Nifty Option Trade No: 20220211N01 (complete)

Here is a Nifty option trade that I initiated on 11-Feb for the rest of the month. All new trades are usually initiated around the closure of the day, around 3:20PM.

View:

1. Overall view for the rest of the month of February is bearish and Nifty is expected to range between 16400 and 18000.
2. We will have high volatility going forward and huge gap up and gap down is a possibility, particularly over the weekends.
3. Though the trade is taken with two weeks view but depending on the market directions, we may close the trade before hand. Will keep on providing updates here as well as in telegram channel as long as the trade is live.

The Trade:

It is covering the estimated range with a probability of profit of over 80%. The margin required should be double than what is shown here given that we might sell/buy more calls or puts going forward if market shows sharper movement in one direction.

Possible risks and mitigation:

1. It is a Vega negative trade and this means we will take some temporary hit if vix goes up unidirectionally from its current level of 18.8. Do not see it going past 21 and we are covered up to that. To know how, see this range calculation based on vix given the number of days to expiry.
2. It is the season of big gap up and gap down. So, temporarily such a strategy may show some M2M loss but that should settle down as and when market retraces.
3. Another way to deal big gap ups and downs on weekends is to take 300/400 points away weekly put on Friday closing time. This will lose some nominal value on Monday morning in case market opens gap up or flat. This is the price you can pay for peaceful weekend.
4. What works for us here is that we are just 10 trading days away from monthly expiry. So, theta should help us more.

Closing condition:

1. We will aim for 50% of maximum possible profit without taking no more than 25% of maximum profit as a risk on daily closing basis. In simple terms, we will close the trade when we get 10K or we lose 5K any day around 3:20PM.

Lets see how it goes. Will keep it updated here and in telegram channel against the trade number.

Update on 15-Feb, 3:30PM:

Even after two days of hectic moves in market, overall, it is still in the same position. Vix increased on 14th and then fell today. We will continue with it without any change.

Update on 16-Feb, 3:30PM:

We are in small profit now. Still a week to expiry. If any day, we get a directional market, we can sell options from the other side to get some intra-day gains keeping this trade as baseline. Those modifications will not be shown here but will be mentioned in the telegram channel.

Update on 17-Feb, 3:30PM:

Absolutely no change in the position. Little gains from theta decay is being compensated by rising vix. This is still good for any strategy. Finally, as the days pass by, theta decay will be more severe, thereby giving us profit. Expecting a rather negative end of week on 18th Feb.

Update on 18-Feb, 3:30PM:

We are already in more than 1% profit and we will continue with some changes on 21-Feb. This is where we stand now

This is the proposed change that will be done around 10AM on 21st Feb

1. Book sold 18000 CE and sell 2 lots of 17700 CE (at market rate).

Update on 21-Feb, 3:30PM:

At morning on 21-Feb, we booked profit in 18000 CE and sold 17550 CE two lots. This is where we stand at day end

We will continue with this trade as the market is moving as per our initial view when we took the trade. A further slide in the market is expected on 22-Feb. If we see a close below 17000, then we will sell 17300 CE after booking profit in 17550 CE.

Note: In these scenarios when we know that market is struggling to maintain higher levels, we can always sell extra lot of calls and that will ask for higher margin. We are not doing it here and just continuing with our current trade as long as market is agreeing to our view.

Update on 22-Feb, 10AM:

Market has good downfall and so, we booked profit in 17550 CE and sold two lots of 17350CE. We already have sizeable profit and we will carry on the trade unless we proved wrong.

Update on 22-Feb, 3PM:

Some reduction in overall profit given that market has moved up during the day after a gap down start. We will continue with the expectation that even if the market remains a bullish undertone every time it goes down, it is difficult for it to touch or surpass 17424 in next two days.

Update on 23-Feb, 11AM:

Booked profit in 16400 PE and 16600 PE. Almost nothing left in them. Sold two more lots of 16800PE. Not a bad bet looking at only two days left to expiry.

Update on 23-Feb, 3:30 PM:

We have closed the trade with more than 10K profit. This is around half of what we can possibly get out of the trade.