IRON CONDOR:

NIFTY WEEKLY STRATEGY: 

Iron Condor: Iron Condor is a very popular neutral strategy that favors Option writers as theta decay is in their favor. 

Iron Condor is favorable when the underlying asset remains range bound within your strike price. Simply put, you make money when the asset moves either a little downwards, upwards, or even remains where we entered the trade. 

For starters, we can trade Iron Condors in Nifty as it has high volumes and highly liquid. This is not a strategy created by me but a very popular strategy (I have refined, tuned, and set rules as per our market) that has given consistent returns of 2-3% per week to me and thus sharing it with you.

A typical Iron Condor consists of 4 legs/trades. If you look at the above option chain of Nifty closely you can see that we have to; 

SELL 1 Call Option and BUY 1 Call Option further above it to hedge and make the most of new margin rules

Similarly, you have to 

SELL 1 Put Option and BUY 1 Put Option below it.   

This makes our 4 legs/trades that have to be executed together. Sounds confusing? Let's put it in the above option chain.

SETUP

As you can see, Nifty right now is trading around 15100 that is the spot price. 

So we SELL a Call Option say 400/500 points above the current spot price and buy a call further 200/300 points below our short price. 

Similarly, we Sell a Put Option 400/500 points below and then buy a Put option 200/300 points above it.

Spot Price: 15100

Sell Call @ 15600

Buy Call @ 15800

Sell Put  @ 14600

Buy Put @ 14400

Now lets move onto the risk and reward part of it.

RISK REWARD RATIO: As you can see by doing the above 4 trades with 1 lot of Nifty we collect a Net Premium of around Rs. 3200 which requires a margin of around Rs. 55,000 which accounts to approximately 6% ROI. But this is if we hold the trade until the expiry day and we don't do that. 

REQUIREMENTS FOR THE TRADE. 

1. Although the margin required for 1 lot of trade is around Rs. 55-60K, I suggest you have 80,000 to 1 lakh in the account while executing the trade. We have to make some adjustments to the trade that can require additional funds. 

2. To get margin benefit you will need to buy the call and put options first. And then sell the Short Strikes. (As shown in the above picture)

3. Make sure your broker allows buying far OTM (away) options.

RULES OF ENTRY, EXIT AND ADJUSTMENTS:

ENTRY

1. We enter the trade at the End of Monday(when the market has settled after the weekend) or even Tuesday. 

2. We always trade the next week's expiry. For ex, if we enter the trade this Monday we choose next Thursday(25th Feb) week's expiry.

3. We Choose our strike price depending upon the volatility and aiming for a net premium of around Rs. 50 / lot i.e around Rs. 3500. 

4. Usually having a safe zone of 400-500 points above and below the current NIFTY levels. That's a total range of 800-1000 points. Very rarely do markets move that violently. 

EXIT

1. Remember our profit target is 2-3% / week only. So we exit the trade when it gives us a return of around Rs. 1100-1500 and this sometimes can be achieved within 3-4 days itself.

2. Just in case the market gaps up or down and moves violently our exit point will be also the same. We will risk only the amount we decided to earn. That is our strict stop loss.

3. But before exiting we can always adjust the trade. That is done by rolling down our profitable side( will show it if and when needed). 

4. We never let our trade go till the expiry date. Preferably we close it by Friday and in some cases on Monday and move onto the next week. Hence our loss will never be huge. 

...