Option Strategy by Sunil Rai


posted by sunilrai on Fri May 31, 2013 05:35 pm

#1

But follow a one strategy u sleep well no need to watch  where market gone . u know ur risk & reward at particular expiry date/ number of days u make strategy . I am very thankful to NP admin who give this opportunity to learn more things regarding  trading  by share the knowledge among the NPians. If any body help us for making strategy welcome in  this new thread with following points-

Characteristics of the strategy :-

A. Market expectation :-

B.  Profit & loss analysis

Maximum profit  :-    

posted by sunilrai on Fri May 31, 2013 05:38 pm

#2
 

 

 

posted by sunilrai on Fri May 31, 2013 05:43 pm

#3

The  mathematics of hedging is being misunderstood by many traders . use clause save your capital & know capital 

risk before entering a trade . this is key point of any strategy . adopting a new technique in trade is bit difficult but 

if it saves your principle capital as well as yields profit than of course it is adoptable. Mainly suitable to who know 

the market well but does not spend time on watching market live.

But follow a one strategy u sleep well no need to watch  where market gone . u know ur risk & reward at particular expiry date/ number of days u make strategy . I am very thankful to NP admin who give this opportunity to learn more things regarding  trading  by share the knowledge among the NPians. If any body help us for making strategy welcome in  this new thread with following points-

Characteristics of the strategy :-

A. Market expectation :-

  •                   B.  Profit & loss analysis

Break  even point     

Maximum loss    :-          

Maximum profit  :- 


posted by sunilrai on Fri May 31, 2013 06:40 pm

#4

Sell ce & pe of 6000 , buy 2 lot 6200 ce, buy 5 lot 5800 pe rate as per market opening , If gap dn or up not enter or adjust the strategy   

Characteristics of the strategy :-This strategy for 10-20 days mainly or u get profit max near about 5800  ( 300 points) based on IV calculation  IV near about 18% between these days if it is must fall below 10% exit , if market goes up side it protect your money

A. Market expectation :- bearish with consolidation between 6100-5800,

 Break  even point  no break even point it gives both protection real & time decay  value 

Maximum loss  :- Mkt  closing at 5800 or 6200 (265 points)
Maximum profit  :-  unlimited

 

 

posted by sunilrai on Mon Jun 03, 2013 11:27 am

#5

Sell ce&pe 6000@  98&111, buy 5 lots 5800pe @ 43  buy 2 lots 6200ce @  29.6  at 10 am

posted by sunilrai on Wed Jun 05, 2013 09:36 am

#6

safe player book profit 40 points here

posted by saamuu on Wed Jun 05, 2013 09:39 am

#7

 good call sunilrai.one request instead of giving 4 positions..make 2 that will be traded by all

posted by sunilrai on Wed Jun 05, 2013 01:52 pm

#8

Thanks for suggestion, i try my best 

posted by sunilrai on Tue Jun 11, 2013 10:06 am

#9

safe player book profit 70 points here 

posted by sunilrai on Tue Jun 11, 2013 12:02 pm

#10

book full profit 6000 Ce @ 26 pe @ 220 5800 pe @ 94 6200ce @ 7  Get Total point 238 

posted by sunilrai on Tue Jun 11, 2013 12:07 pm

#11

Take new Delta neutral strategy Buy future 5868 buy 5600 put 2lot @ 30 

posted by sunilrai on Tue Jun 11, 2013 12:23 pm

#12

Characteristics of the strategy :-Delta of future is one & pe 5600 taking near about 0.3  so for neutral strategy   get 3 lots of 5600pe 

A. Market expectation :-Bullish at expiry near 6000

slightly mistyping get 3 lots instead of 2 lots for so add one lot @ 27 for avoiding of  losses 

posted by sunilrai on Tue Jun 11, 2013 12:56 pm

#13

my rates as per strategy future5818 & put 5600 @28

posted by sunilrai on Fri Jun 28, 2013 06:50 pm

#14

loss in this strategy 220 points in last day of expiry , i am sorry to say when i am travelling i exit 5600 pe 2 lots @ 80/- i can't make updated this because net slow problem , my net loss 60 points but thing to remember in this lession or drawback of this strategy:-

