Replying so that even I am notified when he replies.
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Naked short strangle is a drug that gets you addicted slowly and then kills you one day.
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Not necessarily, you can just change from “Normal” to “Tracking” or “Watching” just below the reply button:
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Thanks. Noted.
this strategy should work. i have been using a similar strategy for the last 1 year and profitable.
For hedging you can do 2 x debit spreads in PE and CE each. So when the market moves against your strike - the debit spreads will offset the SL hit cost.
Do let me know if you need further info on this.
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Could you please elaborate with an example? Are you doing iron condors or did i read that wrong?
you usually take a naked short position in far OTM CE and PE right ?
i assume you keep a stop loss so that you dont run into unlimited loss. I also assume you understand when your stop loss will be hit i.e the value of the underlying or % increase in volatility that rises the premium.
So if you can derive the underlying value, why not create a long position that offsets for the SL hit value
eg: Nifty underlying is 17000
and you short 14000 PE at say Rs10 and you keep a SL of Rs3 (ie. 13 Rs strike price)
now for your SL to be hit, say the nifty should fall to 16500. then do a debit spread ie. buy 16500 PE, sell 16400 PE so that when your SL is hit - the equivalent value is offset by this spread.
If you are a serious trader you should know how to mathematically model to find these sweet spots.
cheers !
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Thanks for your reply, but the premium value also would depend on the number of days passed once the trade is initiated, so how can you predict that if spot price reaches 16500 then premium will increase by 3 and hit the SL? It would be next to impossible to predict the IV on any particualr day and also after how many days 16500 will be reached in your above example, right?
Could you elaborate how you mathematically model these? Thanks
I don’t carry strangles overnight, its risky. Delta, vega and theta can be derived much more accurately intraday.
Please DM if you’d like to know more, I need not spoil the mood of other readers
How is it going for you now? And how did the Covid crash affect you (if at all)?
I’ve been following this strategy for ~3 years now. Got rogered badly during the Covid crash but not only recovered it in the next year, have done well since then. About 2% per month net is possible at scale if you are doing Index options (BankNifty is better than Nifty). You can hit 3% pre month with options in stocks but the risk is higher.
Finding some high beta stocks helps. Zee, reliance, Adanipo, tatachem all offer >3% pm if u sell deep OTM calls/puts at 15-18% away from CMP at the begnning of a series. Indiamart is an interesting new one. Generally avoid stocks with very large values (divis/dr reddy, etc.) as the lots are small, and completely avoid illiquid stocks.
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been doing exactly this for 2 years now,happy with what im making which is over 1% per month.during covid it was over 2%.i agree with what others have said that all the profit can get washed away with just one negative move.it could have happened to me 4-5 times in these 2 years but no,i sensed it early and limited my losses twice,in the remaining occasions i still made a profit,although low.so i guess i can say this strategy works with extreme discipline.
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Can you tell how you did you limited your loss ?
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i normally hold my positions till expiry even when i am in a loss in the hopes that they will become profitable at the end of the month.but when the loss comes close to or breaks my loss tolerance level i close the position no matter the loss and take fresh positions to recover the loss.i am able to do this when the loss happens during the first half of the month.my strategy is a bit different than the OP’s one.
Hi,
I also don’t carry starngle overnight . Been one month starting selling option opting short strangle almost always in profit .Still not confident whether I aud increase capital . Any suggestions ??
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No buddy, i do not have any suggestions or recommendations. Please assess your risk profile and do the needful
I am commenting and also asking a question based on the original post of abhiteja in Oct 2020. I have not read all replies.
One question I have on Black Swan events. The chances of Black Swan events on the down side is much higher, Right?
Instead of being in the FAR OTM strategy as discussed by Abhiteja, let us assume you were in equities of even purchased Niftybees. Wont they also be affected by the Black Swan event?
Siv
With NiftyBees, your losses are unrealized and you can wait for pullback. But with leveraged products, you may have to book losses and then have enough left to fight on.
Hi Abhiteja,
Do you face any liquidity issues at deep OTM ?
I play quite safe.
Less profit but high probability.
I don’t carry forward positions that saves me from unexpected gap up and gap down.
I trade only on expiry day, so 3 expiries in a week 3 trades.
On the expiry day, for example for bank nifty I sell +2% and -2% in first 5 mins(along with the hedges), and then left it as it is.
95% of the time it settles in profit.
5% times stop loss is the saver.