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Pran Katariya @KatariyaPran
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Last week had sold the Aug Bnf 25500/28000 Strangle for 261. If it continues up will have to consider an adjustment. Moving CE up 300 will cost 90. Question is whether to move 25500 to 26000 to save 38 or to leave it alone and put more Capital and sell 26kPE to generate 82
Oddly enough because the Premium received was so rich, the positive is still mildly positive.
Adjusted by buying 1 Bnf Future for my 10 lot position and selling 5 26000PE.
Bought another future and sold 4 26500PE
Will move 25500PE up if the index continues up. At the moment Capital allocation is not an issue and even at current price its giving a ROI of almost 2% on Margin. However, this new ASM regulation has thrown a spanner in the works particularly with the Bnf
This is what Position looks like after todays adjustment on the 2 strangles. Capital deployed is roughly 40 lacs with potential ROI of 6.5% with a 70% POP. The T+0 line shows that at least for today no further adjustment should be required for a 100 Point move in either direction
The sharp slope on the downside is caused by the 2 Bnf Futures. Have to be quick to remove them if the Index corrects-maybe by about 100 points.
The Position is now absolutely Delta neutral with a small MTM loss. Even a move upto 28000 should not take the MTM loss to more than 1%. Hoping ICICI Bank doesn't spoil the whole story. Will prepare for life beyond 28000 in more relaxed settings tonight while hoping for a dip
Bnf has gone up 1000 in the last 5 days. Inspite of horrid Results ICICI Bank ADR is up 4%. I remember Jan series ended up 2000 points. Although my BE is still almost 1000 away at 28600, Profit starts falling sharply after 28200. Some Sehwag like measures needed. Suggestions?
My initial thoughts if it touches 27800
Buy 1 future
Move 25500PE to 26000 and 26500 half and half
Buy back 3 28000CE
Sell 3 27000PE
Dont want to pump more Capital into the Trade at this stage.
Instead of buying back 3 28000CE could also move the entire 10 lots to 28300 (where I already have a short position of another 10 lots) at the same cost. But if Market goes beyond 27800 will 28300 be good enough or will it have to be defended too?
Bought back 3x28000CE
Sold 3x28300C
Bought 1 Future
Sold 2×27000PE
Moved 400 25500PE to 26000 and 26500PE half and half
Generated 18k Premium and increased Capital in Trade by 1.8 lacs
In the Process moved BE on CE Side up by 130 points and P&L will remain unaffected upto 28000
Taken off the Future bought in the morning for small loss of 2500
Never had to do so many adjustments to a Trade so early in the series. Moved 1 28000 to 28300 at cost of 4k. This uptrend has to stop sometime. 1100 points in 6 days.
Incredible! Gave up another 8.5k to move 2 more lots of 28000 to 28300. I am now left with 160 28000CE which at least for now are well hedged by 2 Futures
Also sold 2 26500 and 1 27000PE to recoup about 10k by adding another 2 lacs of Capital
Frustrating! Spent the whole day defending the Position. Moved 1 more 28000CE to 28300 at cost of 4.5k.. So now only 3 lots left at 28300. If it moves up another 200 will have to start dealing with the 28300CE. Currently have Net Premium of about 3 lacs and Investment of 45 lacs.
Late surge in Vol took the Trade into a small loss but it's delta neutral and can easily withstand a 200 point move in any direction. Breakeven is still almost 900 points away at 28700.
Good day with no adjustment needed. Position is more or less at break even. Need a few quiet days like this for theta to do its magic.
Thinking about what can I do about the Position to cope with the RBI Policy.Can plan for a 400 point move in either direction. Nothing I can do beyond that. My closest Positions are 4x28000CE and 4x27000PE. I will take 2 of each off before the policy and put them back on after
The 2 Futures I bought at 27542 have provided a great hedge against the upsurge but can become a big drag if it falls below this Price. Will have to keep a close watch on these and square them off if the index drops 300.
Moved 2x27000PE to 26500PE at cost of 5.8k. May move 2x28000CE to 28300CE later in the day.
Now at 27730. At 26000 I will take off my futures hedge and move 2x28000 to 28300. Just hope that I dont get chopped around.
Sorry 27600
Prepared for a 3-400 move either way. Just hope there is no policy announcement on PSU Banks
Got out of 1 Future booking Profit of 5k and used it to move 1x28000CE to 28300CE. Now only have 2x28000CE hedged by 1 Future which I will take off if it falls another 50 points and on the downside have 2x27000PE
That went well. Now for the commentary today, Expiry tomorrow and the FOMC Meeting outcome either on Mon
Took off the final Future at Profit of 2.5k. So no hedge left.
