Is Short strangle of deep OTM a good strategy for regular returns?

How does one create alerts for prices ?

In Zerodha, you can set alert even for options.

So does it make a sound or only email notification ?

Gets email notification
Gets push notification on mobile with vibration
Gets desktop notification too

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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

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On expiry, I took only call side 24900ce last thu between 9-15 to 9-30.
It reached a max of 7. I kept alert for 8/- but never triggered that day

You’re managing it in a great way effortlessly. Cool!

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I don’t want to put much info , just check what happened on October 15th expiry .
If you are backtesting anything don’t Conclude based on 2/3 data

Hi Abhiteja,

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

Are your strangles working well in this high IV environment? I took my first short strangle on 1st oct and chose strikes that were 0.1 delta ( 10300PE and 11900 CE). So 10% chance of being OTM.

NIfty started moving up with a gap up each day and even after adjusting the non tested side (Put side), the credit received was not enough to cover the loss on the tested side (CALL side). May be this was a freak case and nifty normally doesn’t move like this, but in such a case what do you do?

Cut your losses, buy same strike calls and puts in next month to convert to a calendar, or rollover to next month?

Indian trainers say never enter a short strangle when VIX is above 15 , i.e SS isnt to be initiated when IV is high.
Sites like Tasty trade say enter SS in stock that has high IVP, ie high IV.

Whats the opinion of experts here? SS is best for high IV or low?

And what strategies work best in high IV? ratio spreads?

Thanks

So you close the losing strangle and reinitiate another one in the same expiry?

Example you set up the trade on monday for the thursday expiry of the same week. On wednesday you see that the 20 premium you collected has gone to 40, you close the strangle and initiate another one with new strike prices for the same thurday expiry as your earlier trade that was a loser?

Thanks

kindly share your experience for last 3 days when Bank nifty moved 2000 points in 3 days… did u make profit, were u able to adjust…many thanks

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Banknifty had no mercy for the past two days. Who would expect that crazy rally. With two days to expire, it seem to have 1500 points rally.

Coming to my trade, I entered on Monday morning by shorting a lot of 21500 pe and 25900 ce. That day itself bnifty crosses 25000 and settled at 24890. By looking at historical resistance zones I ignored my stoploss and have to book loss of 142 points (~3500/-).

Biggest learning- behave like a robo in stop loss and managing risk

Adjustment, on Tue end of session, I shorted 4 lots of 23200 pe and 3 lots of 27900 ce. Overall premium of 150.
Logic- Bnifty closed at 25680. Downside of 2500 and upside of 2200 points movement in two days looks safer for me. Also time decay is most on Wed, Thu (May bnifty cools off for sometime, it’s crusing through)
Note: 27900 ce is the last strike price available and max addition of open interest (3.3 lacs) were added on Tue for this strike price. Hopefully it will not go into ITM.
Capital- For this adjustment, I had to put more funds. Margin of 4 lacs required

Revising my strategy- During this volatile time, I wouldn’t like to enter early in the trade. From next week I will short strangle directly on Wed end of session. Will pick strike prices that are of 10/- to 15/- and sell 3 lots each. They will become less than 3/- on Thu. And will continue intrday on expiry day with deep OTM strike prices

Anyone might say, I am making meagre amount after the adjustment.
How I look at it is I will not make loss for this week

Please note 95% traders lose money. I want to be part of 5%

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This strategy looks good initially but one fine day earnings of months and years will be wiped out in aviolent gap up or gap down. One example I can give is the day Nirmala Sitaraman announced corporate tax cut. No retailers would have anticipated that event… next day Banknifty was gap up 2000 points… How will you adjust the options for this scenario… There will be event in future which may even do gap up or down of 4000 points… anything is possible in market.

Most of the retail broker terminal won’t work for few minutes during these violent moves. So you can’t really make any adjustments you are planning in the papar.

Options selling works when you have properly hedge the position but the return will come down significantly.

A person predicted the market movement before the announcement i took it lightly then i realised the mistake

Look for 25 nov a gap up,he also said 2 weeks back todays gap up.

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If that person predicts the market accurately, he can beat Buffet in 2 years time. We all come to know by that time. So chill…

So yeah let’s wait and watch atleast till 25th nov

Now the thing is, Option selling contains unlimited risk and it involves lot more than TA to apply good risk management. I would definitely advise retails to stay away from option selling but yes option selling makes sense due to high probability of making money but you see when you go wrong you might end up losing most of what you have made within minutes and might end up going bankrupt too and in your case, since you’re are looking to play deep OTM contracts, but in a rare case that market ever makes a parabolic move, you better start maintaining some good relations with your debt collectors perhaps you may want to just give them your house. (you get the point)

Now lot of people like to say, if you know what you’re doing then you will make a lot of money, but let me tell you a thing, most of the sellers are big institutions these big institutions have access to information that retails can ever dream of, that may include insider information, sophisticated models etc. But what does a retail have? Some TA pattern non-sense or R & S points? This is obviously ridiculous. Don’t get me wrong, there are pretty successful retail option sellers, but you never know and maybe they are few moments away from incurring incredible losses. My question is, why would you take such an insane amount of risk when there are better ways with lesser risk to make good amount of money?

Now have a look at the market as of 5th Nov 12:45PM:


Just look at the insanity right there, really really huge bet that market won’t go below 12000. But let’s say if it does, you know what the amount of short-covering is going to do? The contract will short squeeze to 1000%+ within minutes, you invest just 1 lakh, and you will have to incur a loss of Rs 10 lakh or probably higher. Having a stop loss won’t guarantee you will be filled in such a chaotic situation just in time.

So you see what option selling could mean. I definitely advise you to stay away especially if you’re new to trading and particularly if you don’t even know how options work.

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