October 17, 2016

NIFTY Option writing trades - I

5-OCT-2016
- sold 8900 call 300 at 60
- sold 8700 put 300 at 80

Total investment approx. Rs.360,000. Max profit = 300*60 + 300*80 = Rs.42,000/-.

6-OCT-2016
- break of 2 day support on 15 min chart
- exited short trade in 8700 put and bought 8800 put option
- sold 8800 call 300 at 76

7-OCT-2016
- booked profit in 8800 put
- open position - 8900 sold at 60 and 8800 call sold at 76
- max profit = 300*60 + 300*76 = Rs.40,800/-


10-OCT-2016
- nothing to do
- hopefully next 2 days should be in my favour


13-OCT-2016
- last 2 trading day holidays worked in my favour
- nothing to do today... just sit back and enjoy the MTM profits.
- 8700 put was an intraday trade


14-OCT-2016 - timepass day, stayed out of market


17-OCT-2016
- closed positions in 8800 and 8900 short call
- profit in 8900 call = 300 * (60-4) = Rs.16,200/-
- profit in 8800 call = 300 * (76-9) = Rs.20,100/-
- total profit = Rs.36,300/-... 
 - I am letting go of Rs.4,000/- potential profits had the position been held till expiry

20 comments:

  1. i cant understand this method can u explain it call me @ 9840333304

    ReplyDelete
    Replies
    1. Not possible to call up and explain.

      Google the net for option writing.

      Delete
  2. Means u expect market wont breach 8900 on upside and wont fall below 8700 before expiry.

    Is Rs.45000 required as margin for selling one lot of option?

    May I know ur stoploss, if you dont mind please.

    ReplyDelete
    Replies
    1. I just wrote at equidistant strike prices... I could have written 9000 call and 8600 put also but the premiums were not much.

      I don't know the exact margin... but with 360,000/- I could write the trades

      I don't have any stoploss as I intend holding positions till expiry. But I will create a hedge on 15 min charts or when 8700/ 8900 levels break.

      Delete
    2. Hi KPL sir- What should be the hedge strategy for option writing? How 1% rule will be applicable in option writing? Could you please help sir?

      Delete
    3. How will you hedge your position in case of gap up/down opening? Writing same amount of higher or lower strike price CE/PE?

      Delete
    4. Risk of gaps is there in this trade... no choice.

      Incidentally I have modified the trade... will post update later.

      Delete
  3. That looks like a good short strangle. 8700 - 8900 range very much likely. ATB,

    Regards,

    ReplyDelete
  4. I haven't done hedging of short strangle before. My guess is the risk in strategy is large gap up above 8900 or gap down below 8700 which may result in imperfect hedge and some loss. But interesting strategy.

    ReplyDelete
    Replies
    1. What you are saying is true... a large gap can make things difficult.

      Delete
  5. MARKET IN A RANGE FOR QUITE SOME TIME , SUPPORT AT 8500 AND RES AT 9000, I THINK YOU WILL WIN.
    ALL THE BEST . REGARDS . A.S.JOSHI

    ReplyDelete
  6. Awesome Strategy as markets waiting for the next trigger and earnings season mixed bag so a perfect way of eating up the Option-Premium. Generally last time it took 8 weeks from July to Aug16 for range breakout of 370 pts in levels 8350-8720, so may be this time due to Diwali it could fire up engines for UPSIDE/DOWNSIDE with full force with a BIG GAP Up/Down for Negating/Following Sept-6 weekly DOJI Candle behavior.
    Appreciate your updates of the strategy as and when with description. Could you pls add Timestamp column also in the display of order details list. - Regards PankajM-lotus1810

    ReplyDelete
    Replies
    1. I just need a rangebound day on Monday... next 2 days holidays will mean more time decay in my favour.

      Reg timestamps... I am taking a screenshot of the NET positions/ not the order book.

      Delete
  7. 200 points gap too close for my comfort. I prefer farther OTM options while writing. Of course the premiums are much lower too.

    ReplyDelete
    Replies
    1. See how I have shifted the trade from 5th to 6th of this month.

      But still, the risk of overnight gaps is there.

      Delete
  8. Replies
    1. Thanks but these trades look nice due to some randomness.

      Delete
  9. Yes,ideally the original strangle trade should've stayed intact. But anyway, money is money!

    BTW, for Option traders on your blog I would recommend Sheldon Natenberg's book Option Volatility and Pricing. It's a gem.

    Regards,

    ReplyDelete