Dont want to be dealing with this. Spent about 9k moving my final 28000 to 28300
The Position now looks much healthier and is currently Profitable. It's slightly unbalanced because of Puts sold to defend. Tomorrow afternoon will sell Calls maybe even at the 28300 level resulting in Profitable deployment of more Capital
Moved up 5x26000PE to 26500PE to generate an extra 7.5k. Will gradually move up all 26000PE to that level if Bnf continues to rise or even remains steady. Extra Premium of about 40k on the same Capital possible
Moved another 10x26000PE to 26500PE to generate an additional Premium of 14k
Moved another 5x26000PE to 26500 to generate another 7k
Weekend thoughts on this Trade. The Bnf is up 1200 since trade put on. Problem is speed of movement. Still have Premium of 3l on 45l Margin or over 6.5%. Was thinking of moving up some 26500PE to 27000PE but now feel it's too early to do so as there is plenty of time for reversal
Not comfortable with the 28300CE although it is 700 away given Market strength. Think I will spend some 30k in moving this to 28500 if Bnf gains another 100+ points. Can always recover this by moving PE up next week and still be on course for 6% ROI.
Last week hedged the Position with a few Futures but they are quoting at a Premium of almost 100 making this too risky. The Position is slightly unbalanced with more PE sold than CE so at some stage will put more Capital in Trade and sell CE.
Moved 12x28300 to 28600
6x26000PE to 26500
5x26000PE to 27000
Net cost 27k. Now left with only 8x28300PE.
Month has been very challenging to say the least
Will probably regret it but at this stage I dont really want to introduce more Capital into this Trade. Bought 1 Future to hedge my remaining 28300CE.
Moved 2x28300 to 28700 and 2x26000PE to 27000PE at cost of 6k. Now left with 6x28300CE hedged with 1 Future
My fears were realized. The Future hedge wasn't very useful. Taken it off for a loss of 2k
BnF up 200 points. Made adjustments which Cost 38k but P&L largely intact. Could have recouped by shifting 26500PE to 27000 but don't want to get caught on downside. Maybe next week if Market permits. Bnf has moved 1400 since position put on. Shows how resilient Strangle is
Uneventful day requiring no adjustment. MTM up slightly in line with expected Theta. Position is unbalanced as many more PE were sold to neutralize Delta during upmove. Would like to sell 10-15 lots CE but will wait for SBI Results. Will also move up PE to generate more Premium
Moved 3x28300CE to 28700 at cost of 17k
Now left with 3x28300. Still not comfortable moving 26500PE to 27000 until SBI Results are out. Relentless upmove. At this rate will have to start thinking of my 28500CE soon.
Bit the bullet and moved 5x26500PE to 27200 to generate 12k additional Premium. So effectively have surrendered 5k to move position up. If there is no correction, will move balance 28300CE to 28700 and equalize the lost Premium by moving up more 26500PE
Bought 1 Future to hedge my 3x28300CE in case of a gap up tomorrow. In all likelihood it will lose so sold a 27000PE to compensate for the possible loss. Now I'm left to deal with 5x28500 and 5x27200PE which can give me trouble
Another 200 points up! Its now up 1500 since the Position was put on. Frustrating having to make so many adjustments but still ok and prepared for another 500 points.
The Net Position is: 1Future
1x26000PE 3x28300CE
24x26500PE 5x28500CE
9x27000PE 12x28600CE
6x27200PE 5x28700CE
So 40 Short PE and 25 Short CE. Net Short 65 lots . Investment about Rs 42 lacs
All PSU Banks have declared good Results. Why should SBI be different? Question is whether Mkt has priced it in. That's why I'm reluctant to balance my position by selling more OTM CE or aggressively moving up PE. Will sacrifice some Premium and move some 28500 to 28700CE
Moved 1x28300 and 3x28500 to 29000 and 5x26500 to 27000 at net cost of 20k. Better to sacrifice Premium and stay safe in this kind of an upmove.
Dont normally like doing this but sold 5x27200PE to generate about 11k and cut down deltas a bit
Moved balance 2x28500 to 29000 at cost of 10.5k. Now action shifts to 25600CE
Recouped additional Capital deployed in morning by buying back 5x26500PE. Expect a big move in late afternoon so will buy 2-3 Futures and sell same number of 27200PE to compensate for possible loss. Will also take a view on moving some 26600 to 28800 and moving up some 26500PE
Not stopping. Bought 2 Futures, moved 6x28600 to 28800CE and 8x26500 to 27200PE. Also sold 2x27200 PE separately to compensate for possible loss on Futures. No cost impact on Premium. Now left with 6x28600PE
My OO file has got messed up. Will recreate later this evening but suspect Position is at BE or slight MTM Loss. The net Position is
Long 3 Futures
6x26500PE. 2x28300CE
14x27000PE. 6x28600CE
19x27200PE. 5x28700CE
No Premium lost as cost of moving up CE was made up by moving up PE. Critical day tomorrow. Hope there isn't another 200 point move.
Heres what it looks like now. Still slightly Profitable and with a lot of Premium intact. Had to move a lot of my 26500PE to 27000 and 27200 so not a lot of room for adjustment if there is a big drop. But lets see how tomorrow pans out
In retrospect should have taken off the darn thing yesterday or day before for a 1% Profit and repositioned at 27000/29000 for 120 or so which had a 3.5-4% Profit potential.
Some learning from this Trade. The Trade should be purely mechanical and not be influenced by ones own views on direction. While I was quick to move up CE as price went up, I was too slow in moving up PE until Bank Results were announced
As a result while I paid about 80-100 for moving up CE I got only 35-40 in moving up PE. Resulted in about 80k or 2% loss in Premium and about 35-40k loss in MTM. Will be quicker to adjust both sides in future irrespective of my view.
