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Stock Options Strategy - Beautiful Butterfly |
ashutoshbpl
White Belt
Joined: 19 Jan 2009
Posts: 25
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Post: #1  Posted: Wed May 13, 2009 8:38 pm Post subject: Stock Options Strategy - Beautiful Butterfly |
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Hi,
chk out the strategy here.
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Trade Master
White Belt
Joined: 27 Apr 2009
Posts: 44
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| Post: #2 Posted: Wed May 13, 2009 10:38 pm Post subject: |
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Hi Ashu
I m stunned how could I have missed such kind of strategy in options !!!! One can make killing out of such options..kudos to you for such a wonderful stratergy..keep up the good work..
(let me now work on some of my bigshot scrips  ...
Thanx
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nareshch
White Belt
Joined: 08 Apr 2009
Posts: 5
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| Post: #3 Posted: Thu May 14, 2009 10:28 am Post subject: |
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Hi Ashu ,
here is the pay off if i play with nifty calls today.
| Description: |
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Download |
| Filename: |
test butterfly.xls |
| Filesize: |
18 KB |
| Downloaded: |
703 Time(s) |
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ashutoshbpl
White Belt
Joined: 19 Jan 2009
Posts: 25
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| Post: #4 Posted: Thu May 14, 2009 3:45 pm Post subject: |
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Hi naresh,
thnx for making payout table.
As per me margin required is only 39*50=1950 or some 500 to 1000 more which depends from broker to broker. Logic is that you are selling 2 calls and also buying 2 calls at the same time. So its exactly an ofsetting position where your risk in any case is limited to Rs 39 only no matter Nifty makes any kind of wild movements. So just check out with your broker how much it will cost for this butterfly. Second thing butterfly is best if the market is rangebound. For May market can break on either side and also volatility for may is expected to be high, still near expiry you can design it for nifty. For June it will one of the best strategy as less volatility is expected in that month. Neways this one gives max return with minumum risk.
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Trade Master
White Belt
Joined: 27 Apr 2009
Posts: 44
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| Post: #5 Posted: Fri May 15, 2009 4:31 pm Post subject: |
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Hi Ashu
Was going through this Butterfly stratergy on the web and came to know about long & Short butterflies...
1.) Short 1 ITM--Long 2 ATM-- Short 1 OTM (Long Butterfly)
2.) Long 1 ITM--Short 2 ATM-- Long 1 OTM (Short Butterfly)
Can you pls elaborate a bit about both the stratergies (when can one adapt short or long butterfly).
Thanks
TM
Last edited by Trade Master on Fri May 15, 2009 9:49 pm; edited 1 time in total |
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MILANCHN
White Belt
Joined: 12 Mar 2009
Posts: 105
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| Post: #6 Posted: Fri May 15, 2009 7:49 pm Post subject: |
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| sir, what could be the max profit as per ur butterfly illuystration.
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ashutoshbpl
White Belt
Joined: 19 Jan 2009
Posts: 25
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| Post: #7 Posted: Sat May 16, 2009 3:35 pm Post subject: |
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| MILANCHN wrote: | | sir, what could be the max profit as per ur butterfly illuystration. |
Sir, maximum profit will be on condition when stock price expires exactly on the strike price of the options which you have sold.
Calculate as follows:
premium received on sold calls/puts - premium paid on otm call/put - premumu paid on itm call/put - brokerage paid(on single side, as we are not reversing positions)
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ashutoshbpl
White Belt
Joined: 19 Jan 2009
Posts: 25
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| Post: #8 Posted: Sat May 16, 2009 3:45 pm Post subject: |
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| Trade Master wrote: | Hi Ashu
Was going through this Butterfly stratergy on the web and came to know about long & Short butterflies...
1.) Short 1 ITM--Long 2 ATM-- Short 1 OTM (Long Butterfly)
2.) Long 1 ITM--Short 2 ATM-- Long 1 OTM (Short Butterfly)
Can you pls elaborate a bit about both the stratergies (when can one adapt short or long butterfly).
Thanks
TM |
Hi TM,
The example which I've given was of Short Butterfly which is opt when volatility of the underlying is very low. So simply putting go for short butterfly when you are very sure that stock is range bound.
Now in current scenario Long butterfly is quite fit as we are having high volatility this month. Volatility is a major factor. Long butterfly is just the inverse of Short butterfly. Your profit will be secured if stock closes At or out of the range, i.e if scrip closes At or out of the strike of the call/put which you have sold.
Current scenario is the best for Long as we can see either side movement in the scrip.
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