BATMAN OPTION TRADING STRATEGY | Regular Income from stock market option trading
Hello friends, Welcome to Day Trader Telugu. Like the thumbnail, this is a batman strategy. This is also called as "Broken wing butterfly". Actually, I know this strategy as a broken wing butterfly.
people requested to explain this strategy so, I've googled it wondering what the batman strategy is and got to know that it is nothing but a broken wing butterfly strategy. We can use this strategy on both High Vix or low Vix conditions. We can gain profit when it is in the market's range-bound, and also if the market moves a bit top-side and down-side The probability of success is high in this strategy. the possibility of gaining profits is high in this strategy. I can't state 100% profit but most of the cases are profitable.
this strategy has been profitable from the past few weeks in the back-test we conducted and only in very rare cases, this strategy ended in loss and that too with limited loss If you search this strategy on google It will be something like selling At the money or Buying Out of the money But in this video, I will explain which premiums to select and how far to reach to trade the remaining options with rules When will I start the Equity series? there are comments below like, "Like this comment for Equity series" people are liking those comments are eager for the Equity series I conducted a poll about F&O or Equity before starting this series you voted for F&O If I start Equity series by public demand even before completing this series this series's content can be compromised like making videos in a hurry there are some more important strategies in this to complete and after uploading these F&O important strategies we can start the Equity series with a satisfaction I promise that we will try to give our best in the Equity series I will try to make you a Pro-Trader even If it's psychology or price action In few weeks, after completing the Options strategies, we'll start the Equity series this strategy particularly is not only for knowledge This can be applied in the market. I said it is Broken Wing or Batman strategy right? If you remember we discussed Long Call Butterfly or Long Put Butterfly, anyways, this strategy can be obtained easily with a small change in Long Call/Put Butterfly strategy If you think that our efforts and content are useful to you encourage us by liking the video also, a small reminder, if you want to open a Demat account at any point in the stock market, instead of opening them from the websites, there are channel's referral links in the comments and description below by using these links, It would be helpful for our channel I used to explain the theory and some core concepts related to the strategy before explaining it but the time and energy is being wasted for the beginners and that is misleading the main strategy. so, I'm starting with the main strategy now I'll explain the strategy and rules first and then I will explain its depth in the second half when should this strategy be used? we can use this strategy when we know that the market will be in a certain range bound The main advantage of this strategy is that there won't any Vix's impact on your profit/loss so, as there is no impact with Vix, we can ignore it. this is a weekly strategy and we can move this strategy every week this is not recommended for Intraday but the results can be better on expiry day with Intraday I'm taking a basic example you will observe buying and selling at multiple stages related to Bank Nifty while executing this strategy, there are 2 parts. Buying and Selling
If you observe the selling part, we'll sell each lot in two parts I'll also explain at which level we should be selling Let's say you are selling two Calls if the sold one is 90 premium, we'll buy one lot that is a bit higher than 90 which can be 100 or 110 we are selling two lots here. we are buying the one which is slightly greater than 90 premium and also a premium that is far from 90, say 30 is also bought in the same way, we'll select a Put with a premium we'll sell two lots and buy a Put that is a bit higher than the premium sold and buy another Put that is far from the sold premium I've written not equal distance here I'll explain this later about this not equal distance Observe the rules carefully. The first rule may not be very important we will take a base point on a Friday to take our positions try to enter the market within 10am Nos, the important thing is, which Call and Put must be sold? as the present Vix is at 13 according to it, we are selecting 90 premium In each Call & Put we are selling 2 lots. 2 lots of 90 premium Call and 2 lots of 90 premium Put are sold I'm writing this Vix here because, If the Vix falls drastically in the future don't sell the Vix even then if the Vix is falling, you should decrease the premium to be selected too. If the Vix is 10, then take premium as 60 If the Vix is increasing to 30, then you can take the premium as 100 or even 130 Then how to select accurately about the premium corresponding to Vix the simple logic is, If you are selecting the 90 premium at present how far are you going from the present market If the Vix is falling and if you select 90, then there won't be such distance If you take 60 instead of 90 then the same distance can be maintained and If the Vix is increasing, from the present point, let's say Bank Nifty is 1000 points I'm taking this as an example If the Vix is increasing, then this will be around 1500 also then you should understand that as the Vix is increasing, the premium must be near 1000 Ultimately, we are trying to get to a distance from the present trading point, which is a safe way If the market is moving rapidly