Discussion in ' Advanced Trading Strategies ' started by rajgiri21 , Jul 14, Log in or Sign up. Jul 14, Messages: Dear All, I have been doing some calculations to make a strategy in Nifty and got an idea which i would like to share here and know whether it has any shortfall.. Pls guide me, any constructive criticism is welcome!!! Here goes my thought: Buy Nifty futures for the near month say now Nifty 31Aug Step 2: Sell "in the money" option say CE 31Aug Thats it!!!
Whenever market falls below sell nifty and once it comes back to buy it!! In this way once the contracts expires we will be getting the time premium of points say nifty closes on 31st Aug, sell the futures which will be giving us a profit of points and buy the CE which has a loss of 35 points earning Rs.
We can do the same for 6 times in a year which will give u a profit of 30, p. One more advantage is that when the market goes up u will be credited with the MTM as well!!!
As it looked very simple to me am confused whether i have left any loopholes here!!! Pls guide me if there is any loop holes left!!! One loophole i thought is tat if market goes gap down from to , i might not be able to sell nifty futures , but still i have points on which i can lose 50points and still earn decent profit and a gap down over points is rare Thanks in advance!!!
Dec 4, Messages: Sep 9, Messages: Yout trading style is similar not same to linkon7's. Aug 1, Messages: Dear rajgiri21 The name of the strategy: Risk capped and reward capped. What you now mention is to increase your reward through trading the future beside the short itm call.
Can be done, no question about that. You also mentioned one loophole which are the gaps. Linkon7 is a future trader and sits in front of his terminal. So he not trades the future above or under a fixed level. In that way he is in control of the strategy. The way you want to trade the strategy can look a bit different in reality: The option must not behave one to one to the future.
I do not mean the delta, I speak about the volatility. Your calculation is only done on the basis of the delta factor but in reality the vola factor will or can hurt you. If market gaps down, vola will jump up and that will increase the price of the long and short options. This increase can be heavy. So, there is no guarantee of profit atoll in case you run into a down trend or into an uptrend. Ok, you can say in case of a down trend: Never mind, my future got stopped out and now I wait until the short calls expires.
Can you stand it? At the same time there will be also no kind of trading any future. In case of an uptrend: You have to be able to sell your short call at a certain time. Now it depends how much you have to pay for the call and the different from the short to the long call price is what the future has to bring.
If now market turns a bit later and suddenly jumps down again, you have to be a clever trader to manage it. Short call was bought back and future now is stooped out through the stop loss. If you implement such a covered call, be sure that market is in sideway mode and do not trade the future unless you are in control of the situation like Linkon7 is.
DanPickUp , Jul 14, VJAY , techtrader2 , Reggie and 5 others like this. Nov 3, Messages: Idhar ich, aur kidhar? Hello Dan, it seems to me that he will make a loss only if NF expire below on 31Aug, in all other eventualities it may be a profitable trade. Do it once in live trading and then let us discuss again about the level. Do it now at present time! You should know that trades, calculated on paper always look best.
No live filled included and no special event included, even normal day trading. No trading psychology, no nothing, Just numbers. I have meet people in my live which came to me with excel calculations and explained me the success the systems show they have in mind. If that example would work the way it is presented, then calculate once the numbers which would made with it. It is quit a big number. If I now come and tell, that this is my yearly average income for the fund I will open, would you give me your money?
If yes, why would it be me? Because I am the best as not even one ore some other body before tried to trade such strategies and now I come up with the holy grail. That is no personal critic to the poster of the idea. Why do you think such hedge strategies are made the way they are and not the way some traders want to change or improve them? Changing and improving such strategies is for absolute pros and how it is done is not written any where in the net.
Believe me about that. VJAY , timepass , rajgiri21 and 2 others like this. Apr 12, Messages: You must log in or sign up to reply here. Learning Technical Analysis silverlining , Nov 6, , in forum: My Ichimoku Charts for Learning niftyoption , Oct 24, , in forum: Share This Page Tweet. Your name or email address: Do you already have an account? No, create an account now. Yes, my password is:More...