Option trading on day before expiry : 15 Jan

Intraday option trading on day before expiry. Taken on 15 Jan 2020. 

ROI (Return on investment) = 0.56%

Margin used = Rs. 1,20,000 

Profit = Rs. 678.75

Below is the 5 minute chart of Nifty on 15 Jan.

Nifty 15 jan

Trades

Trades

Note: All the options traded had expiry on 16 Jan.

Explanation

  • (1) & (2)
    • Sold a Strangle with Stop Loss within 10 minutes of market start. Both strike prices were at ~0.15 delta. Stop Loss was set at ~3x of premium collected. 
  • (3) & (4)
    • Put side is giving decent profits as the premium has reduced by ~30%. So modified the Stop Loss near to the entry price. This way ,this put option can not give me any loss.
    • Call side is still at ~0.15 delta. Sold another 0.15 delta put at strike price of 12200PE. This will hedge the call side.
    • From now on, I will treat the trade as one Put sold which can not make a loss. And another strangle sold which I will delta hedge with my remaining capital, if required.
  • (5), (6) & (7)
    • Call side has also started giving decent profits as the premium has reduced by ~25%. So modified the Stop Loss near to the entry price. This way, this call option can also not go in loss.
    • Put side strangle delta was still around ~0.15, so sold another call option at 0.15 delta which was at strike price of 12400. This call option will hedge the put side of the strangle.
    • From now on my trade will be treated as a strangle sold, a put sold which cannot give any loss, a call sold which can not give any loss.
    • I have no more margin left to delta hedge my strangle. So I have kept very tight stop loss to bot the call and put side. My call side stop loss is Rs. 9. In (7) , I have modified my put side stop also to Rs. 10 . Notice that stop loss of initial strangles were kept at 3x the premium as there was room for hedging. My thought process is, even if one of the sides of strangle hits the stop loss, the other side of the strangle will be in profit thus compensating for much of the loss. I have kept the stoploss tight so that the loss do not go out of hand.
  • (8) & (9)
    • I wanted to exit my trades intraday before 3 , as Nifty may give a violent movement after 3. I was sitting on good ROI, so made an exit with profit on both the call and the put side.

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