to protect from that sudden movement of the market, we maintain a distance from the present point I'm relating everything to Bank Nifty. So, if we select 90 in accordance with the present Vix compared to other premiums, safety can be maintained on this If you want to decrease your risk even more, then you can take the premiums as 60 upon taking some risk-reward, I selected 90 but remember, If the Vix is decreasing, decrease the premium too you can understand all these while practicing, how far the present distance is Depending on the Vix fluctuations, premiums and the distance from the market must be adjusted We'll buy a Call option and a Put option which option can be bought? is there a particular premium to buy? there is no such thing as we have already sold 2 lots of 90-90 premiums now, Call and Put in the Call option chain, select the premium that is a bit more than 90 and buy that Call option similarly, select a Put that is a bit more than 90 premium then buy it after that, I have written optional here, you may get confused from it so, I'll explain it later firstly, 2 lots of each Call & Put are sold Next, one lot of each Call & Put is bought and now we are buying another lot, but this is optional which I'll explain it later we are buying lots one by one we are moving 500 points far from the selling point as we sold 90 premium, suppose, 36000 Call is at 90 premium from here, we'll move 500 points away which means we'll go to 36500 we'll buy a lot Call here I'll show all of this to you and don't get stressed by all these, just pay attention to it as I will repeat it multiple times and at the end of the video, your doubts will be clarified with this 4th step, our strategy's structure will be completed after applying the strategy, we'll exit at only 2 conditions we'll exit when we get 25% of the maximum profit that can be obtained from that strategy never focus on 100% profit as It is almost impossible I'll show why is it like that in the payoff graph but remember this, we'll exit only at 25% profit of the maximum profit this is not a lossless strategy. There is also loss in this strategy
when the market is moving against us, there is a point called trigger point I'll show that point in the payoff graph we'll exit at that point if you are a beginner and you're following our channel and practicing and trying to earn money from these strategies for this strategy, don't make any sort of adjustments I'm asking you this because, If you delay making adjustments here the profit is generally less here and that may turn into risk now if the market is volatile or there is a market reversal, ultimately It will create pressure on you I suggest you avoid adjustments for this starategy we'll exit at 25% profit or at the trigger point beginners avoid making any adjustments in this video never think that adjustments must be made in every strategy because sometimes it can be a risk and for every adjustment you make, the capital needed will be high and it is important to observe the returns for the capitals we are investing for adjustments in most cases, we can generate 6% returns per month. I'll explain it how don't expect high returns like 20% or 30% from this strategy like the returns from Strangle or Straddle risk will be low as well as the return and the chance of you ending up in the loss is very less return will also be less and we'll exit at 25% of maximum profit in most cases, the capital you are investing once you start this strategy and observe the 25% of the maximum profit from this the return on your capital will be nearly 1.2% you can even calculate this suppose the capital is 1 lakh so, 25% of maximum profit for this will be nearly Rs.1200
then you can exit the strategy with Rs.1200 the return here is 1.2% as the capital was 1 lakh and the return is Rs.1200 and we don't have to stay there for a week,, the 25% profit can be obtained only in 3-4 days according to our practice and knowledge, 25% profit is achieved in 3-4 days if the market is favorable but in a month, there will be nearly 20 trading days If we are getting 1.2% return per week, monthly we are getting 6% returns after getting 25% profit per week, we'll change to the next week and so on. or if it reached trigger point we'll exit there and enter the next week's strategy let's observe the theory that we just discussed into the reality I'm selecting a weekly contract of Aug 12.
so when should we enter the contract for Aug 12? on Aug 12, the contract will be expired and we have to enter on Friday before 10am so, we have to enter on the Friday Aug 6, before 10am and the expiry would be on Aug 12 the first rule is the entry and the second rule is we have to sell Call and Put which is 90 premium observe here. 90 is at 36900 we are selling 2 lots here I'll show the money invested here later Next, for the Put, look out for 90. there are 83 and 95 here you can sell either 83 or 95. I'm selling 95 just select whichever is near to 90. so I've sold 2 lots of 95 if you look at a part of this strategy, it will look like strangle but now we'll add the remaining after selling the 90, we have to buy Call & Put that are a bit more than 90 we got 90 Call at 36900 and the premium that is higher than 90 is at 36800 similarly in Put, near to 90 is 95 another one is at 108.5 which is at 35000. I'm buying this. so, the premium must be a bit more than the premiums sold we sold it and bought Call and Put with bit more premium the Call we sold is at 36900 and the Put is sold at 34900 from here, we'll move 500 points 500 points away from Call is 36900+500 which means 37400 Call must be bought also, on the Put side we bought at 34900 500 points away from Put side is 34400 which is nearly at 48.8. we'll buy that one.
