I am trying out a strategy, that I hope will give me 5% per month. I ask the seniors here what they think.
The strategy is not new. It is like a condor. Basically, look at Nifty futures and sell call option at nifty plus 200 and sell put option at nifty minus 200. Cover by buying call at nifty plus 500 and buy a put at nifty minus 500. Your maximum loss = 300 points
Every time nifty moves by 100 points, adjust the condor to once again get nifty +/- 200 and nifty +/- 500. Wait till expiry and enjoy the premium.
This is nothing new. But it may appear that the 300 point "loss band" on either side is very risky. It is. This is my logic.
During market hours, adjusting the position actively ensures that we are not getting hit by the risk. Problem comes with gap up, gap down. I have done a back testing of 600 trading days. There was only one large gap down in those days (at 250 points ) and 1 large gap up at 175 points. So basically, because of back testing, I can say that max loss should be 50 points, (provided future is like the past). It will happen rarely. Incidentally, while back testing, I used percent deviation rather than absolute deviation because there were times when Nifty was 6000 only.
Now comes the question, why limit max loss to 300? When historically it has been about 50? It is because I would like peace of mind. What if terrorist plays some big mischief somewhere and Nifty goes in free fall during opening session? 300 point loss once in a while I can take.
What do the seniors think? Right now I am testing this on NSE "pathshala" simulator with real prices but imaginary rupees
Thanks for your valued feedback in anticipation
Amy
The strategy is not new. It is like a condor. Basically, look at Nifty futures and sell call option at nifty plus 200 and sell put option at nifty minus 200. Cover by buying call at nifty plus 500 and buy a put at nifty minus 500. Your maximum loss = 300 points
Every time nifty moves by 100 points, adjust the condor to once again get nifty +/- 200 and nifty +/- 500. Wait till expiry and enjoy the premium.
This is nothing new. But it may appear that the 300 point "loss band" on either side is very risky. It is. This is my logic.
During market hours, adjusting the position actively ensures that we are not getting hit by the risk. Problem comes with gap up, gap down. I have done a back testing of 600 trading days. There was only one large gap down in those days (at 250 points ) and 1 large gap up at 175 points. So basically, because of back testing, I can say that max loss should be 50 points, (provided future is like the past). It will happen rarely. Incidentally, while back testing, I used percent deviation rather than absolute deviation because there were times when Nifty was 6000 only.
Now comes the question, why limit max loss to 300? When historically it has been about 50? It is because I would like peace of mind. What if terrorist plays some big mischief somewhere and Nifty goes in free fall during opening session? 300 point loss once in a while I can take.
What do the seniors think? Right now I am testing this on NSE "pathshala" simulator with real prices but imaginary rupees
Thanks for your valued feedback in anticipation
Amy
Monthly Income Strategy - What do you think?
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