Hi
This is Umar
While there are many complex options strategies, there are ultimately only four basic ways to trade in the options market.
You can either buy or sell call options or buy or sell put options.
A short straddle is an options strategy comprised of selling both a call option and a put option with the same strike price and expiration date. It is used when the trader believes the underlying asset will not move significantly higher or lower over the lives of the options contracts. The maximum profit is the amount of premium collected by writing the options. The potential loss can be unlimited, so it is typically a strategy for more advanced traders.
Short straddles allow traders to profit from the lack of movement in the underlying asset, rather than having to place directional bets hoping for a big move either higher or lower.
Premiums are collected when the trade is opened with the goal to let both the put and call expire worthlessly. However, chances that the underlying asset closes exactly at the strike price at the expiration is low.
Particularly when #VIX is very high
Since Covid, we can see Indian markets having high volatility.
We can see #nifty moving 200-300 points in one trading session.
This type of volatility makes it very hard for us to manage short straddle
In this video, we will see how we can adjust a short straddle
We have also #back-tested this strategy so you get an idea how this strategy works.
However we have a strong disclaimer
Please consult your financial adviser before trading in options
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Now let’s see the nifty chart for the month of feb 2021
I am intentionally using this month as we had good amount of volatility on the month of February
Nifty opened at 13700 and closed at 14500,,, High was around 15400
So typically nifty moved around 1700 point
Now that’s good amount of volatility.
We back tested the adjustment strategy in this particular month and let’s see what we got
The strike we used is 13700 Call Which was around 340.00
And 13700 Put which was around 377.00
We deployed this strategy on 1st of feb
At the time of implementing this strategy volatility was very high as the finance budget was due to be delivered the next day
On the next day Finance minister #Nirmalasitaraman delivered her speech
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Normally #optionsellers don’t want to book profit
So they tend to build adjustment like this
This #adjustment works perfectly in trending markets.
This adjustments is deployed when we believe that the market cannot move in one direction for a prolonged time.
At some point in time, the price has to retrace.
These are very complex and complicated strategies that are used by HNI and institutions
This is how HNIs and institutions make money.
But there is a catch
If everybody can make money then there will be no losers right!!!!!!!
Every strategy has a downside.
This strategy also has a downside, when the market doesn’t move we are happy and we will make a #profit,, But if the market moves you are in trouble
Particularly if you deploy this adjustment you will require lots and lots of margin money.
This is where retail traders like you and me struggle
We don’t have access to funds ,
Now you would have understood why 95% retail investors lose money in the market
It is not technical analysis or any other analysis which is going to make you sustain in the market ,,,,,
It is pure money power which is going to help you sustain in this market .
Hope you enjoyed this video
Thanks for watching
This video is knowledge sharing purpose only,
Understand the Market Risk and Consult your Financial Advisor Before Investing.
Негізгі бет Short Straddle Option Strategy II Short Straddle Adjustments
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