When to Execute this Strategy
When the Market Expectation is Bearish to Sideways or you are expecting choppy environments with a clear resistance and supports and at the same time you want to avoid if any extreme downside or upside risk as you are dealing with high volatile and uncertain environments.
Bear Call diagonal spread creation
Short 1 lot of 9250PE – Current week expiry @ 124.3/lot
Long 1 lot of 9400PE – next week expiry @ 277.50/lot
Breakeven levels are at 8505 – 9463 levels and the strategy also has limited risk and limited reward style which suits execution especially after a big gap down day where you have to come up with controlled thinking.
Reward will be maximum if Nifty Spot expires at 9250 levels.
What-If Scenario
| Underlying | Exit Date | Profit/Loss | PNL % |
| 8,500.00 | 14-May-20 | -75.72 | -0.66% |
| 8,550.00 | 14-May-20 | -6.07 | -0.05% |
| 8,600.00 | 14-May-20 | 88.11 | 0.77% |
| 8,650.00 | 14-May-20 | 213.46 | 1.86% |
| 8,700.00 | 14-May-20 | 377.78 | 3.29% |
| 8,750.00 | 14-May-20 | 590 | 5.13% |
| 8,800.00 | 14-May-20 | 860.12 | 7.49% |
| 8,850.00 | 14-May-20 | 1,199.13 | 10.44% |
| 8,900.00 | 14-May-20 | 1,618.79 | 14.09% |
| 8,950.00 | 14-May-20 | 2,131.41 | 18.55% |
| 9,000.00 | 14-May-20 | 2,749.53 | 23.93% |
| 9,050.00 | 14-May-20 | 3,485.60 | 30.34% |
| 9,100.00 | 14-May-20 | 4,351.57 | 37.87% |
| 9,150.00 | 14-May-20 | 5,358.52 | 46.64% |
| 9,200.00 | 14-May-20 | 6,516.28 | 56.71% |
| 9,250.00 | 14-May-20 | 7,833.10 | 68.17% |
| 9,300.00 | 14-May-20 | 5,565.34 | 48.44% |
| 9,350.00 | 14-May-20 | 3,467.28 | 30.18% |
| 9,400.00 | 14-May-20 | 1,540.96 | 13.41% |
| 9,450.00 | 14-May-20 | -213.86 | -1.86% |
| 9,500.00 | 14-May-20 | -1,799.63 | -15.66% |
| 9,550.00 | 14-May-20 | -3,220.93 | -28.03% |
| 9,600.00 | 14-May-20 | -4,484.20 | -39.03% |
Entry
Short 1 lot of 9250PE – Current week expiry @ 124.3/lot
Long 1 lot of 9400PE – next week expiry @ 277.50/lot
Exit on Expiry on 14th May 2020
Short 1 lot of 9250PE – Current week expiry @ 107/lot
Long 1 lot of 9400PE – next week expiry @ 331/lot
Net Gain from
Short 1 lot of 9250 – Rs 17/lot
Long 1 lot of 9400 – Rs 54/lot
Total Gain = 71 points x 75 = Rs5325