David Tarazu - Option Strangle Trade. I am introducing new trade for traders to learn, how to play the markets while keeping yourself safe using simple maths.
If you trade this every month, within 1 year you will gain immense amount of knowledge about how markets behave.
If you trade this every month, within 1 year you will gain immense amount of knowledge about how markets behave.
This trade require knowledge of Option Chain, Short Strangle, Straddle & charts. I will post more explanation & examples. Do ask questions.
We use Straddle Premiums to create a safe Short Strangle trade, & keep it safe with regular adjustments to achieve our targets.
We use Straddle Premiums to create a safe Short Strangle trade, & keep it safe with regular adjustments to achieve our targets.
The goal of adjustments is maintain the balance & still keep the distance of more then 1x ATM straddle premium from spot.
ATM straddle premium normally keep falling daily as we approach expiry, so it allow you to come closer & closer to the spot.
ATM straddle premium normally keep falling daily as we approach expiry, so it allow you to come closer & closer to the spot.
In image, I have skipped strikes like 11150, 12450 ... but you shall use all strikes available to trade, its required to find the right balance.
Trade can be started 20-45 days before expiry.
It can be closed early if premium drop to 15% of the sold value.
Trade can be started 20-45 days before expiry.
It can be closed early if premium drop to 15% of the sold value.
Like Tarazu can not be perfectly balanced, Keeping the balance in this trade is the real brain teaser.
With practice, your brain will learn when to wait & when to act. Soon you will find that you are taking better decisions. It will improve your overall performance in trading.
With practice, your brain will learn when to wait & when to act. Soon you will find that you are taking better decisions. It will improve your overall performance in trading.
Short Strangle started 12500/11100 @ premium of 19/20, today show 13/22 is unbalanced.
So we exit 12500 with profit of 6 & sell 12400 @21
New Strangle become
12400/11100 @ 21/22 premium
So we exit 12500 with profit of 6 & sell 12400 @21
New Strangle become
12400/11100 @ 21/22 premium
Short Strangle Call/Put 12400/11100 is now at 28/17, very unbalanced
The Strangle may be balanced intraday when the imbalance become large with a continuous directional move.
so we exit 11100 PE with profit of 5 & Sell 11400 @ 35
New Strangle become 12400/11400 at 28/35
The Strangle may be balanced intraday when the imbalance become large with a continuous directional move.
so we exit 11100 PE with profit of 5 & Sell 11400 @ 35
New Strangle become 12400/11400 at 28/35
Call continues to rise, as there is a breakout & up trend.
If Trend is Up, as per rule 3, Put premium to be higher then call.
Hence we will keep rolling our Put up to 11500, 11600 .. till we see trend go sideways or reverse. We exit only when 12400 strike become in the money.
If Trend is Up, as per rule 3, Put premium to be higher then call.
Hence we will keep rolling our Put up to 11500, 11600 .. till we see trend go sideways or reverse. We exit only when 12400 strike become in the money.
12400/11700 is suitable strangle looking at uptrend.
Rapid Rally or Falls always hurt a Neutral Option strategy. This is where we need Rapid adjustments to protect our position. For Taraaju strategy, Keeping the balance is key to keeping it safe.
12400/11100 >> 12400/11400 >> 12400/11600 >> now at 12400/11700 (47/60)
12400/11100 >> 12400/11400 >> 12400/11600 >> now at 12400/11700 (47/60)
We have booked profit of ~ 6+5+5 = 16, But its not sufficient yet as Call has risen from 21 to 47, 26 points. We need to wait for market to stabilize & premiums to fall.
At EOD 11600CE was at 47 , same as 12400CE but to meet rule 3 we need higher value PE so 11700 PE was sold.
At EOD 11600CE was at 47 , same as 12400CE but to meet rule 3 we need higher value PE so 11700 PE was sold.
Now our strangle show Call/Put 12400/11700 as 34/60. Call premium crashed by 13 while Put premium remain same.
Put is higher but as trend is still up, we keep it. If we see trend reversing (close below 12k) we will balance it well.
Put is higher but as trend is still up, we keep it. If we see trend reversing (close below 12k) we will balance it well.
Was busy trading, the market moved below 12k before 10am, we should balance our Put quickly with 12200CE @ 70 at10AM & then again with 12050 @ 100 at 1:30pm
Strangle moved from 12400/11700 >> 12200/11700 >> 12050/11700 @ 78/91
12400CE no loss, 12200CE booked profit of 70-46=24
Strangle moved from 12400/11700 >> 12200/11700 >> 12050/11700 @ 78/91
12400CE no loss, 12200CE booked profit of 70-46=24
Now Strangle is at 12050/11700 @ 78/91
Total profit till now is 42
But ATM Straddle is at 325 & we are just 150 points away from Spot instead of 325
Hence we should look opportunity to move both call & put 325+ points away to safety. we will check in next 1-2 days. Trend down
Total profit till now is 42
But ATM Straddle is at 325 & we are just 150 points away from Spot instead of 325
Hence we should look opportunity to move both call & put 325+ points away to safety. we will check in next 1-2 days. Trend down
Strangle status: Call/Put 12050/11700
Sold 100/60 (160) Yesterday 78/91 Booked profit:42
Now 64/88 (152 <160), We exit both call & Put, book 8 profit and shift to 12200/11300 at 28/26 as flat 1st half of friday is good.
Total profit now at 50.
