When we started this strategy, NIFTY was at 10741. ( Close on June 21, 2018 )
On completion of 9 trading days , we are almost at the same place.
All the movement to go actually nowhere.
For creating the spread following trades were to be taken on June 22, 2018:
BUY NIFTY PUT 10800 @ Rs. 163
SELL NIFTY PUT 10700 @ Rs. 121
SELL NIFTY PUT 10400 @ Rs. 46.50.
Let us see what is the status of these options after NIFTY has moved up by 31 points over 9 trading days. If we wish to close the trades at the current prices ( July 06, 2018 ), the status is:
NIFTY 10800 PUT @ 127. ( Loss Rs. 36.00 )
NIFTY 10700 PUT @ Rs. 87.60 ( Profit Rs. 33.60 )
NIFTY 10400 PUT @ Rs. 26.30 ( Profit Rs. 20.20 )
If we exit now there is a profit of Rs. 17.80 ( 33.60 + 20.20 – 36.00 ).
Not a great profit but then NIFTY has moved slightly up which is the wrong direction for the spread.
Just be watchful if there are sudden down moves in a big way. We need to manage the trade if NIFTY goes near or below 10500.
We do not lose any money if NIFTY stays above 10800 at Expiry.
For more cautious traders, NIFTY 10300 PUT can be bought now for Rs. 17.70. During trading it was available at Rs. 14.80 also. If this PUT is bought at Rs. 17.00, then it adds to our cost but ensures that the maximum loss will not exceed 17 points.
Maximum profit will reduce to ( 100 – 17 ) = 83.
Maximum Profit — 83 points
Maximum Loss — 17 points
Most of the safety first type of traders would happily take this risk reward ratio.
Readers views are invited through comments.