Look at a very simple strategy with NIFTY options.

Setting Up:

The prices are the last traded prices on June 12, 2020. Actual prices will vary slightly on June 15 while setting up.

Buy NIFTY PUT 10000 — 1 lot — @ Rs. 430

Sell NIFTY PUT 9900 —– 1 lot — @ Rs. 376

Sell NIFTY PUT 9000 —– 1 lot —- @ Rs. 125

Net Credit = 376 + 125 – 430 = Rs. 71

How it works?:

If NIFTY ends up above 10000 at expiry, all the options expire worthless. We get to keep Rs. 71.

If NIFTY closes anywhere between 9900 to 9000 ( a 900 point range ), we get Rs. 100 from the spread.

Profit will be between 00-100 for NIFTY between 10000-9900 and 9000 -8900.

The loss will start when NIFTY goes below 8900.

That point is currently a 1000 points away. Possible, but not very likely.

And if we see that happening, we close out the trades when NIFTY is near 9100 level and book the small profit or small loss whatever is the situation at that point of time.

A simple and effective strategy.

Con here is the margin for the 2nd short of at 9000 PE that you are initiating. You will have to keep more than 130K margin at the exchange.

Strategiy will be a pro, if you are try the Bear Put strategy (if we don’t consider the 9000 PE short) with expectation the market will go down. With only 10000 Long put and 9900 short put, below would be the payoff


Think it through, you will see the opportunity cost and the interest cost that retail traders bear for 130K is much more than benefit we get.

Happy trading.

1 Like

Not useful in new margining policy.

pls explain

Weekly option can be bought for margin benefit and also insurance cost will be very less

naked short leg will require huge margin!