Trade Idea: NIFTY (NSE) Index Options

Update 24th February, 2012

Unfortunately, the position was not successful - the index closed at 5477.50, which was 2.8% above the upper breakeven level of 5329. The net loss of the trade was 3,550 INR per contract.

Position	Type	Strike	Price	Payoff	P&L
-1	Call	5300	27.50	-177.50	-7500
+1	Call	5400	14.50	77.50	3,150
-1	Put	4700	45.00	0	2,250
+1	Put	4600	29.00	0	-1,450
Total P&L					-3,550 INR

Update 23rd February, 2012

Position	Type	Strike	Price	Current	P&L
-1	Call	5300	27.50	216.25	-9,437.50
+1	Call	5400	14.50	120.00	5,275
-1	Put	4700	45.00	0.30	2,235
+1	Put	4600	29.00	0.30	-1,435
Total P&L					-3,362.50 INR

Update 20th February, 2012

Position	Type	Strike	Price	Current	P&L
-1	Call	5300	27.50	298.00	-13,525
+1	Call	5400	14.50	199.75	9,262.50
-1	Put	4700	45.00	0.75	2,212.50
+1	Put	4600	29.00	0.70	-1,415.00
Total P&L					-3,465.00 INR

Update 17th February, 2012

Position	Type	Strike	Price	Current	P&L
-1	Call	5300	27.50	235.00	-10,375
+1	Call	5400	14.50	143.50	6,450
-1	Put	4700	45.00	0.70	2,215
+1	Put	4600	29.00	0.75	-1,412.50
Total P&L					-3,122.50 INR

Update 16th February, 2012

Position	Type	Strike	Price	Current	P&L
-1	Call	5300	27.50	252.00	-11,225
+1	Call	5400	14.50	159.00	7,225
-1	Put	4700	45.00	0.75	2,212.50
+1	Put	4600	29.00	0.75	-1,412.50
Total P&L					-3,200.00 INR

Update 15th February, 2012

Position	Type	Strike	Price	Current	P&L
-1	Call	5300	27.50	166.20	-6,935
+1	Call	5400	14.50	89.90	3,770
-1	Put	4700	45.00	0.80	2,210
+1	Put	4600	29.00	0.75	-1,412.50
Total P&L					-2,367.50 INR

Update 13th February, 2012

Position	Type	Strike	Price	Current	P&L
-1	Call	5300	27.50	139.20	-5,585
+1	Call	5400	14.50	78.65	3,207.50
-1	Put	4700	45.00	1.75	2,162.50
+1	Put	4600	29.00	1.45	-1,377.50
Total P&L					-1,592.50 INR

Update 10th February, 2012

Position	Type	Strike	Price	Current	P&L
-1	Call	5300	27.50	181.00	-7,675
+1	Call	5400	14.50	110.00	4,775
-1	Put	4700	45.00	1.65	2,167.50
+1	Put	4600	29.00	1.35	-1,382.50
Total P&L					-2,115.00 INR

Update 9th February, 2012

Position	Type	Strike	Price	Current	P&L
-1	Call	5300	27.50	147.85	-6,017.50
+1	Call	5400	14.50	88.25	3,687.50
-1	Put	4700	45.00	2.70	2,115
+1	Put	4600	29.00	2.00	-1,350
Total P&L					-1,565.00 INR

Update 8th February, 2012

Position	Type	Strike	Price	Current	P&L
-1	Call	5300	27.50	129.80	-5,115
+1	Call	5400	14.50	76.00	3,075
-1	Put	4700	45.00	4.10	2,045
+1	Put	4600	29.00	3.00	-1,300
Total P&L					-1,295.00 INR

Update 7th February, 2012

Position	Type	Strike	Price	Current	P&L
-1	Call	5300	27.50	136.00	-5,425
+1	Call	5400	14.50	80.50	3,300
-1	Put	4700	45.00	5.15	1,992.50
+1	Put	4600	29.00	3.40	-1,280
Total P&L					-1,412.50 INR

Update 6th February, 2012

Position	Type	Strike	Price	Current	P&L
-1	Call	5300	27.50	129.25	-5,087.50
+1	Call	5400	14.50	76.40	3,095
-1	Put	4700	45.00	6.00	1,950
+1	Put	4600	29.00	4.30	-1,235
Total P&L					-1,277.50 INR

Update 3rd February, 2012

Position	Type	Strike	Price	Current	P&L
-1	Call	5300	27.50	92.00	-3,225
+1	Call	5400	14.50	50.00	1,775
-1	Put	4700	45.00	8.50	1,825
+1	Put	4600	29.00	5.55	-1,172.50
Total P&L					-797.50 INR

Update 2nd February, 2012

Position	Type	Strike	Price	Current	P&L
-1	Call	5300	27.50	87.95	-3,022.50
+1	Call	5400	14.50	48.00	1,675
-1	Put	4700	45.00	7.00	1,900
+1	Put	4600	29.00	4.65	-1,217.50
Total P&L					-665.00 INR

Update 1st February, 2012

Position	Type	Strike	Price	Current	P&L
-1	Call	5300	27.50	72.15	-2,232.50
+1	Call	5400	14.50	38.00	1,175
-1	Put	4700	45.00	7.65	1,867.50
+1	Put	4600	29.00	5.20	-1,190
Total P&L					-380.00 INR

