Even with this hit ratio supertrend is a clear winner because of using trend following. In the cases when target hits, the profits are big and in cases where stoploss hits, the losses are small. So on an average if we keep on capturing less number of big profits compared to more number of small losses, in the end , the overall portfolio would be in profit over a period of time.
Now just imagine, if we can make a trading system, where we can capture only profit making trades and eliminate the loss making trades, what an invincible system it will be. This trading system works perfectly in nifty as there is good liquidity in different strike prices of options and also in near-far month contracts.
How this works, the delta of one lot nifty is 1 and delta of one lot nifty CE is 0. After executing this, we are delta neutral on this position and as time passes, this delta neutral position will become profitable and we can square off entire position without taking a loss. How this works, the delta of one lot nifty is 1 and delta of one lot nifty PE is 0. After executing this, we are delta neutral on this position and as time passes, this delta neutral position will become profitable and we can square of entire position with out taking a loss.
This has been tried and tested for Nifty only. Kindly first trade in small quantity to master the system before taking huge positions. Basic knowledge of Delta Neutral hedging strategies is required. For any queries on this, I can be reached at meet. My expertise is in option strategies. What if we get further trade signals while we are in delta neutral strategy? Should we ignore them? Then we are not taking advantage of Suertrend!
Can you publish your back testing report i believe you have to hand create report based on strategies executed. Thought process definitely one have to appreciate it.
However to execute this strategy during loss trades and keep continuing with other Signals one need to have adequate amount of margin to catch all the trendy moves in the market. Otherwise skipping the signals and waiting for the losses to turn positive might kill lot of good trades. When we are short and sl hits we sell puts. What about the buy call which comes with the sl? What happens if market dumps more than total value of calls sold?
This is a flawed strategy -- you will end up wiping your capital on a black swan day. Take an example where nifty tanks to from in the above trade.
Your loss is pts -- money made from selling calls I. Not possible to time market without dealer terminal or automation. But we have our position sizing and alternate channels of trading for black swan type of days. Too much margin will be used up if you have keep selling more and more calls are position goes against. How exactly would you delta hedge the position…for example at every hundred point drop in nifty what exactly would you do with the options.
Pls give some specific strikes in the example so that strategy is more clear. What happens if market is choppy and short also gets stopped out? You would have sold puts as stop for that. Do you hold all positions till expiry and keep taking fresh positions or remove the calls if another long trade comes now you have a long future hedged with short calls running.
This strategy is based on supertrend and how to improve the probabilities better in our favour. This is a multi-leg strategy involving future prices of two different month contracts and corressponding options prices, so its not possible to assume things.
This kind of strategies are for specialists only. Your strategy looks interesting. Wont the losses will be more OR as option value decay with time it will eventually covers up? In our example, due to statistics, if we have 10 losing trades in a row every trade, we trade with 1 lot of futures , then one should have at-least 40 lots worth of margin. Some brokers, might offer margin benefit as we are buying futures and selling options. Still, for convenience purpose, lets assume that the broker blocks only 35 lots worth of margin instead of 40 lots worth of margin..
So, to hold these 10 trades and take the next 1 lot futures trade, we need at-least 36 holding 35 and new 1 futures worth margin. They are worried about their risk on each trade. They are focused on money management. They ask if the trade being executed correctly? How much of their total account is at risk? Are the stops in the right place?
Its your choice to publish this comment or not. This is just an idea to think out of the box. Definitely such ideas are welcome to make the traders to think how to control their losses. Though its tough for the common traders to handle such positions one should definitely appreciate the way the author thought. Thanks for responding to my comment. He has tried and tested it, huh? These kind of statements should be avoided in a reputed financial blog like yours and hence the post. More over, author did not think through completely on how one exit from both futures and options.
He just gave a blanket statement that we need to exit when the trade goes into profit. Bottomline -- am just criticizing the blanket statements and an incomplete article. Honestly, the article title would just attract more traffic but of no use to traders esp. What i see i this Delta Neutral can be to control losses in few of the trades which is practically possible for most of the traders. Not necessarily this strategy has to be applied for supertrend but can be applied to avoid any marginal loss in any kind of trading situation while trading derivatives market.
And If the author says he had already tested out already then you should give enough time for him to explain things rather than throwing brickbats at him. I guess from next articles onwards the author might control his excitement and advice him to be more practical from a retail traders perspective. I understand what Delta neutral strategy is. That is exactly why i want the author to try it in live market for 6 months.
Not sure why people are so hung up on avoiding losses. Well, any post that appear in your blog is a representation of the quality of the blog. But, who am i to talk about this? I shared this article in context of supertrend as its very easy for amateur option traders to understand. This is strategy , and as all strategies , the results will vary alongwith market.
Yes i have tried and tested this for last one year before placing this on public domain. I would request you to try this out yourself and you can come up with any practical problems you face, rather than assume hypothetical situations with out trading real time. Come on please give it a try starting on a small scale. Moreover when we do delta neutral , we get margin benefit from exchange also. I have derived this strategy on the basis that supertrend may give losses in straight line. I believe that you have been trading this delta neutral idea for the last 1 year.
Keep doing what you are doing. As long as it works for you, great. But, when you come and post in a public forum, please be ready to answer questions with utmost clarity and to the point. And regarding the quote, it is not a quote.. By the way, have never heard of Bramesh bandari. He must be a pretty important person and probably appearing in tv shows. This is a multi-leg strategy, so you need to trade it, or atleast papertrade it if you are not willing to risk. For such a great trader as you, trading it out must be very easy, as i believe that you might be allocating some risk capital for trying out new strategies.
Can you please share any wonderful strategy that you are successfully trading yourself?? Thomas is a commerce graduate with specialization in accounting and holds MBA degree in finance and Marketing.
He has a diverse experience of six years working at all levels in the field of Equity Brokerage. His core strength is excellent team management and strategic marketing. He is an expert in Technical analysis and has been providing technical education for last six years. His diverse experience and knowledge is helpful to the organization in framing the key strategies and Internal Policies.
He also oversees the compliance and regulatory laws. So, it is hard to believe that you are trading for a living.
There is no sarcasm intended, i seriously wish to know few strategies from a full time trader. In this Case futures are hedged them selves What one should do on expiry? Normally Short Strangles would give money in ranged market and any Immediate wild move in one side would give problem.
As per Strategy one can exit if the whole portfolio once he got profit. Again take today as example any deceive move due to ECB meet on tonight would give series draw down to this portfolio. Usually one should not take short Strangle Just Before any important event.More...