Hello folks
The title may seem bit confusing ... agree ... it is not a std term.
Well, there are vertical speads (same month, different strike prices) and there are horizontal spreads (successive months, same strike price). If you make a combo of these two, what you get is "SLOPING SPREAD".
How to set up?
This is ideally set-up around 1st of every month.
Bullish direction: Sell Put of current month which is around 250 and buy put of next month which is around 150 (net credit inflow 100). Whenever Nifty rises about 200 points from this day, get out with abt 80 points profit.
For bearish Nifty: Same as above , replace Put with Call.
In the current month, a bearish spread was created on on 4-OCT which was squared up on 17-Oct when Nifty fell to 8550.
Actuals: On 4-Oct the OCT 8600 ce was sold at 250 and NOV 8700ce was bought at 140.
On 17-Oct bought OCT ce at 70 (profit 180) and sold NOV ce at 210 (loss 70). Net profit 110 (after removing expenses it is Rs 7500 on investment of 50k which is 15%). Agree that such sharp fall will not occur every month, but still 8% looks good in first leg (first 15 days of a month).
It is also possible to set up one more spread in the remaining part of the moth.
Live Example with bullish directional call - Today at 12:50 pm sold one lot of 8800pe OCT at 160 and bought one lot of 8600 pe NOV at 110 (net inflow 50).
Payoff for various OCT expiry levels of Nifty:
8800: OCT pe profit 160, NOV pe estimated price that day: 30, loss 80. Net profit 160-80 = 80
8700: OCT pe profit 60, NOV pe estimated price on that day: 80, loss 30. Net profit 30
8600: OCT pe loss 40, NOV pe estimated price on that day: 140, profit 30. Net loss 10.
Considering that there are only 10 days to go for expiry and investment is about 50k, a profit of even 40 points is 3 k (6%) which is quite good.
Has anyone of you been practicing SLOPING spreads and if yes, then what is the experience? If the directional call goes wrong, the loss is small.
Await your responses.
pos_trader
The title may seem bit confusing ... agree ... it is not a std term.
Well, there are vertical speads (same month, different strike prices) and there are horizontal spreads (successive months, same strike price). If you make a combo of these two, what you get is "SLOPING SPREAD".
How to set up?
This is ideally set-up around 1st of every month.
Bullish direction: Sell Put of current month which is around 250 and buy put of next month which is around 150 (net credit inflow 100). Whenever Nifty rises about 200 points from this day, get out with abt 80 points profit.
For bearish Nifty: Same as above , replace Put with Call.
In the current month, a bearish spread was created on on 4-OCT which was squared up on 17-Oct when Nifty fell to 8550.
Actuals: On 4-Oct the OCT 8600 ce was sold at 250 and NOV 8700ce was bought at 140.
On 17-Oct bought OCT ce at 70 (profit 180) and sold NOV ce at 210 (loss 70). Net profit 110 (after removing expenses it is Rs 7500 on investment of 50k which is 15%). Agree that such sharp fall will not occur every month, but still 8% looks good in first leg (first 15 days of a month).
It is also possible to set up one more spread in the remaining part of the moth.
Live Example with bullish directional call - Today at 12:50 pm sold one lot of 8800pe OCT at 160 and bought one lot of 8600 pe NOV at 110 (net inflow 50).
Payoff for various OCT expiry levels of Nifty:
8800: OCT pe profit 160, NOV pe estimated price that day: 30, loss 80. Net profit 160-80 = 80
8700: OCT pe profit 60, NOV pe estimated price on that day: 80, loss 30. Net profit 30
8600: OCT pe loss 40, NOV pe estimated price on that day: 140, profit 30. Net loss 10.
Considering that there are only 10 days to go for expiry and investment is about 50k, a profit of even 40 points is 3 k (6%) which is quite good.
Has anyone of you been practicing SLOPING spreads and if yes, then what is the experience? If the directional call goes wrong, the loss is small.
Await your responses.
pos_trader
SLOPING spreads
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