iCharts Discussions

[sandy975]

Hi,

I want to make a quick 100- 300 points by buying options and at the same time recover the entire cost of the options purchased by shorting 2 lots options in the direction of trade several hundred points OTM and of the NEXT MONTH should my punt go wrong.

for example,
if index ( nifty 50) is at 5300, and I anticipate a fall in nifty due to euro crisis to the extent of around 500 points, I would:

buy a put at 5200 strike for Nov;11 at 60 INR( brokerage included)
short 2 lots of puts at 4800 of Dec'11 at 40 INR each to recover the cost of long put
buy 2 lots of puts of 4800 strike of Nov;11 at 10 INR to protect myself against any sudden fall

In case nifty remains around 5300 in Nov'11 I would exit all positions at a very marginal loss as the 4800 Dec put would by then come down in value to Rs 10. ( see the differential in premium between Nov and Dec'11 4800 put above)

this is the worst possible loss making situaltion that I can envisage. Before i put money in this type of trade I want to anticipate all possible complications and plan for it.

[sandew]

One leg of the set up is still incomplete.
Else,
you are naked short vide Pe.

[ragarwal]

if the nifty closes around 5250 you wil end up losing all d premium but d dec put tht u shorted which too wud hv eroded in value.
regds