now, If you observe. you can see a shape like Batman I'm zooming it for the better view this is it at present, the market is at 36031 from here, if the Bank Nifty is moving downside 34700 or 37065 topside at the time of expiry if the market is in between, you will be profitable and if the market moved in a single direction, the loss will be limited If you keep ignoring the loss as it is limited, at the end of the quarter, the performance will be effected at some point, we have to exit so, we shouldn't wait for the loss and exit. remember this point let's observe the capital required now I've sold 2 lots of Call and Put and bought the options that are related to them after doing that, Rs.77690 is required to maintain this strategy
but to enter this strategy we'll need Rs.87042 to start but after starting, the money blocked from us is only this. so, we have to count this margin as used and the remaining can be used by us to follow this entire strategy, the amount required is nearly Rs.78000 and the maximum profit from this strategy is nearly Rs.4000 25% of Rs.4000 is Rs.1000 and the capital is nearly Rs.78000
so, 1000/78000 *100 will be the final return percentage so we got a return of 1.28% let's round it off to 1.2% as we may get less in some cases we can achieve this in 3-4 days as we are focussing on the 25% profit of the maximum profit and if we achieved it in 4 days, we have 20 working days in a month so 20/4=5. so, 5 times we can generate returns using this strategy in a month which means, in a month we can generate 6% returns monthly and we'll exit after 25% returns but then what about the trigger point? as we've sold the options 90&90 and bought a bit higher option like selling a 36990 Call, we bought a 36800 Call at 108 when the market reaches and touches 36800, we have to exit then just exit the strategy and start the next week's strategy the buy position that we took after selling at 90 exit at that point and don't wait for the breakeven point breakeven points are considered only for the expiry days here the breakeven point on the topside is 37000 but you have to exit at 36800 only so, the buy positions that we took previously Call side 36800 which was more than 90 and Put side 35000, where we will exit we shouldn't wait for 34735 as it is the breakeven to exit these positions are the trigger points this was for the beginners and just follow this, not what I'm about to tell. I'm now saying Strangle, Straddle, Ion Condor, and especially IronFly If you think you can easily execute the adjustments of Ironfly after watching the videos you can follow that same strategy here you can make the adjustments here and if it is reversed you can exit from there Now, we'll talk about the positives and negatives related to this strategy on most of the strategies, the impact of Vix is essential depending on the Vix fluctuations, the profit/loss relating to the strategy will be impacted but on this strategy the impact of the Vix will be very less the impact will be very minimal but existent though. and from this strategy, we have limited risk and good profits as this has a wide range most of the time, if the market is in the range-bound or neutral we'll end up profitable but the negative is, the number of strike prices we are using to build a strategy and on buying and selling them, the brokerage charges related to them and the slippage while buying and selling which is, at the point of buying the order can change from 35 to 35.5
so, 0.5 is the slippage we cannot buy at the exact price as the buyer and seller have different strike prices, there will be some slippage but if you think about it, the maximum profit earned is nearly Rs.1000 and these charges will be around Rs.3000 to execute all these lots then the net profit will only be Rs.700 we are investing Rs.78000 and the profit is Rs.700 which is nearly 0.9%
so, the monthly net percentage will be 4.5% only but earlier we thought it was 6% but the net percentage after all the charges are executed is 4.5% per month this is another negative. we may think it is 6% per month and after all the brokerage charges the practical net profit per month after all these charges is only 4.5% there are multiple strategies with the same Batman strategy with small changes in which we can improve our profits and nearly 1.5% were reduced due to the charges
we'll observe a strategy that will decrease the charges too we can get that by doing very small changes if we take all of these into consideration, the sold ones are important to us as If this becomes zero, then we can get the profits as we bought the premiums that was a bit higher than that these premiums will be increased even before this goes into negative more than the sold 36900 Call 36800 Call will increase when the market moves topside and if the market moves in a single direction as we already bought at 500 points far from the initial selling point we bought Call & also Put what is the advantage of buying these? In most cases, these will be zero then why should we buy If it's going to be zero? as we know it's going to be zero, lets remove these from the strategy now It would still be Batman strategy but now, It will give us unlimited loss the shape of the graph is still Batman but there will be unlimited loss in this if you observe the range there is a change in the range up to 100 points It is not that exact but the range has been improved In this range too, we can get the profit the profit now will be more than the initial strategy profit to match the sell quantity and buy the quantity, we are buying the options a bit far the main advantage through this is, capital will be reduced the investment earlier was Rs.78000 In this strategy, we have to sell 2 lots of Call and 2 lots of Put and then buy each one premium that is a bit more than the sold one the required amount is Rs.1,90,000 but the broker blocks around Rs.1,81,000 once we enter the strategy the main thing to remember while following option strategies is the returns from the capital for the capital invested earlier, the net return is 4.5% ultimately
