Bear Call Spread and a Bull Put Spread with the short call and put options on the same strike price (at the money).

The choice of which strike prices to buy the long legs at depends on the range within which the underlying asset is expected to trade in (Profitable Range). The further away from the money the 2 long legs are, the lower the risk (as the underlying stock needs to move further in order to exit the profitable range), but the higher the maximum loss would be should the profitable range be exited. Again, this is a trade-off that all option traders need to decide and accept when trading any kind of option strategies.

PLS EXPLAIN. I CAN UPLOAD THE WHOLE PAGE IF NEEDED.

REGARDS

 

[ksesha]

The keyword is "profitable range" which in your case was 5100 - 5500.

So you should have bought your protection long legs at those levels to minimize the losses. hope this is clear.

SIR,

THANK U 4 AN EARLY RESPONSE, I AGREE TO UR LOGIC. ACTUALLY THE CONFUSION WAS CREATED BY A TUTORIAL ON " IRON BUTTERFLY SPREAD" BY "OPTIONTRADINGPEDIA". I AM QUOTING THE EXACT LINES OF THE TUTORIAL WHICH CREATED THE CONFUSION -

1. Veteran or experienced option traders would identify at this point that the Iron Butterfly Spread actually consists of a Bear Call Spread and a Bull Put Spread with the short call and put options on the same strike price (at the money).

The choice of which strike prices to buy the long legs at depends on the range within which the underlying asset is expected to trade in (Profitable Range). The further away from the money the 2 long legs are, the lower the risk (as the underlying stock needs to move further in order to exit the profitable range), but the higher the maximum loss would be should the profitable range be exited. Again, this is a trade-off that all option traders need to decide and accept when trading any kind of option strategies.

PLS EXPLAIN. I CAN UPLOAD THE WHOLE PAGE IF NEEDED.

REGARDS

 

[imazina]

Re: TARGET :500 Nifty points per month...!

--------------------------------------------------------------------------------

Quote:
Originally Posted by cool_kk
Thanks Lincoln for your time to reply

Hmm.. I was thinking I can use a part of your startegy to eat premimum and just short/long Nifty at my straddle strike point

It doesn't look like a great idea.. Isn'ted ?

Thanks
Kaps

Actually...writing a straddle / strangle can be hedged with nifty... but issue is the non linear movement that we have every day... say u are running a short..and the next day it reverses... then you end up having to decide if you should reverse the trade or hold on ...

for someone who cant manage to give sufficient screen time...ideal strategy is to short straddle / OTM strangle and have a definite cut off point in terms of nifty movement... where you exit the trade...

or u can go for calender spreads...
__________________

linkon7



hi,

my question is regarding CALENDER SPREADS. i prefer to go with SHORT CALENDER STRADDLE if i am taking the trade in the beginning of the month since volatility remains high(generally), in the middle of the month i prefer CALENDER STRADDLE (vola low, premium decay faster - generally).

pls put ur views.

regards

 

[cool_kk]

Hi

I am planning to open a thread which says "where to find lincoln":lol:

I read lot of threads and it says.. thread move here..

It reminds me of...3 idiots Song

"Yaar hamara tha woh.. Dhoondho use"

Well as I am following some threads.. for me.. traderji 3 Idiots are

Lincoln
AW10
Edward

Also, I read threads and reco's by

Simple trader,Capricorn,Raunak,JV Blogger.Kesho,Dan

I may have missed few ..

Cheers...
Kaps:clap:

 

[linkon7]

Hi

I am planning to open a thread which says "where to find lincoln":lol:

I read lot of threads and it says.. thread move here..

It reminds me of...3 idiots Song

"Yaar hamara tha woh.. Dhoondho use"

Well as I am following some threads.. for me.. traderji 3 Idiots are

Lincoln
AW10
Edward

Also, I read threads and reco's by

Simple trader,Capricorn,Raunak,JV Blogger.Kesho,Dan

I may have missed few ..

Cheers...
Kaps:clap:

I'm here...as always...!

Not sure about AW10.... he just vanished...!

Ed is there in the forex room...minting money as usual...!

 

[vssoma]

dear,
can you pls. explain with real time example, now nifty if at 6000 level,
consider this level, give me a example.
tnx,

Re: TARGET :500 Nifty points per month...!



for someone who cant manage to give sufficient screen time...ideal strategy is to short straddle / OTM strangle and have a definite cut off point in terms of nifty movement... where you exit the trade...

 

[gangadharan]

Is nifty going to close below 5800 on this sep. Settlement???????

 

[linkon7]

Is nifty going to close below 5800 on this sep. Settlement???????

the way even the non movers are moving... looks like settlement will be at 7000...

fii are buying like crazy... everything is cheap.... buy buy...

 

[summasumma]

hi Link,

i have a general query regarding option premium eating strategies(like short straddle/short stranggle).

Will the raise in price (say nifty index) increase the risk in these strategies?

Because, for example consider the following scenario:
- nifty was trading around 4000 level
- the call/put option price of 4000 strike is 100/100 respectively.

Now the strategies helps you to be relax between 3800-4200 range as you wont loose anything. This means that you can afford raise in NIFTY by 5%.

But considering the current scenario where NIFTY is trading at 6300 and the corresponding call/put @ 6300 price is say 100/100 respectively. Then you can relax btwn 6100-6500 range.
This is same 400 points range as incase of when nifty@4000 , but when you see closely, now when nifty raise by just 3.1% you wll be in danger.

And when Nifty price raises on and on to say 10000, then just a 2% raise can put you in danger spot, which can happen in a day... But when Nifty price is less around 4000, you can be little relaxed(comparatively) as 5% raise is big for a day.

Just want to understand that whether these strategies will be @ more risk when the underlying price tempt to cross your safe range by mere % raise.

Thanks,
summasumma