1. I have made this strategy in mid of month, this is usually meant for beginning of new month 

2. can't go through EOD of expiry book profit or loss before expiry

3. Last & final for safe ur money choose atleast  four position not in two ,to get time decay also

posted by sunilrai on Fri Jun 28, 2013 06:56 pm

#15

loss in this strategy 220 points in last day of expiry , i am sorry to say when i am travelling i exit 5600 pe 2 lots @ 80/- i can't make updated this because net slow problem , my net loss 60 points but thing to remember in this lession or drawback of this strategy:-

1. I have made this strategy in mid of month, this is usually meant for beginning of new month 

2. can't go through EOD of expiry book profit or loss before expiry

3. Last & final for safe ur money choose atleast  four position not in two ,to get profit in time decay.  

I am also invite to write drawbacks of Delta neutral Strategy in this forum so avoid  this type of strategy took place at wrong time , Thank You 

posted by sunilrai on Sun Jun 30, 2013 09:34 pm

#16

some more information regarding Delta & Gamma

Delta

The delta of an option is defined as the rate of change of option price with respect to the price of underlying equity/asset. As example, delta of reliance call option (Rs.860 Strike) is 0.35 which means if the stock price goes up by Rs.10 then option price will tend to go up by Rs.3.5. If you have one lot (250 options) of thse reliance options, then delta of your position is 250x0.35 = 87.5.

You can use delta to do hedging which is also called as delta-hedging. Suppose you have sold one lot of above mentioned reliance options. Then delta of your position is -87.5. Now you lose money if stock goes up. Delta of a stock is 1. So if you buy 87.5 (~88) stocks of reliance. Then delta of your overall position becomes zero and position is delta neutral. Now your option position is hedged.

It is important to relaize that as delta changes, your position remains delta hedged for only a relatively short period of time. The hedge has to be adjusted periodically. This is known as rebalancing. This is also known as dynamic hedging. If you don't rebalance then its called as static hedging or hedge-and-forget.

Delta decreases as strike price of option increases and it increases with increasing time to expiry. Delta of a long call option is positive and delta of a long put option is negative. 

posted by sunilrai on Sun Jun 30, 2013 09:36 pm

#17

Gamma

The gamma of an option is the rate of change of option delta with respect to the price of the underlying asset. It is the second partial derivative of option price with respect to asset price.

When you are doing dynamic hedging then rebalancing to keep the portfolio delta neutral need to be made infrequently.

In the example above, gamma is 0.0092 which means when stock price changes by Rs.1 then delta of option changes by 0.0092. 

posted by sunilrai on Tue Jul 02, 2013 11:18 am

#18

sell 5800 ce & pe @145 &72, buy 3 lots each 6000ce@48  & 5700 pe @44   total cost 59 points

posted by sunilrai on Wed Jul 03, 2013 01:15 pm

#19

Cover 5800 ce 88 & sell 5900 ce 48 

posted by sunilrai on Sat Jul 06, 2013 09:08 am

#20

Butterflies

Where vertical spreads require you to have an opinion just on direction, a butterfly requires more precision because, not only do you have to have an opinion on direction, but also a target price. Essentially, a butterfly is a combination of a vertical bull spread with a vertical bear spread using either all calls or all puts. “The way a butterfly is formed is by buying an in-the-money and an out-of-the-money call or put, and then selling two calls or puts at the middle strike,” which is your price target, Burgoyne says.

One reason a trader may use a butterfly over a vertical spread is because it is usually cheaper, Kearney says, because you are selling two options. This changes the risk/reward ratio.

Looking again at Kearney’s $63 stock, if we think it will be at $70 at expiration, a butterfly could make a lot of sense. To put it on, we again buy the 60-70 vertical bull call spread by buying an in-the-money 60 call and selling an out-of-the-money 70 call, but we then add a 70-80 vertical bear call spread by selling a second out-of-the-money 70 call and buying an out-of-the-money 80 call. 

In this example, our reward is maximized if the stock settles at $70 on expiration, in which case our 60 call is 10 points in-the-money and the other three calls all expire worthless. Even if it doesn’t settle at $70, as long as the stock increased in value, our butterfly still could be profitable within a range of prices. If the stock either stagnates or only rises a little, or if it takes off and completely overshoots our $70 target, our loss is limited to the cost of the butterfly because of the wings on either side. “The risk/reward on a butterfly usually is very good,” Kearney says. “Once again, though, we have four commissions entering the trade and two to four on the way out, so it is commission-intensive.” 



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