a_shah2

Long Strangle - NIFTY

NSE:NIFTY   Nifty 50 Index
Hello, in the current market it is impossible to catch the trend, so plz             do not do it. What's guaranteed over next few days and mainly this week due to budget is the volatility . So one need to be long volatility . I know this can be done by buying VIX             future but obviously that has a big ticket size so not advisable for most investors.
So what we do is buy long options. Remember volatility is directly related to option price. Higher the vol, higher the option price (both call and put). But again we are not sure of the direction, so we should buy both a call and put. Now which strike to choose? It has to be out of money for feb expiry. This is a classic long strangle.
Buy any strike with equal distance from NIFTY             at your point of trading. So e.g., if NIFTY             is at 11000 then do +/-200 points strike on both direction (delta neutral to an extent). So 11200 call and 10800 put. You can choose your own range based on time of trading but important to remember that you choose out of money strike.
Since this is a pure vol trade ( vega             capture) you should not hold it for more than 7-8days (max 12th Feb). This is because as the expiry is near volatility ( vega             ) losses its significance. Close the trade when vol spikes and you see one of the side of trade is significantly higher than other giving an decent overall profit.

All the best and hope the trade proves to be rewarding for you.

Mr. Shah
Comment: Hello, for anyone who had implemented the idea above, you would have experienced a very decent profit (~30-50%) by now on your long puts which would have more than offset the loss on the long call.
I see the weakness is still on cards but its losing the momentum by each day. I suggest covering your long puts and keep holding on long call for now. On long call, you should look to square it off over next 10days wherein I expect couple of huge upside nifty moves during this period.
thanks!
Comment: Good day to cover yoyr long calls. This might be the last lift before the sell off for this month.
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