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 Put Diagonal Spread to Capture the Downside Odds

41 sec read

The most important thing is taking a view and riding with options strategy is the breakeven level. Faster the breakeven levels better the odds of risk-reward ratio. Diagonal Spreads has a faster breakeven with controlled risk and limited reward.

Trade Expectation: Nifty to touch the freak low 10800 as explained in the How to Design a Bearish Hedged Bear Put Spread article. Nifty has been hovering around psychological reference around 11000. Any Acceptance below 11000 can test towards 10800 and 10750 respectively.

Bearish Put Diagonal Spread

Bearish Put Diagonal Spreads are used to take a mild bearish view with limited risk and limited reward. Where the main position is the long dated option. In this example 11050PE Put Long 13th Aug 2020 expiry considered for long dated option which is hedged with short dated option by shorting 11750PE Put short 06th Aug 2020 expiry to create a Put Diagonal Spread.

Buy 11050PE – 13th Aug 2020 – Rs 173.70/lot
Short 10750PE – 06th Aug 2020 – Rs 12.70/lot

Lower Breakeven : 11017

Profit Expectation : 10K – 13K

Max Profit Potential: 13,432 per set

Max Downside Risk : 12071

Margin Required : 22,071 (Approx)

What if Scenario on Expiry

Update at 9.30a.m

Closing the Put Diagonal Spread on Losses – 5925/set

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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