BN Vertical Call Credit Spread
Updated
Following trade is for educational purposes only. An Iron Condor is an option strategy, where the expected outcome for next week is range-bound.
A CE option mentioned below is a European Call Option, while a PE option is a European Put.
A hedger always buys these options and a speculator mostly sells one.
But when the speculator only sells these options, the risk involved is unlimited and the margin requirement is also high. This is called naked option selling. When both CE and PE are sold, it is called a short strangle.
In combination with this, if we buy much farther CE and PE, the short strangle becomes an Iron condor. Here, the idea is to capture the option premium in a range-bound market with reduced risk and margin compared to short straddle.
The spread between buy and call leg is based on optimum use of margin. Since the option premium is credited to us in advance, it is also a credit spread.
Since this week the view is bearish , we are taking only the CE leg of Iron Condor. As the week progresses, additional trade may be added.
Please leave a comment if you need further clarification on the following trade
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Buy 39500CE, Sell 38900CE
The history of trades of this trade model is in the following link:
docs.google.com/spreadsheets/u/2/d/e/2PACX-1vS4ByIZLUWmS7jVIwEW8ub4B80gFhnuNnhcQFVNxtD-geIj8Q6RZo5CSMX8C6HEe4XWCYmXcEVgJoe8/pubhtml
My concept of trading is not to be an overnight millionaire, but a disciplined method to grow the wealth that you own.
Please leave a like if you like the trade ideas :)
A CE option mentioned below is a European Call Option, while a PE option is a European Put.
A hedger always buys these options and a speculator mostly sells one.
But when the speculator only sells these options, the risk involved is unlimited and the margin requirement is also high. This is called naked option selling. When both CE and PE are sold, it is called a short strangle.
In combination with this, if we buy much farther CE and PE, the short strangle becomes an Iron condor. Here, the idea is to capture the option premium in a range-bound market with reduced risk and margin compared to short straddle.
The spread between buy and call leg is based on optimum use of margin. Since the option premium is credited to us in advance, it is also a credit spread.
Since this week the view is bearish , we are taking only the CE leg of Iron Condor. As the week progresses, additional trade may be added.
Please leave a comment if you need further clarification on the following trade
---------------------------------------------------------------------------------------------------------
Buy 39500CE, Sell 38900CE
The history of trades of this trade model is in the following link:
docs.google.com/spreadsheets/u/2/d/e/2PACX-1vS4ByIZLUWmS7jVIwEW8ub4B80gFhnuNnhcQFVNxtD-geIj8Q6RZo5CSMX8C6HEe4XWCYmXcEVgJoe8/pubhtml
My concept of trading is not to be an overnight millionaire, but a disciplined method to grow the wealth that you own.
Please leave a like if you like the trade ideas :)
Note
Buy 36800PE, Sell 37400PEConvert to Iron Condor
Note
Note
Exit the spread 36800PE, 37400PEBuy 37600PE, Sell 38200PE
Note
People are asking me why I am not doing anything about CE leg,I am sure they have not traded in options before.
1. Our breakeven on higher side is at 39032
2. Highest Call OI buildup is at 39000
We are not suppose to do anything until absolutely necessary,
And here it is not necessary as of now.
If you let greed or fear over power you, you will not be a successful trader.
Be logical, work within a defined framework and only take action when the framework asks you to do so.
Best wishes on your learning journey. And dont be afraid to ask questions as comments instead of dm. Your doubts will help others learn too.
Note
We are at a profit of 1.9k now, if you are afraid you may close.Understand losses are part of the game. You cant always avoid it. Embrace it gracefully.
Note
This is for educational purpose, please consult your financial advisor before taking any positions.Note
Exit 37600PE, 38200PEBuy 38300PE, Sell 38900PE
Convert to Iron Fly
Our BEP is 38670 to 39130 now
Note
Thought it would consolidate whole day,kept SL at 25% above cost on both legs and slept off,
SL saved the week, did not expect the breakout
Note
The model can be explained in a nutshell as below:1. Start the week with vertical credit spread if you have a directional bias (bearish/bullish) or Iron Condor if neutral view
2. Convert vertical spread to Iron Condor if directional view changes
3. Shift the strike of profit making legs closer if the trend continues, hold the loss making leg
4. Shift till Iron Condor becomes Iron fly, i.e., both leg strikes are same
5. Put a SL on both sell legs, to cut off loss making leg if trend continues
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