October 25, 2016

NIFTY option writing trades - II

This post has my option trades (mostly writing) from 17th OCT onwards

17-OCT-2016
- I am bullish from current levels and expect 8500 to hold

- New trade: short 8500 put at 72 and long 8400 put at 42. Qtty : 300
- Max profit Rs.9,000/- max loss Rs.21,000/-.



18-OCT-2016
- still bullish.
- around 2 pm, covered the short trade in 8500 put in profit and long trade in 8400 put (loss)
- booked total profits approx [(72-25)-(42-13)]*300 = Rs.5,400/-


- now long in 8600 call: 300 at 87
- short 8600 put at 47 and long 8500 put at 25. Qtty: 300

Net open positions... MTM is profit for the day at time of this post (2.29 pm)


19-OCT-2016
- added short positions in 8500 put (around 21)
- I am now holding short positions in 8500 and 8600 put and long in 8600 call
- all are positional trades


20-OCT-2016
- traded long in 8700 CE intraday
- covered all positions; may not be in markets tomorrow
- overall a good day ... approx 20K profits.


21-OCT-2016
- no open positions
- did nothing today/ gave markets a miss
- next week is expiry

24-OCT-2016
- no open positions
- did nothing today/ gave markets a miss
- will not be doing anything this week (renovation at home)

4 comments:

  1. Let us assume this strategy is correct 70% of the time . Then out of 10 trades 7 will be correct and 3 will be wrong. For 7 correct trades I gain 9000*7 = rs.63,000 and for 3 wrong trades I lose 21000*3=63000, net result zero ( brokerage and STT extra)- facebook.com/groups/AmibrokerAFLcollection

    ReplyDelete
    Replies
    1. In option writing, the profits are limited while losses are unlimited.

      Option writing means dealing with probabilities and not certainties. So I can still make money with a trade of max 10 Rs profit and max 90 Rs. loss simply because that rare event does not happen.

      But it is also possible you can have 99 profit making trades while one bad trade takes away profits of all the 99 trades.

      So a hedge is created and in addition, one has a trailing stoploss. Now my strategy is loss minimisation so if SL gets hit, then I exit the trade immediately. So I do not wait for full loss.

      The hedge is created for another reason... what if there is 10% gap down today? Here my hedge will automatically limit loss to 21000 but if the hedge was not there, losses would have been phenomenal.

      Delete
  2. Hello KPL sir-Understood max profit calculation, could you please explain max loss assumption?

    ReplyDelete