Update 30th January (close), 2012

Position	Type	Strike	Price	Current	P&L
-1	Call	5300	27.50	36.95	-472.50
+1	Call	5400	14.50	18.50	200
-1	Put	4700	45.00	15.50	1,475
+1	Put	4600	29.00	9.60	-970
Total P&L					+232.50 INR

Update 30th January, 2012

Position	Type	Strike	Price	Current	P&L
-1	Call	5300	27.50	70.10	-2,130
+1	Call	5400	14.50	37.50	1,150
-1	Put	4700	45.00	9.10	1,795
+1	Put	4600	29.00	5.65	-1,167.50
Total P&L					-352.50 INR

Update 27th January, 2012

Position	Type	Strike	Price	Current	P&L
-1	Call	5300	27.50	55.95	-1,422.50
+1	Call	5400	14.50	28.50	700
-1	Put	4700	45.00	13.35	1,582.50
+1	Put	4600	29.00	8.60	-1,020
Total P&L					-160 INR

Update 25th January, 2012

Position	Type	Strike	Price	Current	P&L
-1	Call	5300	27.50	45.80	-915
+1	Call	5400	14.50	23.00	425
-1	Put	4700	45.00	17.60	1370
+1	Put	4600	29.00	11.25	-887.50
Total P&L					-7.50 INR

Update 24th January, 2012

Position	Type	Strike	Price	Current	P&L
-1	Call	5300	27.50	38.75	-562.50
+1	Call	5400	14.50	19.40	245
-1	Put	4700	45.00	24.20	1040
+1	Put	4600	29.00	14.80	-710
Total P&L					+12.50 INR

Update 20th January, 2012

Position	Type	Strike	Price	Current	P&L
-1	Call	5300	27.50	30.00	-125
+1	Call	5400	14.50	14.85	17.50
-1	Put	4700	45.00	31.95	652.50
+1	Put	4600	29.00	20.00	-450.00
Total P&L					+95.00

The index posted a small rally yesterday and our position is still showing a small profit of 95 INR. This is due to a decrease in implied volatility, which helps a position like this.

18th January, 2012

I've been looking for an opportunity to test out one of the trading strategies I watched in the TradingOlogy videos and think that the NIFTY index is a great candidate for an Iron Condor strategy.

A long Iron Condor is a 4 legged option strategy that looks like a Long Butterfly except the center strike is split into two separate strikes creating a wider profit area.

You can also look at an Iron Condor as two Vertical Spreads: a short upside call spread and short downside put spread. Here are all 4 legs of this trade put together;

NIFTY: Long Iron Condor
-1 5300 Call @ 27.50
+1 5400 Call @ 14.50
-1 4700 Put @ 45.00
+1 4600 Put @ 29.00

Due to the trading restrictions on foreigners in India I cannot actually execute this trade with real money via my own brokerage account so this will just be a paper trade that I will monitor over the coming weeks. But if I were to trade this at the above prices it would result in a net credit into my account of 1,450 INR (Indian Rupees) as the Multiplier of the NIFTY is 50 INR. The max loss if the trade goes against me will be 3,550 INR. Here's the payoff Graph;

Payoff profile of Iron Condor for NIFTY Index options

Max Profit = 1,450
Max Loss = 3,550

The break even points are 4,656.50 (-7%) and 5,343.50 (+7%). This means that the market needs to stay in a 14% range over the next 36 days in order for the trade to remain profitable. Here is a graph of the NIFTY index;

The two horizontal lines represent the profitable area i.e. as long as the market remains in this trading range the strategy will be profitable.

Here is a screen shot of my trading screen where I took the option prices from;

I'll continue to update the trade every few days to keep you posted of its' results. If you don't want to keep coming back to the site to check, you can subscribe to updates for free via the following;

PeterOctober 29th, 2012 at 4:25am

Hi Nitin,

Do you mean in relation to options for stock? It is also called the Multiplier or Contract Size and refers to the number of shares that each option converts to.

Typically this number is 100 - so for example, if you buy one call option you have the right to exercise that option into 100 shares of the underlying stock.

nitinOctober 27th, 2012 at 8:54am

tell me about stock ratio

PeterAugust 29th, 2012 at 7:59pm

Hi Kumar,

These screen shots are taken from my online trading terminal that my broker, Interactive Brokers, provides me.

KumarAugust 29th, 2012 at 5:24am

Hi,

what software are you using to see options chain for Nifty. I can see the option chain this page however I am unable to make out the software name

thanks

PeterJanuary 18th, 2012 at 6:24pm

Hi bb, I usually look to sell the leg of the option that has a delta of 20% (-20% for puts). So, for the SPX the strikes based off yesterdays prices would be;

-1 1355 Call
+1 1360 Call
-1 1240 Put
+1 1235 Put

Approximately 8% buffer.

I use Interactive Brokers and currently no implied volatility data is showing for the FTSE 100 so I cannot comment on that. I'll look again this afternoon when the market has opened and let you know.

bbJanuary 18th, 2012 at 3:28am

Hi Peter,

What range will you pick if you are trading on ftse 100 index optons and spx index options?

I just want to see if this work on s and p and ftse

Thanks,
bb