Skip to main content

DOUBLE CALENDAR SPREAD / SNIPEX 

The market has been really choppy and unpredictable for quite a while now. One day Bulls are trapped and the next day Bears are trapped. NIFTY Moving violently between 14600 to 15400 range. Some call it a Kangaroo market, unsure about where it wants to go but keeps hopping from place to place. Making it really difficult for short-term traders (intraday and positional traders). 


But the beauty about Options is that once you realize the behavior of the market there is always a strategy to make money out of it. An exceptional strategy to make money out of this kind of Market is DOUBLE CALENDAR SPREAD or what I like to call it 'SNIPEX'. Sharing the setup, Risk-Reward, Rules, and Exit for the same.





This a general Payoff Diagram of DOUBLE CALENDAR SPREAD, which looks like a double suspended bridge or having 2 mountain peaks. This is because this strategy isn't neutral but one for the speculators, speculating a price at the end of a certain expiry above and below the current price.


SETUP


We generally can use this in NIFTY AND BANKNIFTY as this scrips are the only ones where we get good liquidity in little further date expiries.


To create a DCS or Snipex we need to:


SELL (immediate week's expiry)


1 OTM PUT  & 1 OTM CALL 


(where we think the market will be at the end of the week, 'generally/often/these days' Nifty makes a movement of 400-500 points in either direction and for BankNIfty around 1500-2000 points)


BUY


1 OTM PUT & 1 OTM CALL (one week further expiry)


(same strike price as our Short Put and Call above)


Let's understand this with an example and trade I took this week.........





Ideally, I enter this trade on THURSDAY. For instance, this Thursday on the 4th of March when Nifty was trading around 15100 and moving violently, I felt it is either heading towards a new All-time High or going to test 14500 level again in the coming week. 


Hence I Sold 14600 PE and 15600 CE (both around 500 points away from the spot price) for 10th March expiry. 


And bought 14600 PE and 15600 CE for 18th March expiry.


ENTRY AND EXIT


As mentioned we enter the trade on Thursday only. 


Exit for this strategy is very crucial as there are no adjustments that can be made to it.


1. Exit when you see desired ROI on your trade. For ex with a capital of 60k if you see a 3% ROI within 3-4 days it's a good exit according to me. 


2. If the market is choppy and not moving towards your speculated price, its important to exit on Tuesday/Wednesday to at least get a little return & avoid major theta decay. 


3. If there's a huge movement and the price crosses your short Call/Put within a day or two, exit with minimal loss.




COST


1 lot of NIFTY/BANK NIFTY Double Calendar Spread requires a capital/margin of Rs. 55k-60k.


This strategy gives a very wide range for breakeven and excellent reward if the speculated price is accurate and minimal reward even if the market doesn't move much. 


The above pay-off chart is for the trade that I entered on Thursday with 3 lots. The blue line indicates profit on Monday having a wide range of 14600 to 15600 in between 8-10k already. 


Options and Option Strategies are like Skill Sets one equips to make money in any kind of market be it Bull, Bear, Rabbit, or Kangaroo. 

Labels:

Comments

Post a Comment

Popular posts from this blog

 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...
Post a Comment
Read more
PUT CREDIT SPREADS: To be profitable consistently over a period of time a trader needs to master certain skills and make them as a trading habit.   Sharing one of the easiest and my bread and butter strategy with the trading principles that I follow along with it. This basic strategy has been giving me a consistent return of around 5-10% a month with around 90% probability.  It's 'PUT CREDIT SPREAD'. 1. SETUP  Though the setup of a trade is not everything but important as it defines your path moving forward. It's simply the foundation of your trade that defines the strength of your trade.  For a PUT CREDIT SPREAD to work consistently the stock has to be on an uptrend for at least the last 6-9 months. (Look at the above charts for reference) all three stocks having 50,100,200 EMA moving upwards) Also, the stock has been respecting and taking the support of 50 EMA if and when there is a correction. Ideally, we would like to enter the trade when it is around th...
Post a Comment
Read more
  Long Term Portfolio: So as of today, these are the stocks in my Long term portfolio along with the weightage they carry individually. Building a Long-term Portfolio is still very overlooked amongst most traders. As I have said before, at least 30-50% of your entire account should be dedicated towards long-term investments if you are in the market for the long run. Right now, around 50% of my account size is invested in liquid debt funds, 30% is invested in long-term investments and the rest is cash used for further investments or adjustments in short-term trades if required.   So, you'd wonder where does the capital to trade comes from? The 80% of investments are pledged with the broker who in turn provides margin money for F&O trading after a minimum haircut. In short, my investments are making passive income for me while I use that money for short-term speculative trades.  Now, it doesn't mean you can throw your money into long-term investments in random sto...
Post a Comment
Read more