Introduction: This strategy initiated with the objective to make money from option trade with less theta or time value decay expose. Multiple bull bear spread reduce the delta significantly and reduce the theta significantly. Bull or bear spread is a close end strategy i.e. limited profit and limited loss.
Any rational move in the direction of the trend anticipation of the trader, makes him a winner, consolidation protects and any wild move in the opposite direction of the trade protects and rewards some time.
LTP | 7851 | ||
---|---|---|---|
Trend Expectation as per Fibonacci | |||
0.236 | 26.94194016 | 7877.942 | 7824.058 |
0.382 | 43.60941161 | 7894.609 | 7807.391 |
0.5 | 57.08038169 | 7908.08 | 7793.92 |
0.618 | 70.55135177 | 7921.551 | 7780.449 |
0.786 | 89.73036002 | 7940.73 | 7761.27 |
0.888 | 101.3747579 | 7952.375 | 7749.625 |
1.236 | 141.1027035 | 7992.103 | 7709.897 |
1.618 | 184.7121152 | 8035.712 | 7666.288 |
This levels calculated using the nifty future reference price of 7851 on 20th November 2015. As per the above discussed implementation rule if nifty future falls below 7807 then this confirms the downtrend and we will initiate the nifty option strategy as follows.
You can add number of lots in such a way that the net delta must satisfy the above condition.
One can use 7750 strike also it is not mandated that you must maintain 100 point difference. The main reason why I have kept 100 point difference is it will have better risk reward ratio.