Rajandran R Telecom Engineer turned Full-time Derivative Trader. Mostly Trading Nifty, Banknifty, USDINR and High Liquid Stock Derivatives. Trading the Markets Since 2006 onwards. Using Market Profile and Orderflow for more than a decade. Designed and published 100+ open source trading systems on various trading tools. Strongly believe that market understanding and robust trading frameworks are the key to the trading success. Writing about Markets, Trading System Design, Market Sentiment, Trading Softwares & Trading Nuances since 2007 onwards. Author of Marketcalls.in and Co-Creator of Algomojo (Algorithmic Trading Platform for DIY Traders)

Bearish Option Strategy: Nifty Hedged Puts – June 2020 Series

54 sec read

Structurally June 2020 series is having a monthly gap and that is a bearish odds which brings the possibility of Nifty Futures testing sub 9600 levels to close the gap. The monthly gap is primarily created post the announcement of GDP data

In-Order to play for this Monthly Gap one can consider using ITM Puts hedged with x2 times of OTM Short calls. Thing could bring some cushion for traders to manage the theta decay in the Put Options.

Entry

Buy 1 lot of 10100PE (ATM Puts) – 25th June 2020 Expiry at 274.50/Lot

Hedge Protection

Sell 2 lot of 10500CE (OTM Calls) – 25th June 2020 Expiry at 105.60/Lot
Buy 2 lots of 11000CE (OTM Calls) – 25th June 2020 Expiry at Rs27.70/Lot

Total Margin Required for Hedged Position : 82,986/-

Nifty LTP : 10107

Strategy Breakeven Point : 9981
Exit on Nifty Closing the Monthly gap (i.e Nifty Futures testing 9557 levels)

Strategy Risk Level : Moderate Risk Level and Risk increases if Nifty starts moving above 10500 level.

What if Scenario on Expiry Closing

Nifty Spot ExpiryExpiry DateProfit/Loss
9,000.0025-Jun-2073,597.50
9,050.0025-Jun-2069,847.50
9,100.0025-Jun-2066,097.50
9,150.0025-Jun-2062,347.50
9,200.0025-Jun-2058,597.50
9,250.0025-Jun-2054,847.50
9,300.0025-Jun-2051,097.50
9,350.0025-Jun-2047,347.50
9,400.0025-Jun-2043,597.50
9,450.0025-Jun-2039,847.50
9,500.0025-Jun-2036,097.50
9,550.0025-Jun-2032,347.50
9,600.0025-Jun-2028,597.50
9,650.0025-Jun-2024,847.50
9,700.0025-Jun-2021,097.50
9,750.0025-Jun-2017,347.50
9,800.0025-Jun-2013,597.50
9,850.0025-Jun-209,847.50
9,900.0025-Jun-206,097.50
9,950.0025-Jun-202,347.50
10,000.0025-Jun-20-1,402.50
10,050.0025-Jun-20-5,152.50
10,100.0025-Jun-20-8,902.50
10,150.0025-Jun-20-8,902.50
10,200.0025-Jun-20-8,902.50
10,250.0025-Jun-20-8,902.50
10,300.0025-Jun-20-8,902.50
10,350.0025-Jun-20-8,902.50
10,400.0025-Jun-20-8,902.50
10,450.0025-Jun-20-8,902.50
10,500.0025-Jun-20-8,902.50

The strategy has protection up to 10500 levels. If Nifty goes beyond 10500 levels it requires exit on the hedge until then, No strategy adjustment is required.

Update on 12th June 2020 (9.18a.m)
Strategy Status : Closed

Strategy made net gain of +385.6 gain points i.e Rs28920/-

Rajandran R Telecom Engineer turned Full-time Derivative Trader. Mostly Trading Nifty, Banknifty, USDINR and High Liquid Stock Derivatives. Trading the Markets Since 2006 onwards. Using Market Profile and Orderflow for more than a decade. Designed and published 100+ open source trading systems on various trading tools. Strongly believe that market understanding and robust trading frameworks are the key to the trading success. Writing about Markets, Trading System Design, Market Sentiment, Trading Softwares & Trading Nuances since 2007 onwards. Author of Marketcalls.in and Co-Creator of Algomojo (Algorithmic Trading Platform for DIY Traders)

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