I personally think it is way too risky to have short strangles / straddles even with a SL. Any gap up/down would kill. whatever PnL you are looking to make.
Why not try short Iron Condors or short Iron butterflies? Speaking from experience, I started off with Deep OTM Calls and puts on individual scrips and in the 2nd month that I started I lost about 80k or so.
Since then, I’ve moved into OTM Short Iron condors, its not at all flashy - you make money really slow and a consistent downward/upward trend in prices can sneak up on. you without realising but it is much less risky than naked option selling.
Hi Abhijeta, it’s wonderful that u are maintaining sustainable performance thru your short strangle strategy. Just few queries, do u also look at delta while selecting strike prices, and how much margin do u maintain to avoid getting negative balance in your ledger.
Thanks, its always inspiring to see positive stories like yours.
Choosing strike price
I look at open interest in option chain, key support and resistance levels in choosing the strike prices. Being a very safe play, I chose options whose premium is not more than 25/-
Margin
I maintain 1.15lac (for 2 lots, one on pe and one on ce). Even when vix reached 23 last week, I didn’t face margin issue
Cool! Should b worth giving it a try. And for adjusting positions I believe you roll down your positions from the farther side, and don’t exit your loss making positions.
My plan is to enter the trade on Monday and the time decay works best.
I made adjustments for the trade I entered on Thu/Fri when market was moving in one direction.
I squared of loss making positions and took new strike prices at slightly higher premium (from other end, eg: market moving up, then take pe side strike price a closer). My overall profit dips a bit due to adjustment but no loss
This Mon, planning to enter at 25500 CE and 21300 PE. Up side big resistance and market looking downside, hence farther stike price.
I’ve been trying Iron Condor in Nifty in the last few expiries at 0.3 Delta, most of the times I ended up in red even after adjusting positions actively. This also shot up my brokerage costs considerably. So quite not understood, whats the logic when they say 30% Probability of ITM, when it is ending up ITM so frequently. Definitely, a change in strategy required.
Previously, I’ve also tried credit spread strategies in stocks based on technical analysis, where I earned profits in many trades consecutively till my last two trades went against me and caused me big losses. Seems like strategies in stock options is only for ppl who have sufficient capital to adjust, and even take assignments of stocks when ITM
Positional Stock options are risky and prices can quickly move when compared to index
Iron condor is complex to adjust as there are both buy and sell option at two ends of the strikes. Short strangle is relatively easy to adjust with predefined sl
@Abhiteja_Pachipulusu You square off loss making positions when they are in the money or just as they shoot up beyond a certain price point. If you are doing the latter one, u might not be giving probabilities enough time to play out.
I never take ITM, requires huge capital.
I take deep OTM where options premium is around 20.
Say If CE premium is going beyond 40, I squared off loss (note PE premium would come down to ~10) , so net loss would be ~ 10 premium only.
Then I take new positions on both call and put sides with similar premium (20/- ce and 20/- pe)
At the end I take 30/- premium (-10 loss + 40 adjusted one)
I keep two alerts ,one at sl and one near sl. Eg: one at 35/- premium and another 40/-.
Also, As I wfh, I have laptop open. I casually check positions in free time
What time you did this strangle on this expiry day ?
Unless you did this before 9.17am , there is no way you might have sold options for 6rs which is 900 points away.
And 6rs option strangle might hit SL 10 atleast one side on the last expiry .
If you are paper trading , you might miss the spikes and wrongly end up calculating the closing price
Generally it is a great strategy, for a regular income. In my lifetime in markets, i have seen scalpers who closely observe Domestic Currency variations and INDIAVIX importantly to do position sizing and have liquidity for a cover strategy if and when required. Black swans are testing times, when discipline and liquidity saves the day.
Happy Investing
Team StockOrganics
