Options - Bull Spread (Call) Strategy on Nifty / Sensex in Derivatives - In this strategy, one expects markets to go up
Bull spread - call Strategy(definition)
A bull call spread is constructed ...
Bull spread - call Strategy(definition)
A bull call spread is constructed by buying a call option with a low exercise price (K), and selling another call option with a higher exercise price.
Often the call with the lower exercise price will be at-the-money while the call with the higher exercise price is out-of-the-money.
Both calls must have the same underlying security and expiration month.
Example:
Date: July 5th 2011.
Nifty Current Value: 5630
Sell (write) one lot of 5800 Call (28 JUL 2011 expiry) at a premium of 35.
Buy one lot of 5600 Call (28 JUL 2011 expiry) at a premium of 120.
95 Rs (35 - 120) per lot is debited from your account entering the above position. You will make profits if Nifty ends expiry above 5695 (5600 + 95)
Below are the various profit/loss scenarios at expiry
Nifty ends above 5800 - You will make profits of 4000 Rs
Nifty ends between (5695 - 5800) - You will make profits ranging from (0 Rs - 4000 Rs)
Nifty ends below 5695 - You will make losses ranging between 0 Rs to 4750 Rs.
If you are a smart trader, you will get opportunities before expiry to exit the bull spread strategy with decent profits even if Nifty does not rise above 5695.
(write:buy) ratio in the above example is 1:1 and the gap between write and buy contracts is 200 Points in Nifty. You can tweak the (write:buy) ratio and gap to build you own strategy based on your risk appetite.
Note: I did not include brokerage charges in the above example
Any views on this strategy are welcome. Let us know how it works for you.
how to track VIX in realtime?? if VIX dropped even the market movement is there it kills the value.
You can track VIX realtime in nseindia.com home page ... yes, if VIX drops, it will erode the premium ... But if there is enough movement, it will give profits in a hedge or strangle strategy
For prompt reply I am thanking you.
one day NIFTY gave 141 points move up.but CE options gains 30 points +.where it should gain 70 - 80 points.and similarly PE dropped more because there was a premium eating + upside movement.So gain on loss might turn into loss.And lower brokerage won't support the hedger also.In this FII driven NIFTY broken butterfly and delta hedging is looking cool rather than anything.
For prompt reply I am thanking you.
one day NIFTY gave 141 points move up.but CE options gains 30 points +.where it should gain 70 - 80 points.and similarly PE dropped more because there was a premium eating + upside movement.So gain on loss might turn into loss.And lower brokerage won't support the hedger also.In this FII driven NIFTY broken butterfly and delta hedging is looking cool rather than anything.
Thanks And Regards
Last month, VIX was at 30 and premiums were high ... This month VIX is below 20 and premiums are good for options hedge
I have a question regarding the profitability of a Bull Call spread.
I am setting up a bull call spread on NIFTY and I am getting a loss no matter what is the maturity value of NIFTY.
e.g. buy 1 call of 8600 strike at Rs 181 and sell 1 call of strike 8800 at Rs 79. The total payout is Rs 7635.
The maximum gain from the strategy is diff of the two strikes less the difference in option premium times the lot size.
i.e ((8800-8600) - (181-79))*75 = Rs 7350.
This amount that i get back when i square off is LESS than what I paid initially i.e. 7635.
It seems this strategy will result into a loss. Can someone please advise what is going on here? I am quite confused and need some experienced person's advise.
I have a question regarding the profitability of a Bull Call spread.
I am setting up a bull call spread on NIFTY and I am getting a loss no matter what is the maturity value of NIFTY.
e.g. buy 1 call of 8600 strike at Rs 181 and sell 1 call of strike 8800 at Rs 79. The total payout is Rs 7635.
The maximum gain from the strategy is diff of the two strikes less the difference in option premium times the lot size.
i.e ((8800-8600) - (181-79))*75 = Rs 7350.
This amount that i get back when i square off is LESS than what I paid initially i.e. 7635.
It seems this strategy will result into a loss. Can someone please advise what is going on here? I am quite confused and need some experienced person's advise.
thanks in advance.
regards
Millionaire
Assuming Nifty ends at 8900 .... 8600 Call will be 300 and 8800 Call will be 100 .... and you will have a payout of 15K ....
hello sir please tell how to trade option expiry of any stock , index profitably like which stock to select , which info to see etc....
waiting for your precious advice..........
hello sir please tell how to trade option expiry of any stock , index profitably like which stock to select , which info to see etc....
waiting for your precious advice..........
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