Sold 100/60 (160) Yesterday 78/91 Booked profit:42
Now 64/88 (152 <160), We exit both call & Put, book 8 profit and shift to 12200/11300 at 28/26 as flat 1st half of friday is good.
Total profit now at 50.
If you go thru the complete trade cycle of nearly 1 week.
We started a Balanced monthly strangle
We faced both a rapid rally & fall. We kept booking profit on 1 side & keep the balance.
We came closer to Spot & then moved back. Total 50 profit ~ 2% in 1 week & still safe
We started a Balanced monthly strangle
We faced both a rapid rally & fall. We kept booking profit on 1 side & keep the balance.
We came closer to Spot & then moved back. Total 50 profit ~ 2% in 1 week & still safe
Strangle Call/Put 12200/11300 sold at 28/26, Today EOD showed 32/13 . As per strategy we should book profit of 13 on PE & sell 11500PE at 29.
New strangle 12200/11500 at 32/29
I may post some trades only to track. One can continue to balance as per rules
New strangle 12200/11500 at 32/29
I may post some trades only to track. One can continue to balance as per rules
Strangle 12200CE/11500PE
Yesterday: 32/29
Today: 36/21
Balancing required: We should book 8 profit on PE & Sell 11700PE at 45 (>36) as trend is up.
New strangle 12200CE/11700PE at 36/45
Booked profit till now 50 + 13 + 8 = 71
Yesterday: 32/29
Today: 36/21
Balancing required: We should book 8 profit on PE & Sell 11700PE at 45 (>36) as trend is up.
New strangle 12200CE/11700PE at 36/45
Booked profit till now 50 + 13 + 8 = 71
Strangle yesterday: 12200CE/11700PE at 36/45
Today EOD is 22/49, One should book 14 profit on CE and balance the PE with 12100CE. New Strangle 12100CE/11700PE at 44/49
You can see how call fell a lot while PE did not rise much. This need that balance be maintained.
Today EOD is 22/49, One should book 14 profit on CE and balance the PE with 12100CE. New Strangle 12100CE/11700PE at 44/49
You can see how call fell a lot while PE did not rise much. This need that balance be maintained.
Strangle 12100CE/11700PE yesterday at 44/49 Now show 36/40 , Vix continue to fall & both side premiums drop. Good profit.
ATM straddle premium is ~ 216 & our strangle is 200 away from spot.
We shall move away to safer strikes tomm OR can close this & start July strangle.
ATM straddle premium is ~ 216 & our strangle is 200 away from spot.
We shall move away to safer strikes tomm OR can close this & start July strangle.
12100CE/11700CE sold at 44/45 is now at 22/50 profit of 17
I prefer to exit this strangle now & start july strangle on monday mainly because the Vix is low & if rise will make it difficult to manage june strangle but may work better with july.
I prefer to exit this strangle now & start july strangle on monday mainly because the Vix is low & if rise will make it difficult to manage june strangle but may work better with july.
Week 1
12500CE/11100PE @ 19/20 > 13/22 (6)
12400CE/11100PE @ 21/22 > 28/17 (3)
12400CE/11400PE @ 28/35 > 40/30 (5)
12400CE/11600PE @ 40/50 > 47/46 (4)
12400CE/11700PE @ 47/60 > 21/72 (0)
12200CE/11700PE @ 70/72 > 46/92 (24)
12050CE/11700PE @ 100/92 > 64/88 (+36-28=8)
Profit 50
12500CE/11100PE @ 19/20 > 13/22 (6)
12400CE/11100PE @ 21/22 > 28/17 (3)
12400CE/11400PE @ 28/35 > 40/30 (5)
12400CE/11600PE @ 40/50 > 47/46 (4)
12400CE/11700PE @ 47/60 > 21/72 (0)
12200CE/11700PE @ 70/72 > 46/92 (24)
12050CE/11700PE @ 100/92 > 64/88 (+36-28=8)
Profit 50
Summary Week 2
12200CE/11300PE @ 28/26 >> 32/13 (13)
12200CE/11500PE @ 32/29 >> 36/21 (8)
12200CE/11700PE @ 36/45 >> 22/49 (6)
12100CE/11700PE @ 44/49 >> 22/50 (+22-5=17)
Profit: 44
Total Profit : 50 + 44 = 94 x 75 lot size = Rs.7050
12200CE/11300PE @ 28/26 >> 32/13 (13)
12200CE/11500PE @ 32/29 >> 36/21 (8)
12200CE/11700PE @ 36/45 >> 22/49 (6)
12100CE/11700PE @ 44/49 >> 22/50 (+22-5=17)
Profit: 44
Total Profit : 50 + 44 = 94 x 75 lot size = Rs.7050
Capital ~ 1.60lakh (1 put + 1 call)
Total ~ 26 transactions
Zerodha brokerage+charges comes to Avg. 25 per transaction (for 1 lot per leg) =26x25=Rs.650
Net profit: 7050 - 650 = 6400/-
Percentage profit 6400/160000 = 4% approx = 2% per week in June
Total ~ 26 transactions
Zerodha brokerage+charges comes to Avg. 25 per transaction (for 1 lot per leg) =26x25=Rs.650
Net profit: 7050 - 650 = 6400/-
Percentage profit 6400/160000 = 4% approx = 2% per week in June
Profit look little high for June, as due to falling Vix & better balancing with my experience, we got 2% per week, normally 0.5 - 1% per week should be good performance for newbies. Strategy is made to target 2-4% per month.
Thanks to @DillikiBiili for posting live test trades for this strategy here. Many interested can follow.
