Showing posts with label short straddle. Show all posts
Showing posts with label short straddle. Show all posts
Sunday, December 25, 2016
Saturday, June 11, 2016
Short straddle in BHEL and BankNifty
This strategy requires that you sell both call and put options of the same strike price for the same expiry date. This strategy makes profit because of the decay in premium with time. Short straddle can be used if you know where the stock is going to end.
First column shows the underlying price.Other columns shows the premium of call and put options combined for the strike price mentioned in the top.
BHEL
|
125
|
120
|
130
|
115
|
110
|
114.85
|
15.55
|
14.05
|
18.25
|
12.45
|
13.35
|
113.85
|
15.7
|
14.15
|
18.9
|
13.65
|
13.5
|
116.45
|
15.2
|
13.5
|
19.35
|
13.35
|
14.65
|
116.85
|
15.15
|
13.05
|
17.95
|
12.9
|
14.35
|
112.85
|
15.9
|
13.8
|
18.3
|
12.8
|
12.65
|
113.9
|
15.45
|
13.15
|
19.85
|
12.05
|
12.55
|
119.25
|
12.35
|
10.95
|
17.85
|
11.1
|
12.55
|
122.8
|
9.75
|
9.65
|
10.85
|
11.3
|
14.95
|
127.45
|
9.15
|
11
|
9.2
|
14.4
|
18.5
|
127.3
|
8.2
|
10.25
|
8.35
|
14.05
|
17.65
|
133.65
|
10.75
|
14.3
|
7.7
|
18.9
|
23.65
|
132.2
|
9.65
|
13.25
|
6.85
|
17.35
|
20.95
|
132.95
|
9.85
|
14.15
|
6.8
|
17.65
|
23.6
|
128.9
|
6.9
|
10.55
|
5.9
|
14.65
|
19.15
|
127.55
|
5.7
|
8.55
|
5.15
|
12.8
|
18.7
|
125.65
|
4.15
|
6.9
|
5.4
|
10.7
|
15.35
|
129.15
|
4.6
|
9.2
|
3.15
|
15.05
|
20.25
|
127.75
|
3.85
|
8.3
|
2.6
|
13.3
|
19.05
|
125
|
0.1
|
5.05
|
4.9
|
9.85
|
15
|
For 125 strike price, the combined premium went from 15.55 to 0.1.
You can even sell for more than 2-3 strike prices and take the advantage or you can apply this strategy on 2-3 stocks.
For strike price 120, 125 and 130, combined premium = 47.85
and at expiry premium = 10.05.
Short straddle on Bank Nifty
Strike Price CE+PE ====>
| Banknifty |
16500
|
17000
|
17500
|
16716.9
|
849
|
1142
|
991.65
|
16795
|
850
|
1095
|
910.85
|
16543
|
763
|
1083
|
1041.5
|
16388.7
|
739.4
|
1118.8
|
1138.3
|
16274.25
|
702.05
|
1124.1
|
1217
|
16281
|
659.95
|
1039.95
|
1173.35
|
16296.6
|
642.45
|
1017.9
|
1163
|
16686.1
|
621.7
|
803.4
|
858
|
16784.95
|
640.05
|
780.1
|
767
|
16754.45
|
626.55
|
800.9
|
811.25
|
16923.7
|
698.05
|
796.05
|
657
|
16716.9
|
564
|
730
|
829
|
16737.55
|
540.15
|
672.4
|
749.4
|
16762.75
|
526.9
|
644.8
|
746.5
|
16728.95
|
497.3
|
608.6
|
762.45
|
16565.25
|
420
|
602
|
949.6
|
16481.45
|
323
|
481
|
973.55
|
16407.55
|
236.3
|
406.4
|
1096.55
|
16456.65
|
176
|
257
|
991.4
|
16997.45
|
512.45
|
516.25
|
494.1
|
17359.3
|
841.55
|
841.6
|
114.25
|
For 17500, combined premium went from 991 to 114.25.
One of the drawbacks of this strategy is if the stock made a large move in any direction then you will be in loss and it requires a large margin to execute.
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