The premium falls sharply on the expiry day. Can we use it to our advantage.
We can use the Short straddle strategy. In this we have to sell both call and put option of a same strike price.
Let's take today's case.
At 1:30 PM premium for banknifty 9 June 2016
Bank nifty was at 17910
17800 CE = 90.
17800 PE = 18.30
You sold both of them and got a premium of 108.30.
At end of the day premium was
Bank nifty was at 17887.
17800 CE = 69.90
17800 PE = 0.05
Buy Back at the end of day
Premium that you gave back = 70+0.05 = 70.
You don't need to buy 17800 PE. Let it expire.
Gain = 38
Gain per Lot = 38*30 = 1140
What's the catch here.?
This strategy requires that market should't make a big move. If the market makes a big move, you will be in loss.
We can use the Short straddle strategy. In this we have to sell both call and put option of a same strike price.
Let's take today's case.
At 1:30 PM premium for banknifty 9 June 2016
Bank nifty was at 17910
17800 CE = 90.
17800 PE = 18.30
You sold both of them and got a premium of 108.30.
At end of the day premium was
Bank nifty was at 17887.
17800 CE = 69.90
17800 PE = 0.05
Buy Back at the end of day
Premium that you gave back = 70+0.05 = 70.
You don't need to buy 17800 PE. Let it expire.
Gain = 38
Gain per Lot = 38*30 = 1140
What's the catch here.?
This strategy requires that market should't make a big move. If the market makes a big move, you will be in loss.
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