Options Trading Adjustments Simplified!
hello hello friends. I am your friend Vivek Bajaj. Founder of Stockedge and elearnmarkets. I hope you are liking our face2face series because it is not only me but my whole team behind it. And also the guest speaker for the effort. So I will not take the full credit. from the time it starts to the time it releases, there is a lot of effort. If you see then every video has English transcripts, that takes so much time and effort.
the whole process takes a lot of time, so I will not take the whole credit. The entire team and my entitled guest. so thank you so much for accepting our content and spreading it if you are here for the first time then face2face is revolutionizing financial knowledge free of cost so we have recorded many videos, if you are watching this for the first time then watch this for sure and also the previous videos on this channel. So watch it in your own time. so we will continue face2face version 2 with Raghu. So in the previous part, we discussed some strategy and now we will talk about options adjustment. so Raghu will teach us today. Last time we did iron condor and this time we will do another strategy with option adjustment. So Raghu! Hi Raghu! Hi! Glad to be back. The first video got a tremendous response and everyone was waiting for the second one. Some even told me to shoot the 3rd part but let us shoot 2nd.
even I got a lot of queries from your viewers in face2face. calendar strategy in options or in expiry trading? yes exactly I will request you all to watch the first video for more clarity. Let me introduce you again that Raghu is the founder of Opstra. It is a well-known company for all traders. so before we start just tell us about you and your background. Where are you and what are you involved in? Currently, I am living in Milan Italy. I am living here for 13 years. It's in the cancer field. Oh. This is actually news for me. I was doing research in cancer field, and then I came to India for some reason. so you are a commerce graduate with a finance background. But we need your trading knowledge.
So I will make you the presenter, and if you don't mind then speak in Hindi and we will do the English transcript. so friends, last time we talked about options strategy for retail investors in which we talked about iron condor so whatever you want to know about it I will tell you everything calendar spread involves the selling and buying of options meaning it has different periods for buyingand selling we say that because we use two different options for expiry and with the same option, you have to buy. So the back month will be next month So I will tell about calendar spreads through monthly options there are many variations, but we use calendar spread also, tell us about next week. We will sell it by expiry. all the stocks are stable and sideways it is difficult in calendar spreads because the liquidity is not so much so it is a beneficial strategy, so this is a mega strategy and I will tell you why then it enters this problem, and when the volatility and vix falls down then it becomes a problem so we don't take a lot of risks. So let's go and check the example of calendar spread strategy this is 15,700 now you can sell it I will tell you why do I prefer put a calendar strategy over call calendar strategy so this is your calendar strategy, This has 2 different expiry so how do we generate the payoff, and if we generate on the expiry..what will be the payoff? this is a risk defined strategy, and the maximum loss is the difference between the two we don't know that it will increase or decrease in the future so it is difficult to even predict it's break-even for the same reason two I have already told you, when the expiry will be close it will start decreasing the second factor is vega, in the next expiry it gets down in the calendar strategy the more no of days equal to more expiry so the option in the back month, the vega should always be more the strategy of PnL increases by 400 rupees one is vega, normally it is a delta neutral strategy so let's assume 40,000 is the capital requirement, so even that is a defect so these are the characteristics and the capital requirement why is it changing all the time, maybe the problem is in the software now I will show you a what-if scenario when it increases, automatically the provision also increases assume 20% falls tomorrow, then what will happen so you need to take this consideration that what can happen the current conditions show for the calendar strategy you can do candle searching and IV scan this is very simple, I will show you a NIFTY IV chart now what this does is.
for how many days it is up, it all depends on this so only 3% of days. Can we only compare it to a daily basis if you see then during corona, this was the situation it went up to 100, so there was not a single day that let the IV go up it is not necessary that it will always happen like this but still, you can do it if this happens compared to this then it will happen actually, this happened in the last 2 months, in the last 1 year if you want to go forward then you should consider these 2 points so this is the inside story of the calendar spread so let's check the entry positions, and the expiry on the front in the weekly option, you have to take 10-day expiry and this is my exit rule, which you can change and modify so let's assume it is 40K so for traders, this is a very good opportunity because the capital requirement is not that much so gamma risk is that your game is going too fast so to avoid that we exit long back more close you go, the theta to the expiry starts increasing and the answer is gamma, gamma really manages with the delta we try that let them go till the last day of expiry we will also see the examples we will do an urgent survey, roll out and roll down another adjustment method is that you can rollover this time I will talk about the other strategy, super simple calendar spread that strategy we used, we can take down here and use before that, I will show what I did 1 year back now you see the return, overall 82% in the last I can show you the examples in 2 different ways so first let's go-to options so we will take it as 14,300 we will buy June's expiry your stop loss is 20% off, so you decide the purchase so now we will just close it this is the expiry it will be 15,000 but you have to exit on Monday before the expiry so now your Monday is here, so we can exit so this one is very simple because it only happens once and now you buy now this is your one trade. Vivek ji you were saying now I will tell you how that happens here we have taken a drop and it will be the same for march now let's go ahead and have a look at the beginning of the expiry, there can be a huge premium so you will have to adjust again what is the grey line for..oh I got it so it is fine it if goes a little here and there so we will see the strategy we will keep this close your voice is a little breaking. Yes it goes from here and then goes from there
we will try that we are close to underline price how are you able to see this? so we started on 25th, and this is January now see this is such a big gap down and then from there, we will stretch so you saw all this in an easy way especially options adjustments I will tell you, the adjustment strategy is very simple so this is different from others so this was the trick that how do you use this strategy so if you chose put then you have to use put price if you take put and the market goes down, then your break-even increases when the market falls, then this one increases more so this is how it goes, call and put if I take both call and put and then the expiry, then how? I understand both the strategies but I am talking about the curve if you are able to manage then yes