overall, we can get 6% but after excluding all the charges the net returns are 4.5% but here, the net return in this strategy is 6% when you follow this strategy In this strategy, we sell 2 lots of Call & Put each of 90 premium and then buy 1 lot of each Call & Put with a higher strike price than the sold one here, there is no balance there are 2 positions in the selling points i.e., Call side and Put side but while buying only one position is taken of Call & Put still, there is no hedge for each sell position here if the market moves in any single direction, there is chance of getting unlmited loss and the capital is also increased. but again, don't take this capital increase as a disadvantage the return from the investment is always important So, the main advantage here is here we can avoid buying extra 2 positions which in turn reduces the charges, slippage and the profit can be increased but the disadvantage is unlimited risk because there will be unhedged position in Call & Put and there will be the impact of Vix and volatility on this strategy because we have extra sell positions finally, at the unhedged positions, due to Vix impact, premiums will be increased If the Vix increases, it will be a disadvantage and the capital also increases if the capital here is high the returns will also be high. so, don't think of it as a disadvantage. when compared to the previous strategy, this is not a big disadvantage here we don't wait for 25% of maximum profit to exit because as we are avoiding 2 buy positions here within 3-4 days, 40% of the Rs.6335 can be obtained if the market is in the desired range so, 40% of Rs.6300 is Rs.2520 which can be collected within 4 days in the worst case
the capital here is Rs.1,81,000 which when percentated, we get nearly 1.39% we can take this as 1.4% but I'm considering it as 1.3% this 1.3% can be obtained within 4 days and this strategy can be executed 5 times in a month
we can get a gross profit of 6.5% but there are charges on them. As we avoided buying 2 positions, the charges will only be 0.5% instead of 1.5% overall, we can gain 6% net profit per month after removing the out of the money hedged positions so,, which strategy should you consider out of these two? if you are a beginner, follow the first one because gap up and gap down will be heavy and you can't manage and another important point is, Maximum profit can never be obtained I will show you that in the pay-off graph. If you observe here, if the market is in the middle, the maximum profit that can be obtained is Rs.1640 when the market is moving upside, at one particular point you can get the max profit and even on the downside, if the market closes at a particular point, you will be able to get the profits so, ignore the maximum profit here while executing the strategy that is the reason, I'm asking all of you to exit at 25% of maximum profit with complete hedged positions if it is Out of the money and you want to remove them, then exit at 40% of the maximum profit there is a logic behind this. Never think to wait to gain more than 25% profit because 25% is the maximum you can earn from that strategy we can move on to the next weeks, and have better capital and higher returns so, from the selling point, we spread 500 points far away and buying Call & Put is optional to you as I said earlier even if you buy them, this is still Batman strategy & this entire strategy can be closed within Rs.78,000
If you want to increase your profits and decrease the charges If you want to improve the returns from 4.5% to 6% then avoid these Buy positions and due to this, there will be a risk of unlimited loss, you should be active and capital is increased to have high returns. for that, we have to avoid buying those options the trigger point in both of these strategies is the same if you are able to make adjustments and can use IronFly, you can apple it here too to our knowledge for this strategy, the advantage by making adjustments is not as great as the next week's strategy so, there is not much importance of making adjustments in this strategy so, Beginners should exit this week and enter the next week than making any adjustments If you are making the complete hedged strategy with Buy and Sell positions aim for 25% of the maximum profit because there will not be profit everywhere there will be only 2 points, where you can exit. so, exit at 25% profit 25% is the maximum but you can exit at 10% or 15% too but the monthly return will be reduced from 4.5% but If you want to gain maximum profit, 25% of the maximum profit is your exit point and move on to the next week This is today's video did you like it? then like it and share it with the beginners if you think this will be useful If you haven't subscribed to this channel take a look at the channel's content, If you think the content is useful to you, subscribe to the channel and hit the bell icon I'll be back with another interesting video. Until then take care JAI HIND.