STRANGLE STRATEGY:CASH TIME

A short strangle gives  the obligation to buy the stock at strike price A and the obligation to sell the stock at strike price B if the options are assigned. You are predicting the stock price will remain somewhere between strike A and strike B, and the options you sell will expire worthless.

By selling two options, significantly increase the income you would have achieved from selling a put or a call alone. But that comes at a cost. There is  unlimited risk on the upside and substantial down. This strategy is only for the most advanced traders who like to live dangerously .

There are two break-even points:

·         Strike A minus the net credit received.

·         Strike B plus the net credit received.

PROFITS AND LOSSES IN THE STRATEGY:....

OPTION STRATEGIES PACKAGE

We have posted a sample strategy Nifty strangle strategy  on our blog. If you wish to get more such rocking!!!(5-7)  strategies in a month join our option strategies package. The traders having lack of time but interested in trading will love this package which gives LOW RISK HIGH RETURNS.

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CALCULATION OF PROFIT N LOSS IN OPTION TRADING

While it comes to calculation, there are 2 things we have to learn – how to calculate the break even point of an option and how profits/losses are calculate. Let’s go with an example, nifty to understand better how profits and losses are calculated in options trading. The lot size of nifty is 50 shares in number irrespective of call or put. The profit/loss does not depend on the type of call , expiry or strike price. It directly depends only on premium which trader selects while purchasing the option....

BOOK PROFIT IN NIFTY STRANGLE STRATEGY

 Buy Nifty 5800 call @40 (sold at 88) and Buy Nifty 5700 put @ 76 (sold at 106) in last post. Net cost was  196 now it is 106 ,Book profit of (196-106)*50=4500 in the strategy given in post.

NIFTY SHORT STRANGLE STRATEGY

SELL 5800 Apr call  @ 88

SELL 5700 Apr put @ 108

TOTAL RETURN=(88+108)*50= 9800

LOWER BREAK EVEN POINT=5712

HIGHER BREAK EVEN POINT=5808..

BOOK PROFIT IN IDFC STRANGLE STRATEGY

IDFC STRANGLE STRATEGY given on 1 march, IDFC 160 call given @ 1.6 hope you have  booked  profit near 4.5 (i.e. profit of  3800) yesterday keep put contd… to hold

BOOK PROFIT IN IDFC STRANGLE STRATEGY

IDFC STRANGLE STRATEGY given on 1 march, IDFC 160 call given @ 1.6

 made a high of 3.6 today you can book profit near 4.5, keep put contd… to hold

IDFC STRANGLE STRATEGY

LEG1: BUY IDFC 160 CALL @1.60

LEG2: BUY IDFC 130 PUT @1

COST =2.60        

Total risk=5330

Return=unlimited

Pay off table:

OPTION PLAIN VANILLA V/S SPREAD STRATEGIES

A bull call spread is a type of vertical spread. It contains two calls with the same expiration but different strikes. The strike price of the short call is higher than the strike of the long call, which means this strategy will always require an initial debit. A bear put spread is a type of vertical spread. It consists of buying one put in hopes of profiting from a decline in the underlying stock, and writing another put with the same expiration, but with a lower strike price, as a way to offset some of the cost.

Advantages of strategies......

BOOK PROFIT IN UNITECH BULL CALL SPREAD

Book profit in Unitech bull call spread strategy given on 15 feb 2013.  Unitech 30 call made a high of 2.80 and 32.50 call made a  high of 1.25. Net profit of .55 (Rs 5500) on cost of 1 rupee.  Hope u have booked the profit….