My Operaeasy options
Tuesday, September 20, 2011 1:25:54 PM
easy options
get rich quick
Just like there is many a method to do fishing from a deep and wide ocean, stock market is a deep and wide ocean there are many methods by which you can profit from it. And one of the methods for the experienced once are the options trading.
Calendar spread basically is selling one month and buying another month, Nifty Index is a good one to trade because of the liquidity and the various strikes available.
Lets buy a 5400 Nov call, it was recently trading at 44 so imagine if we buy that and our money layout is very small around Rs.2200. Now to protect against the downside as per the theory one should sell a Oct call of strike 5400, but the problem is it never comes near in covering the amount, say we might be able to sell it for rs15 or rs 12 etc, so do not go for that instead lets sell 5300 call we might get it around rs 37 so that somewhat decently covers our downside with minimum risk of around 10 points.
Lets see how this strategy pans out, if we enter the position in mid September and when spot nifty trading 4950.
out strategy is in short
BUY Nov 5400 call for 44
Sell Oct 5300 call for 37
Outcome scenario I.
If the nifty falls down all of a sudden our sold call will be immediately in profit and we can fully book profit or when you feel that it wont go further down. If nifty goes down slowly then also we are benefited we can book profits in the sold call and you have two months time to wait for the other buy to come into profit. Or to say in another way you have net long position in the market with nil or very low capital outlay.
Outcome scenario II
If the market goes up slowly that is an ideal situation for us because our sold call which is near month will be keep on loosing its value or coming into profit for us and the buy call will be gaining because its the further month and because the market is going up. The only tricky situation is if the market runs up too fast, then we will have to exit the sold call and then sell a further up strike.
I think this is a simple and profitable strategy to operate especially when the market is oversold and when the sentiments are very weak and negative.
get rich quick
Just like there is many a method to do fishing from a deep and wide ocean, stock market is a deep and wide ocean there are many methods by which you can profit from it. And one of the methods for the experienced once are the options trading.
Calendar spread basically is selling one month and buying another month, Nifty Index is a good one to trade because of the liquidity and the various strikes available.
Lets buy a 5400 Nov call, it was recently trading at 44 so imagine if we buy that and our money layout is very small around Rs.2200. Now to protect against the downside as per the theory one should sell a Oct call of strike 5400, but the problem is it never comes near in covering the amount, say we might be able to sell it for rs15 or rs 12 etc, so do not go for that instead lets sell 5300 call we might get it around rs 37 so that somewhat decently covers our downside with minimum risk of around 10 points.
Lets see how this strategy pans out, if we enter the position in mid September and when spot nifty trading 4950.
out strategy is in short
BUY Nov 5400 call for 44
Sell Oct 5300 call for 37
Outcome scenario I.
If the nifty falls down all of a sudden our sold call will be immediately in profit and we can fully book profit or when you feel that it wont go further down. If nifty goes down slowly then also we are benefited we can book profits in the sold call and you have two months time to wait for the other buy to come into profit. Or to say in another way you have net long position in the market with nil or very low capital outlay.
Outcome scenario II
If the market goes up slowly that is an ideal situation for us because our sold call which is near month will be keep on loosing its value or coming into profit for us and the buy call will be gaining because its the further month and because the market is going up. The only tricky situation is if the market runs up too fast, then we will have to exit the sold call and then sell a further up strike.
I think this is a simple and profitable strategy to operate especially when the market is oversold and when the sentiments are very weak and negative.
