Thursday 22 December 2011


DLF BUTTERFLY STRATEGY
DLF is highly volatile stock but as expiry in due in almost a week. Volatility will show sharp decline in coming week. DLF butterfly strategyis an attempt to encash this volatility.
Butterfly strategy have 3 legs and four option contract are involved.
BUY DLF 190 CALL @ 12
SELL TWO DLF 200 CALL @ 5.3
BUY DLF 210 CALL @ 1.90
TOTAL RISK 3300
MAX PROFIT 6700
Maximum profit generated when DLF expired @ 200
LOWER BREAK EVEN POINT : 193
HIGHER BREAK EVEN POINT: 207
To get more option trading calls CLICK HERE

PAY OFF TABLE
Closing price
Lot size
Total Investment
Return from call
loss from II call
return from
gross return
net return
184
1000
3300
0
0
0
0
-3300
186
1000
3300
0
0
0
0
-3300
188
1000
3300
0
0
0
0
-3300
190
1000
3300
0
0
0
0
-3300
192
1000
3300
2000
0
0
2000
-1300
194
1000
3300
4000
0
0
4000
700
196
1000
3300
6000
0
0
6000
2700
198
1000
3300
8000
0
0
8000
4700
200
1000
3300
10000
0
0
10000
6700
202
1000
3300
12000
4000
0
8000
4700
204
1000
3300
14000
8000
0
6000
2700
206
1000
3300
16000
12000
0
4000
700
208
1000
3300
18000
16000
0
2000
-1300
210
1000
3300
20000
20000
0
0
-3300
212
1000
3300
22000
24000
2000
0
-3300
214
1000
3300
24000
28000
4000
0
-3300












BUTTERFLY STRATEGY SYNOPSIS
 Long butterfly spreads are entered when the investor thinks that the underlying stock will not rise or fall much by expiration. Using calls, the long butterfly can be constructed by buying one lower striking in-the-money call, writing two at-the-money calls and buying another higher striking out-of-the-money call. A resulting net debit is taken to enter the trade
 JRNHXGQWAB7A
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Thursday 15 December 2011

NIFTY STRANGLE STRATEGY

OPTION CALL PUT STRATEGY




NIFTY is extremely volatile these days.On account of RBI policy this volatility can be to its peak . further on account of global turmoil We expect this volatility to continue. To encash this volatility we suggest u strangle strategy in nifty.



The long strangle, also known as buy strangle or simply "strangle", is a neutral strategy in options trading that involve the simultaneous buying of a slightly out-of-the-money put and a slightly out-of-the-money call of the same underlying stock and expiration date.



NIFTY STRANGLE STRATEGY



LEG1: BUY NIFTY 4900 CALL @ 65

LEG2: BUY NIFTY 4700 PUT @ 65

COST =145

RISK PER LOT = (65+65)*50=6550

RETURN = UNLIMITED





Pay off table




Call Option Price
Strike Price
PUT Option Price
Closing price
Total Investment
Return from call
return from put
Payoff
65
4600
65
3900
6500
0
35000
28500
65
4600
65
3950
6500
0
32500
26000
65
4600
65
4000
6500
0
30000
23500
65
4600
65
4050
6500
0
27500
21000
65
4600
65
4100
6500
0
25000
18500
65
4600
65
4150
6500
0
22500
16000
65
4600
65
4200
6500
0
20000
13500
65
4600
65
4250
6500
0
17500
11000
65
4600
65
4300
6500
0
15000
8500
65
4600
65
4350
6500
0
12500
6000
65
4600
65
4400
6500
0
10000
3500
65
4600
65
4450
6500
0
7500
1000
65
4600
65
4500
6500
0
5000
-1500
65
4600
65
4550
6500
0
2500
-4000
65
4600
65
4600
6500
0
0
-6500
65
4600
65
4650
6500
0
0
-6500
65
4600
65
4700
6500
0
0
-6500
65
4600
65
4750
6500
0
0
-6500
65
4600
65
4800
6500
0
0
-6500
65
4600
65
4850
6500
2500
0
-4000
65
4600
65
4900
6500
5000
0
-1500
65
4600
65
4950
6500
7500
0
1000
65
4600
65
5000
6500
10000
0
3500
65
4600
65
5050
6500
12500
0
6000
65
4600
65
5100
6500
15000
0
8500
65
4600
65
5150
6500
17500
0
11000
65
4600
65
5200
6500
20000
0
13500
65
4600
65
5250
6500
22500
0
16000
65
4600
65
5300
6500
25000
0
18500
65
4600
65
5350
6500
27500
0
21000
65
4600
65
5400
6500
30000
0
23500








The long options strangle is an unlimited profit, limited risk strategy that is taken when the options trader thinks that the underlying stock will experience significant volatility in the near term. Long strangles are debit spreads as a net debit is taken to enter the trade.