I am a new user to Sensibull platform and now in trial period. I have basic knowledge of option trading but not very deep knowledge of strategies.
Recently, while browsing option trading strategies wizard of sensibull, I tried to create a strategy based on my assumption that SBIN price will not go below 150 in June series.
It showed me a strategy wherein i need to BUY SBIN 25 Jun 140 PUT and SELL SBIN 25 Jun 142.5 PUT . The CMP of SBIN is 189.25
It shows me that for trading this two legged strategy i need a margin of 28k and the maximum profit is 6600 while the maximum loss is 900 while probability of profit is 94%. Profit potential in 19 days is 23%
Now my question is …
Is it really possible to get this much profit with this strategy? or it is just theoretical concept?
Is it really possible that my maximum possible loss is limited to 900 if i buy and sell put as described?
What is the meaning of probability of profit here?
If 23% profit is possible in 19 days ( provided my assumption remains true that SBIN will not go below 150 in June Series) then why not every tom dick and harry invest in this particular way?
What points should i keep in mind if i straightaway jump into this trade after seeing strategy at sensibull?
Though i understand basic theory of option trading ( i understand naked put and naked call) being a newcomer, i need complete guidance.
That is the beauty of Options trading, if you get your analysis right the potential for profit is great while at the same time keeping losses minimum.
Your position is hedged, and if done properly hedged positions have minimal risk with handsome pay-off.
Probably of Profit indicates the chances of profit for your strategy at expiry.
Options trading hasn’t been everyone’s cup of tea due to exorbitant margin requirements, now that margins have come down we might see more people explore this field, but it’s not as easy as it looks. You might have simple strategies give big reward but one also needs right mindset to pull it off.
Sensibull has just put forward a strategy baised on your view, it’s up to you whether you want to trade it or not.
It’s always good to read theory, follow concepts / tools but live market teaches you things which theory can never teach. So, most important thing is derive a strategy which suits you based on rigorous backtesting.
@Sensibull please reply my queries in the very first message of this thread.
If I am shown two legged strategy whrein i need a margin of 28k and the maximum profit is 6600 while the maximum loss is 900 while probability of profit is 94%. Profit potential in 19 days is 23%
Can i directly jump into this strategy without a second thought if I am ok with a probable loss of 900/.
Also pls reply how the probability of profit is calculated here?
You have bought 140Put and sold 142.5 Rs put . That means you collect a credit of 900 Rs. (Maximum Profit). You can loose maximum amount of 6600 Rs. (3000 * 2.2) . But for that that to happen price needs to go below 140 Rs.
@manu_goel You need to revise your option theory bro. You messed it all up. This is Bull Put Spread, which is net credit strategy. Total Credit is (2.80-0.60)*3000 = 6600. This is max profit. Max loss will be (142.5-140-2.80+0.6)*3000 = 900 only. So yes calculations are right. (Pachka!)
@Sushil_Girdher 142.5 is illequid strike. One need to look for Best Bid-Ask to evaluate various scenarios and not LTPs. especially in illequid stock options. If you really trade this strategy it is highly unlikely that you will get a fill at the prices you want.
If you go by Best BID ask the results are like this.
@maddy_Des pls explain in simple language what you want to convey. If you really trade this strategy it is highly unlikely that you will get a fill at the prices you want.
Hi Sushil, Maddy has shared the required detail however such detail may sound absurd if one isn’t well versed with how option strategies are calculated.
Option trading has a lot of potential and can really turn profitable provided person has required knowledge before entering the trade. 90% of the option seller take profit home, 95% of option buyer take losses home.
I would highly recommend options chapter on Zerodha vasity. I myself learnt from these chapters and it has changed my views of looking at options.
Dear Sushil, you are novice in options trading as well as trading in general. You know very little of the trading. I urge you to first start trading and learn everything about trading slowly step by step.
You want me to tell you in simple language the meaning of my sentence. And I am confused what is the hard part that you do not understand. The sentence is clear and simple.
If you trade this strategy = If you go and buy and sell these options tomorrow.
it is highly unlikely that you will get a fill at the prices you want. = you will not be able to trade at the prices mentioned in your screenshot.
P.S. I am damn sure that you will still be confused and you still don’t get wth I am saying! If you are still confused try googling words and phrases from my sentence. If still confused then feel free to ask me again.
All advisory services are based on theory, and may not really work in real world.
Just know that Sensibull is a private business (kind of online advisory) for such trade recommondations, and apparently Zerodha has invested in Sensibull. Hence, zerodha will do all it can to make it work and become profitable as now it is a partial owner of sensibull.
Coming back to the earlier point - Sensibull is simply online advisory which provides such technical and other indicators and so-called strategies. Now think about it.
If its strategies worked, why isn’t Sensibull following them on its own and making handsome profits for itself? Why is it asking for few hundred rupees from individuals every month as subscription fee? Why has it taken funding from zerodha?
The answer is that there is absolutely NO surity of profits in the strategies it is recommending. At the end of the day, whether an individual client like you and me make profits or losses, they always make money. Its same like brokerage business.
Hence, avoid following such strategy offering services - they are not profitable.
Why is zerodha supporting it? First, they have invested in it so they want them to be profitable so they can get their share. Second, the more “strategies” a client follows, the more trades occur for zerodha which adds to their brokerage profits. Double Win!
For that matter, zerodha has also invested in several other businesses, even in online yoga and exercise classes called IAMSTRONG, and that too is heavily advertised to “give peace of mind to traders in such difficult times”. Nothing but aiming for profit this way or that way.
All in all, be aware that all together they are after your money in terms of subscription and brokerage charges. Its you who will win or lose your hard-earned money by following such recommendations and strategies. Avoid such services.
Yes sir you will receive the profit they show if the conditions you state before entering the trade are met. The max loss will also be what they show. Now in case there’s a bug (there’s none as of now) and you make a loss from that trade they won’t pay up for your losses.(I contacted customer service). But like everyone else is saying I would really suggest you to understand the theory behind options before using sensibull. Most of the time the strategy with a max loss bigger than max profit would have higher chances of winning and vice versa. Now if we don’t know the theory I would always go for the options where the max loss is less than max profit.
Sir it would be wrong if I offered you advise. The thing I was just trying to say is most of the time the probability of profit is higher for strategies that have a higher max loss than max profit. Just to give you a very simple example. If you look at easy options and you have a bullish outlook. I never know by how many points the market is going to move. But the chances of it moving 50 points higher is higher than the probability of it moving say 150 points. So when they ask you if it will be a big move or a small move the small move has more chances of happening. Now if you look at it strategies for a small move has a fixed max profit and a larger max loss. But if you look at the strategy for a big move they show that your profit is unlimited and your loss is fixed (and smaller than unlimited). Again sir I would really suggest that you understand the theory.
Sir. If you want to start (1) always start with indices (nifty/bank nfty) and (2) A (bullish/bearish) spread strategy. Where loss & profit are always limited.
