OPTION TRADING STRATEGY

BOOK PROFIT IN NIFTY STRANGLE

2012-02-16T19:50:00.000-08:00

Nifty Strangle strategy rocks !!!! Book profit ...Book nifty 5400 call @ 200
Total cost Rs 140.

NIFTY OPTION LONG STRANGLE STRATEGY

2012-02-03T04:55:00.000-08:00

OPTION CALL PUT STRATEGY

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 5400 CALL @ 70

LEG2: BUY NIFTY 5000 PUT @ 70

COST =140

RISK PER LOT = 7000

RETURN = UNLIMITED

Pay off table

Closing price	Lot size	trading cost	Total Investment	Return from call	return from put	Payoff
4800	50		7000	0	10000	3000
4825	50		7000	0	8750	1750
4850	50		7000	0	7500	500
4875	50		7000	0	6250	-750
4900	50		7000	0	5000	-2000
4925	50		7000	0	3750	-3250
4950	50		7000	0	2500	-4500
4975	50		7000	0	1250	-5750
5000	50		7000	0	0	-7000
5025	50		7000	1250	0	-5750
5050	50		7000	2500	0	-4500
5075	50		7000	3750	0	-3250
5100	50		7000	5000	0	-2000
5125	50		7000	6250	0	-750
5150	50		7000	7500	0	500
5175	50		7000	8750	0	1750
5200	50		7000	10000	0	3000
5225	50		7000	11250	0	4250
5250	50		7000	12500	0	5500
5275	50		7000	13750	0	6750
5300	50		7000	15000	0	8000
5325	50		7000	16250	0	9250
5350	50		7000	17500	0	10500
5375	50		7000	18750	0	11750
5400	50		7000	20000	0	13000
5425	50		7000	21250	0	14250
5450	50		7000	22500	0	15500
5475	50		7000	23750	0	16750
5500	50		7000	25000	0	18000
5525	50		7000	26250	0	19250
5550	50		7000	27500	0	20500
5575	50		7000	28750	0	21750
5600	50		7000	30000	0	23000

6 Golden Rules For Option Trading

2012-01-28T02:09:00.000-08:00

6 Golden Rules For Option (call put) Trading

1. Clear Vision Of Target

We must always remember that reward and risk go hand-in-hand in trading and that we cannot expect to achieve high returns without planning for high risk (i.e. draw-downs). Your objectives and goals will be very specific to you, but they must have the following characteristics to be useful:

Be measurable
Be achievable
Be worthwhile
Be positive

2. Discipline

This is most important part of option trading. In order to realize the full potential of your trading systems it is critical that you take every trading entry, adjust every stop, and close out every trade as and when your system says you should do

3. Never add to a losing trade

Averaging is Options could prove to be very dangerous as there is always time factor.

4. Don’t take too much risk

Risk associated in every Option call should be very low and well calculated before entering any trade.

5. Minimize all trading business costs

You should select your broker carefully and should be aware of all the cost associated with each trade.

6. Be well educated
Keep a track of borad meetings ,any possible major event in market Etc because they create huge effect on Option pricing

PROFIT BOOKED IN IFCI OPTION STRATEGY

2012-01-28T01:34:00.000-08:00

IFCI OPTION STRATEGY UPDATE

Profit of 5200 @ investment of 12800

http://optioncallputtradingtips.blogspot.com/2012/01/ifci-strangle-strategy.html

What is Sell Strangle Option Strategy ?

2012-01-22T22:23:00.000-08:00

Sell Strangle Option Strategy

When volatility is very high, and the market has just made a dramatic move and you are expecting it to consolidate and take some time to digest its gains, you might consider selling a strangle.
This strategy involves selling an out-of-the-money call option and an out-of-the-money put option on the same asset with the same expiration date. This strategy differs from the Sell Straddle strategy because the options are not at the same strike price. This provides a different profit/loss curve that is worth checking out.
This gives you a known, but limited gain, but does expose you to unlimited risk, so you must be careful with this position and be confident of your assumptions. It is not suitable for all investors.
With this strategy, your gain is composed of the premium you received for the call and the put, less the commissions.
When we sell a Strangle, the put and call that we sell are normally on over-priced options that are out-the- money. We consider doing this after a dramatic move in the market, when we are expecting it to consolidate the move and digest its gains before moving again. Because of the dramatic move that was made, volatility is high, making the options we sell very expensive. Then as the market consolidates, volatility decreases and lowers the price of the options. Decay also works in our favor with this position.
But be ready to buy back one of the options if there is any indication that the market will resume its trend or reverse direction. If it looks like the market will trend up, buy back the call; if it looks like the market will trend down, buy back the put.
It is also important to cover risks and caveats of this strategy.
The risk of this position is unlimited so you must be very careful. Remember that the commission you pay for this position will be higher because you are initiating two related option transactions.
It is important to analyze your expectations for the underlying asset and for the market before selecting your strategy.

