What is short strangle? Why so famous?

What is short strangle? Why so famous?

Short strangle is very famous for nifty and secondly banknifty. It Involves selling options at two points at a distance from Spot Price.

How to select our selling strike price in our strangle?

1. Go for technical analysis and draw resistance/vah(value are high) and support/val(value are low)

Sell strikes at these support and resistance drawn.

 

2.  Go for monthly chart and draw high and low, now draw last few weeks high and low. Now select points of support and resistance using the high and low’s

 

3. Option chain analysis to figure out the sellers perspective of highest OI(active contracts) and change in OI(market participants) ande volume … Read the rest

Trading Breakouts with Stop-Loss Entry Orders

Trading Breakouts with Stop-Loss Entry Orders

For a likely breakout point in any range breakout, you can use a resting stop-loss entry order placed just beyond the breakout level(buffer of 0.0025% that is 0.5 for 200 rs) to get into a position if a break occurs.

Two scenarios

1.To get long for a break to the upside breakout

  • We would leave a stop-loss entry order to buy at a price just above the upper level of the range or pattern (market stop loss) . There can be some slippage with market stop loss. But with limit stop loss the order may not get executed at all if in high momentum.

2. To get short for a breakout at lower end… Read the rest

BankNifty Composition and Weightage 29 October 2021

BankNifty Composition and Weightage 29 October 2021

The NIFTY Bank Index includes the most liquid and significant banking firms in India. It serves as a benchmark for investors and market intermediaries, capturing the capital market performance of Indian banks. The Index includes a maximum of 12 companies that are publicly traded on the National Stock Exchange of India (NSE).
The free float market capitalization approach is used to calculate the NIFTY Bank Index.
The NIFTY Bank Index can be used to benchmark fund portfolios, establish index funds, ETFs, and structured products, among other things.
NIFTY Bank Total Returns Index is a type of index.

Company’s Name     Weight(%)

HDFC Bank Ltd.                                        26.61
ICICI Bank Ltd.                                        22.91
State Bank of India                                 13.82… Read the rest

Option strategies – Synthetic Long ( risk reversal)

What is  Synthetic Long ( risk reversal) Option strategies?

A synthetic long Option strategy is for options trading that is designed to mimic a long stock position. Traders create a synthetic long asset by purchasing at-the-money (ATM) calls and then selling an equivalent number of ATM puts with the same date of expiration.

Synthetic long assets carry an infinite amount of risk, but they also carry an infinite amount of potential return. The synthetic long asset position is a less expensive approach to trade than buying a comparable number of shares of the underlying stock outright. Because the cost of the call options is at least partially offset by the money obtained for selling the put options, it can be … Read the rest

Option Strategies – Synthetic Short (risk conversion)

Option Strategies – Synthetic Short (risk conversion)

The synthetic short stock options strategy consists of simultaneously selling a call option and buying the same number of put options at the same strike price. Both options must be in the same expiration cycle. As the strategy’s name suggests, a synthetic short stock position replicates shorting say 100 shares of stock.

Synthetic Short Stock Strategy Characteristics

 

Synthetic Short Strategy ‘s general characteristics:

Max Profit Potential – it defined by below where the selling and buying the same strike price can result in debit or credit net premium. Breakeven point is simple as explained below

Max Loss Potential: Unlimited

Expiration Breakeven

If the synthetic is entered for a debit premium then breakeven … Read the rest

Regular profit strategies Iron Condor vs Iron Butterfly ?

Regular profit strategies – Iron Condor vs Iron Butterfly ?

The Iron Condor and Iron Butterfly are both very popular for Regular profit / income which is used by many traders. Also next thing to know is these 2 strategies is that they work on Hedging, so you pay less margin. They also have defined max loss and max profit, so you never lose more than what you know you are ready for.

Iron condors and iron butterfly options are both very similar Option Strategies and both are very popular options trading strategies. Both Iron Condor Option strategy and (Short) Iron Butterfly Option strategy (also called iron fly) can profit by selling short positions in the face of low implied … Read the rest

Option Strategies – Iron Butterfly Option Strategy ?

What is the Iron Butterfly Option Strategy ?

Options provide a variety of money-making tactics that cannot be matched with traditional equities, and not all of them are high-risk endeavors. The iron butterfly technique, for example, can provide consistent income while limiting risks and profits.
Because each strategy is named after a flying species like a butterfly or condor, the iron butterfly option strategy approach is part of a collection of option strategies known as “wingspreads.” A bear call spread and a bull put spread with the same expiration date that converge at a middle strike price make up the strategy.

The “body” of the butterfly is formed by a short call and put sold at the middle strike price, … Read the rest

Option Strategies – The Long Straddle Strategy

Options Strategies – The Long Straddle

Number of times times have you been in a situation where you take a trade with great confidence, either long or short, and the market immediately reverses direction after you begin the trade? Your entire strategy, planning, effort, and capital are thrown out the window. I’m sure we’ve all been in a position like this. In fact, this is one of the reasons why most expert traders go beyond standard directional bets and develop systems that are resistant to market volatility. “Market Neutral” or “Delta Neutral” tactics are those whose profitability isn’t entirely dependent on market direction.

Long straddle is perhaps the simplest market neutral strategy to implement. Once implemented, the P&L is not … Read the rest

Option Strategies- what is Iron Condor Strategy

Option Strategies- what is Iron Condor Strategy

These are captivating times we are living in, especially if you are an alternatives trader in India Starting 1st June 2020, NSE’s new margin framework is live, which essentially brings down the margin requirement for the hedged position.

What is a hedged position?

Like riding a bike without carrying a helmet. The risk of market-moving against your position, causing capital erosion is high. However, if you hedge your position, then the danger of losing capital reduces drastically. Now, think about this – if your capital loss is minimal, then it implies that the risk for your broking is also minimum right? Now, if the risk for the broking reduces, it also means the … Read the rest

Option Strategies – How to do “The Long & Short Strangle” ?

Option Strategies – How to do “The Long & Short Strangle” ?

Option Strategies – How to do “The Long & Short Strangle” ?

If you have understood the straddle, then grasp the ‘Strangle’ is quite straightforward. For all practical purposes, the thought method behind the straddle and strangle is quite similar. Strangle is an improvisation over the straddle, mainly to minimize the cost of implementation.

Setup

Nifty is trading at 15921, which would make 15900 the ATM strike.  If you have been to set up the long straddle here, you would be required to buy the 15900 CE and 15900 PE.

The premiums for both these alternatives are 66 and 57 respectively. Net cash outlay = 66 + 57 … Read the rest