Dont want to cover my 3Futures until after SBI results. Selling 29000CE to compensate for loss.
Squared off 1 Future, sold 5x29000CE and moved up balance 6x26500PE to 27200 to generate about 21k
Sold 3 more 29000CE to cover possible loss in 2 Futures to generate 5k
Sbi results out. Exited my Futures
Sorry 1 Future. Left with 1.
Sold 2x29000CE to generate 4k and insulate from possible loss on 1 Future
Position looking much better. Time Decay accelerating. Now with all Bank Earnings out of the way hope that we have a quiet week ahead
How quickly the sentiment changes!Taken off my last Future. Hope I dont have to defend the 27200PE.
Position is currently at BE. Travelling on 15th night so will miss the Expiry which promises to be an eventful one. Will close this Trade if the Index falls to 27000 and will move 27200PE down to 27000 and continue it if it doesn't
Just updated-it's down 20k due to sharp increase in vol but still comfortable with it unless there is a sharp selloff during the day
After so much of a struggle the Trade has a princely MTM of 5k. Tempted to get out of it but have decided to give it one more day. In the meantime have had to short 2 Futures to keep the deltas at a manageable level and absorb losses from a possible gap down tomorrow
Pleasant surprise. Position is now up 30k but dont know whether this will last till EOD. Traveling on 16th so have to take decision on whether to carry it. Theta of 18k with so many holidays and only 10 sessions to go is tempting. If I do, I will move my 24x27200PE down to 27000
The Futures I bought as a hedge are a big drag on the Position but I will keep them for the time being. Maybe take of 1 and sell a few OTM Puts to cover some losses that may happen on 16th. Have reduced my expectations from this Trade and will be happy to exit with say 1l Profit
Ok. Squaring off 1 short Future. Now left with 1
Decided to carry the Position. Shifted half my 27200PE to 27000 as I wont be able to adjust on Thurs. Also sold 2x26800PE to cover possible loss from my short Future.
Took off the last remaining short Future and moved 2 of the 3x28300CE to 28500. With that I think I am finished with adjustments for this Trade. Now my closest Positions are 1x28300CE and 12x27200PE
Probably Theta for tomorrows holiday factored into the MTM which is now at 54k. Will now look at this Trade on Friday or maybe for a few minutes while in transit at Frankfurt. Hoping for 2-3 quiet sessions so that I can get out of this Trade.
Looks like a quiet day was too much to ask for. Asian Markets closed weak and now both the European and US Futures have suddenly plunged lower indicating a bad day for our Markets tomorrow. Thankfully I had moved half my 28200PE down 200. Hope it will be enough.
Can't wait to move my balance 12x27200PE down to 27000
Done at a cost of only 12k.
Just checked the PNL on this Trade. Its now 67k or about 1..5% ROC. MTM coming purely from Time Decay not getting any help from Vega at all-but that has to change as expiry fast approaches. Feel Position is quite Safe as BEP's are about a 1000 points away in either direction.
Here's how it ended up today with a MTM of 73k. Great to have moved the 28200PE down in the Morning. Would have sold some CE if I had got the opportunity. Will look to close out this Trade early next week-Trump willing
Sorry 27200PE down in the morning
Another 200 Point day. Just woke up for a few minutes to check. Buying 2 Futures to hedge my 28500CE in case something unpleasant happens while I'm asleep and selling 4x28800CE to recover the Premium if it slips.
Going back to sleep. Put a Market SL on my 2 Futures 150 Points below.
Just woke up to check the Position. Seems to want to continue up. Bought 1 Future and sold 3x28900CE. Now have 3 Futures which I will have to be quick to get out of if Mkt shows any sign of weakness on Monday. Will put a SL 150 points down.
Position virtually unchanged from yesterday. The 300 Point upmove ate up most of my Theta . Reminds me of Ghalib's couplet
dard minnat-kash-e-davā na huā
maiñ na achchhā huā burā na huā
Anyway with only 8 Trading sessions left, things can only improve
Bought 1 Future.
Moved my 6x28600CE up to 28700CE. Will probably be out of this Trade tomorrow or on Wed so why take a chance of a sudden upsurge. Now left with 2x28500 and 11x28700CE hedged by 4 Futures
Marginal improvement in Position thanks mainly to the Hedge. Would have exited today but the 21k Theta and the Wed holiday kept me in for another day. The additional Future purchased today will help if it continues up. Should exit at EOD tomorrow
As expected PNL on Position is now 1L. Let's see how it goes till EOD. Meanwhile selling 28900CE to compensate for Loss in Futures.
Taken off 2 Futures
Thought about carrying it one more day in the Morning when Bnf was down about 100 but just woke up to see its fully recovered. Think Time Decay for holiday has been captured. Don't want to adjust again so exiting for Profit of 1.2l or almost 3%
The BnF is up 1600 Points from the time the Position was initiated. Yet it was never at a loss of more than 0.5% and BEP always remained at least 1000 away in each direction. Shows what a resilient Strategy the Strangle is
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