WHAT IS OPTION (CALL N PUT) ?

2012-01-09T02:58:00.000-08:00

What is an option?

An option contract gives the buyer the right, but not the obligation to buy/sell an underlying asset at a pre-determined price on or before a specified time. The option buyer acquires a right, while the option seller takes on an obligation. It is the buyer’s prerogative to exercise the acquired right. If and when the right is exercised, the seller has to honour it. The underlying asset for option contracts may be stocks, indices, commodity futures, currency or interest rates

What are the types of options?

Broadly speaking, options can be classified as ‘call’ options and ‘put’ options. When you buy a ‘call’ option, on a stock, you acquire a right to buy the stock. And when you buy a ‘put’ option, you acquire a right to sell the stock. You can also sell a ‘call’ option, in which, you will acquire an obligation to deliver the stock....

And when you sell a ‘put’ option, you acquire an obligation to buy the stock.

What do you understand by the term option premium?

Option premium is the consideration paid upfront by the option holder (buyer of the option) to the option writer (seller of the option). The option holder gets the right to buy / sell the underlying.

What is the strike price or the exercise price of the option?

The right or obligation to buy or sell the underlying asset is always at a pre-decided price known as the ‘strike price’ or ‘exercise price’, which is linked to the prevailing price of the underlying asset in the cash market. Usually, option contracts are available on the underlying asset on various strike prices (generally, five or more)-divided equally on either side of its spot price.

How does an American option differ from a European option?

In ‘European’ options, a buyer can exercise his option...

only on the expiration date, that is, the last day of the contract tenure. Whereas in ‘American’ options, a buyer can exercise his option any day on or before the expiration date.In the Indian equity market context, index options are European style, while stock options are usually American in nature.

How do options differ from futures?

In futures, both the buyer and the seller are obligated to buy and sell, respectively, the underlying asset-the quid pro quo relationship. In case of options, however, the buyer has the right, but is not obliged to exercise it. Effectively, while buyers and sellers face a linear payoff profile in futures, it’s not so in the case of options. An option buyer's upside potential is unlimited,while his losses are limited to the premium paid. For the option seller, on the other hand,his maximum profits are limited to the premium received, while his loss potential is unlimited.

IFCI STRANGLE STRATEGY

2012-01-02T03:58:00.000-08:00

OPTION CALL PUT STRATEGY

IFCI is extremely volatile these days. Annulized volatility of IFCI is above 91.We suggest strangle strategy in IFCI to make most of this situation.

IFCI STRANGLE STRATEGY

LEG1: BUY IFCI 25 CALL @ .75

LEG2: BUY IFCI 20 PUT @ .85

COST =12800

RISK PER LOT = (.75+.85)*80000=12800

RETURN = UNLIMITED

LOWER BREAK EVEN POINT :18

HIGHER BREAK EVEN POINT 27

Pay off table

Closing price	Lot size	trading cost	Total Investment	Return from call	return from put	Payoff
17	8000		12800	0	24000	11200
17.5	8000		12800	0	20000	7200
18	8000		12800	0	16000	3200
18.5	8000		12800	0	12000	-800
19	8000		12800	0	8000	-4800
19.5	8000		12800	0	4000	-8800
20	8000		12800	0	0	-12800
20.5	8000		12800	0	0	-12800
21	8000		12800	0	0	-12800
21.5	8000		12800	0	0	-12800
22	8000		12800	0	0	-12800
22.5	8000		12800	0	0	-12800
23	8000		12800	0	0	-12800
23.5	8000		12800	0	0	-12800
24	8000		12800	0	0	-12800
24.5	8000		12800	0	0	-12800
25	8000		12800	0	0	-12800
25.5	8000		12800	4000	0	-8800
26	8000		12800	8000	0	-4800
26.5	8000		12800	12000	0	-800
27	8000		12800	16000	0	3200
27.5	8000		12800	20000	0	7200
28	8000		12800	24000	0	11200
28.5	8000		12800	28000	0	15200
29	8000		12800	32000	0	19200
29.5	8000		12800	36000	0	23200
30	8000		12800	40000	0	27200
30.5	8000		12800	44000	0	31200
31	8000		12800	48000	0	35200
31.5	8000		12800	52000	0	39200

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.

2011-12-22T04:00:00.000-08:00

DLF BUTTERFLY STRATEGY

DLF is highly volatile stock but as expiry in due in almosta week. Volatility will show sharp decline in coming week. DLF butterflystrategyis an attempt to encash this volatility.

Butterfly strategy have 3 legs and four option contractare 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 profitgenerated 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 theinvestor thinks that the underlying stockwill not rise or fall much by expiration. Using calls, the long butterfly canbe constructed by buying one lower striking in-the-money call, writing two at-the-money callsand buying another higher striking out-of-the-money call. A resulting netdebit is taken to enter the trade

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