Rajandran R Founder of Marketcalls and Co-Founder Algomojo. Full-Time Derivative Trader. Expert in Designing Trading Systems (Amibroker, Ninjatrader, Metatrader, Python, Pinescript). Trading the markets since 2006. Mentoring Traders on Trading System Designing, Market Profile, Orderflow and Trade Automation.

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 Founder of Marketcalls and Co-Founder Algomojo. Full-Time Derivative Trader. Expert in Designing Trading Systems (Amibroker, Ninjatrader, Metatrader, Python, Pinescript). Trading the markets since 2006. Mentoring Traders on Trading System Designing, Market Profile, Orderflow and Trade Automation.

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