NIFTY ended up at 11018 on Friday, July 13, 2018.
Readers would recall that when the strategy was set up NIFTY was below 10800. NIFTY 10800 PUT was an ITM Put.
NIFTY has come up from 10741 to 11018 in these 14 days.
This means we were wrong about the NIFTY direction.
Strategy would have made money if NIFTY stayed below 10800 but above 10300. That case does not seem very likely now.
Let us see how the trades are performing.
Our prices at the time of entering the trades:
NIFTY 10800 PUT Bought — Rs. 163
NIFTY 10700 PUT Sold ——- Rs. 141
NIFTY 10400 PUT Sold ——- Rs. 46.50
Prices on July 13 close were :
NIFTY 10800 PUT —- Rs. 26.95
NIFTY 10700 PUT —- Rs. 18.75
NIFTY 10400 PUT —- Rs. 8.80
Profit/ Loss :
Put 10800 —- (-) Rs. 136.05
Put 10700 —– (+) Rs. 122.25
Put 10400 —– (+) Rs. 37.70
Profit — 122.25 + 37.70 – 136.05 = Rs. 23.90
NIFTY has moved completely in the opposite direction and by a significant margin.
To see some profit in the right direction, NIFTY will have to move down by more than 300 points over next 9 trading days. It may happen or it may not happen.
People who trade strategies do not look for big profits. Their main aim is to get consistent profits even if small but to minimize the loss.
So an exit can be made by booking a profit of 23-25 points or whatever the market gives on Monday ( July 16 ) morning and enter the same strategy for August Expiry.
Buy 11100 NIFTY AUGUST PUT — Rs. 199
Sell 11000 NIFTY AUGUST PUT — Rs. 155
Sell 10700 NIFTY AUGUST PUT — Rs. 68
Positive Cash Flow while setting up : Rs. 24.
If we wrong again and NIFTY ends up higher than 11100 on August Expiry, we still get a profit of Rs. 24.
We have to some trade management when NIFTY shows signs of going below 10800.
Disclaimer: This post and examples are for teaching purpose only and are not meant as advice/suggestion to trade in these stocks. Trading in Futures and Options can lead to big losses and should be done with appropriate knowledge and advice only. Mentioning the stocks here does not imply that I have a trading position or likely to take a trade in these stocks.
Nathan July 15, 2018 at 11:19 am
Good strategy to generate consistent cash flow with capital protection.Reply
Most suitable for those with low risk profile.
When the market moves lower, trade management become necessary.
Hope later, Master may propose to initiate similar trades with CALLs also to push away the break even level.
Any trader with good capital will love to get consistent returns with low risk.
Thanks a lot, Master.