Nifty option strategy – negligible loss unless IVs rise by leaps and bounds

If bears out there still expect Nifty to drop, lets say by 400 points or so by April expiry. Here is an interesting strategy to consider.

First and foremost, loss is bare minimum.

Strategy set up –

Short Nifty futures (Apr) @ 7740

Long Nifty 7500 Call (Apr) @ 250

Short Nifty 6800 Put (June expiry) @ 26.50

Here is the payoff chart


Chart –

Yellow line – pay off 10 days from now

Blue line – April expiry

With IVs at 17 on April expiry, there is negligible loss. 10 days from now we are in profit if market starts falling.

The only risk is IVs let say jump to 25 plus levels in which case on expiry the June PE option value will spike



Leave a Reply

Fill in your details below or click an icon to log in: Logo

You are commenting using your account. Log Out /  Change )

Google+ photo

You are commenting using your Google+ account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )


Connecting to %s