Some people advice strategy for option buy same strike price put and call
Is it use in intraday or for month?
How trader will get profit because when put rise call down and reverse . how his money rise?
some time both call & puts are rise or down ? is this strategy really useful what is your opinion because you all are experienced traders.
The strategy you are referring to is also called as a long Straddle, check this. This is profitable if you are expecting a one sided movement in the markets and are not sure which side. So for example, heading into election results day, budget day, etc are good times to be long straddle. If there is a big move on one side, you will end up making money.
But as you already know, if market remains flat or even if it moves in one direction but not by much, this strategy can end up losing you money. If you are using this for intraday, only do it on days when you expect huge moves, otherwise such a strategy is always best positional.
In my opinion, Long Straddling will not work in normal market scenarios. So better avoid it.
I personally feeling NRML is best for options. If you find a better price you can sell within the day, If you dont find, then you can carry your positions to next day, until you find a better price.
For example, let us take APOLLOTYRE
Today the price of the underlying stock is 196.85
If you see the option chain in nseindia.com @ the strike price of 200, you can see
Call option for 2000 shares is at Ask Price of Rs. 8.70, So you invest 2000 x 8.7 = 17400
Put option for 2000 shares is at Ask Price of Rs.10.25, here you invest 2000 x 10.25 = 20500
Considering only the intrinsic value
If the stock price moves greater than 200+8.70 = 208.70, your call option will be in profits.
If the stock price moves lesser than 200-10.25 = 189.75, your put option will be in profits
You dont know which direction it will move, up or down, but assume today night they will declare their quarterly results.
So you buy a call option and put option at the same strike price 200. This is Long straddling.
Now let us see what happens, If price moves to say 230,
you will earn (230-208.7) x 2000 = 42500 in call option
you will lose complete 20500 in put option
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Net earnings = 42500 - 20500 = 22000 profit
Now let us see what happens, If price moves to say 170,
you will earn (189.75-170) x 2000 = 39500 in put option
you will lose complete 17400 in call option
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Net earnings = 39500 - 17400 = 22100 profit
Now check out what happens if the price stays in the range of 180 to 220,
You will make profit in one and make loss in other
Also if the price stays close to 200, you will make loss in both call and put.
So in net you will be in loss zone.
So in order to get profits the long straddling, the market should have a huge rise or huge fall.
Note: The above discussion is without considering greeks and difference in effects of call and put options.
In reality they also play roles. So huge price difference is necessary for long straddling.
Thank you, Nithin
Thank you,
But which method is best for option intraday or keep possition for week or 2 week,