When your primary concern is safety of capital, is dealing in F&O a good option? I always thought F&O is great if your call or put option go in your favor or you lose your entire capital.
1% per month is equal to 12% p.a. I am sure even if you do normal cash segment investing activities you will be able to get this kind of return from stock market instead of going for F&O where the probability of capital loss is higher.
There are many ways to protect a black swan event using options. You can define risk using strategies.
One way options is to write Far OTM calls spreads or call ratio spreads. Since your expectation is 1%, you can exit once you make 1% of the capital. Again if safety is concern, avoid weekly expiry & go for monthly, better do a far month call spread / call ratio spreads.
Very true, at the same time, the need to take risk also kind of comes down with high capital.
Example if I trade with 10 lakhs capital, risk thats required to make 50000(5%) is higher when compared to making the same 50000 with 50 lakh capital. High capital does guarantee safety, certainly helps in not taking high risk trades.
when you check history you will find great risk reward trades but while you are in a trade its not that easy ! Price is a probability not a certainty. 90% of the time your risk reward will not work . so be careful.
Do Cash secured Put and covered call strategy in Niftybees with target of 1% monthly.
e.g Sell monthly put with premium of 1% of Nifty LTP. If price goes below your strike price, buy equivalent Niftybees of 1 lot. Then sell monthly call with premium of 1% Nifty LTP. If the price goes above your strike price, sell the NiftyBees and repeat the process.
Nifty Futures can be used instead of Niftybees, but you will have to roll over the futures contract on expiry.
If capital is not really an issue then I would suggest you to buy 0.99% stake in Reliance industries or HDFC Bank which will cost few lakh Crores only. 0.99 % is sufficient to manipulate/regulate/operate (whatever you want to call it) the stock price.
You can earn unlimited profit monthly and your capital will be safe as you will be the one who will be having highest amount of liquid stocks.
If there is high volatility, the premiums will also be higher. So that 1% will make you purchase far OTM Put/call. Most of the time your Put/Call will not go ITM. In case it goes ITM, you give/take the delivery in terms of futures or Niftybees and square off when your price again goes ITM on the other side.
Then you can try your luck in iron Condor of Nifty.
At the start of new expiry contract, look for India vix value and divide it with square root of 12 I.e. ~3.46 to get expected monthly nifty movement value from cmp. eg if vix is 20, then 20/3.46=5.8
Add 5.8 % to Nifty cmp to get upper range, subtract 5.8 % from Nifty cmp to get lower range.
Sell the option nearest to these values and hedge it with options 2 to 3 strikes far from it.
This will be relatively safe range atleast 1 to 1.5 Sd away and u will have good probability of winning in range of 70%