Look at a very simple strategy with NIFTY options.
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.