Yash Mehta

Yash Mehta

18-11-2022

13:30

Option trading is tough as there are many strategies to learn. Sharing 6 Advanced Option Strategies for free that you can use based on different market view (sold as a โ‚น 50,000 course!). Shared a bonus trading strategy at the end that has good accuracy. A thread ๐Ÿงต:

We have shared 6 basics option strategies already. You can refer to the below thread to clear your basics. Now let's try out different permutation and combination to understand advanced option strategies that can benefit you in trading.

1/ Put Calendar Spread This means selling put option of current expiry and buying same strike put option of next expiry. Nifty Spot is 18400. I will sell 18400 PE of current expiry and buy same strike option of next expiry. Payoff is attached below.

Let's decode above position. Payoff is similar to Iron Fly where profit is maximum at 18400. This is because Theta decay of current expiry will be more than the next week expiry. Also, Risk:Reward is quite favorable here, but Probability of Profit reduced.

2/ Call Calendar Spread This means selling Call option of current expiry and buying same strike Call option of next expiry. Nifty Spot is 18400. I will sell 18400 CE of current expiry and buy 18400 CE of next expiry. Payoff is attached below.

Both these strategies looked like neutral strategy, just like Iron Fly. Let's modify it more.

3/ Call Cross Calendar Spread: This means selling ATM Call option of current expiry and buying OTM Call option of next expiry. Nifty Spot is 18400. I will sell 18400 CE of current expiry and buy 18600 CE of next expiry. Payoff is attached below.

4/ Put Cross Calendar Spread: This means selling ATM Put option of current expiry and buying OTM Put option of next expiry. Nifty Spot is 18400. I will sell 18400 PE of current expiry and buy 18200 PE of next expiry. Payoff is attached below.

Above 2 strategies looks like directional (bullish/bearish). Payoff is looking like skewed because of less theta decay in next week expiry. Also, profit is maximum near ATM region, and it decreases as options moves away from ATM.

5/ Cross Calendar Iron Fly: This means selling ATM Put and Call option of current expiry and buying OTM Put and Call option of next expiry. Nifty Spot is 18400. I will sell 18400 PE and 18400 CE of current expiry and buy 18200 PE and 18600 CE of next expiry.

6/ Cross Calendar Iron Condor: This means selling near ATM Put and Call option of current expiry and buying OTM Put and Call option of next expiry. Nifty Spot is 18400. I will sell 18200 PE and 18500 CE of current expiry and buy 18000 PE and 18700 CE of next expiry.

Bonus Strategy: Iron Fly on Multiple Strike For any expiry, select three strikes above Calls and below Puts the ATM strike for Nifty that are in multiples of 100. For example if Nifty Spot is 18400, then select 18400 CE, 18500 CE, 18600 CE and 18400 PE, 18300 PE, 18200 PE.

Now short all this options and buy 500 points away hedges from ATM to hedge your position. So in the above example, hedge will be 18900 CE and 17900 PE and 3 units will be bought. All trade will be done in current week expiry. Let's see the payoff now.

So this is the details. Max Profit here is Rs 21,000 (12% RoI/week) Margin will increase to Rs 1.8 lakh as we are shorting multiple options. But you will be at breakeven in Nifty options as long as it is in range of 18155-18645 (500 points range). Isn't this strategy simple?

Now what will be the exit strategy here? 1. If Breakeven levels are hit, then you can exit. 2. If 75% of the max profit is realized, then you can exit your position. Don't wait for max profit. Also, you can do backtesting and if you are convinced then only try this strategy.

That's all about Advanced Option Trading Strategy that you can use, as all are risk defined. If you found this useful, please RT the first tweet. Also, for live trading and stock market related updates, you can join our Telegram Channel โคต๏ธ



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