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Short Strangle Option Trading Strategy | Pushkar Raj Thakur Share Market Free Course - YouTube
Channel: Pushkar Raj Thakur: Business Coach
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So welcome back to the options strategies
series.
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Well, today we are going to talk about another
options strategy, which you can use in the
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sideways market.
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If you are feeling that the market will go
up or come down, or it will maintain its position,
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it is not going to grow and break too much
and your view for Markey is neutral, then
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you can earn money from the market by using
this strategy.
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Now in this strategy and what we learned before,
we talked about short straddles in the last
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video and today we are talking about short
strangles.
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So you are thinking about triangles by this
strangle, then what is the difference between
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this strategy and that one?
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You saw that when we built the Straddle, then
there was a proper triangle made there, but
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the triangle is coming in it.
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It looks like a strangle, and we are going
to cut the peak of this triangle, and we are
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going to cut the peak which means the maximum
profit you were getting at this straddle centre.
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You shorted the at the money option in the
straddle, you have sold them both.
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So you were getting benefits at the peak.
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So if the market closed on at the money, then
you had the maximum profit.
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But now we will not wait for it.
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We would say that the market should close
anywhere up to 400 points.
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For example, Now we are talking about Nifty.
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You can also use this strategy in bank nifty
and you can also use options in stock options,
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so this strategy works everywhere.
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So here we want that market to give us regular
benefits according to flat service.
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For example, the market is on 17300, either
the market closes on 17100, or it closes on 17500
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We should know that we will get this much
profit or will get this much profit and that
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can be anywhere.
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We know that this much profit will come.
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Now, the loss can be unlimited even in this
strategy.
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I am giving you an example that if the market
broke on 17100 or it increased by 17500.
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If you have created the strangle here, then
the strangle you have made, there can be unlimited
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loss in it because you are shorting the position
but if the market will remain sideways and
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your view is correct.
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See, all the strategies work here.
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But if your view is not correct then you will
suffer.
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If your view of the market is right, then
you are going to make a profit.
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Now here you are going to make a profit, and
how you will make a profit, I'll just show you
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Before that, I will tell you what you have
to do to make a strangle.
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I am repeating that we were selling calls
and put both options in at the money and Straddle,
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but in the strangle we don't sell them at
the money options.
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Here we have to short, short means to sell.
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Here we will sell out of the money options
of put and call hereby by selling out of the
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money options, you will understand that you
will not profit on the peak, your profit
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will be flat and the market will come anywhere
in the middle.
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Now understand one thing, we don't have to
say here where the market will go.
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Your psychology should change here.
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You just have to predict that the market just
won't go that far.
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Now think what is the difference.
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One we are saying that the market will go
to 18000 and one is saying that the market
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will not go to 18000.
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What do you feel now?
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You understand the difference here that anyone
says with surety that the market will go to 18000
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Means there will be a six on the ball and
we are saying that this ball will not hit
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a six, so you know that probability is more
of not hitting six but we are doing here on
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probability and here we don't only see probability.
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We are doing technical analysis here and we
are considering price action here, so we are
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getting verification from many places that
the stock and index we are looking for, whether
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it will reach there or not, then the probability
of reaching increases, more than not reaching
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I'm trying to explain to you.
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So If you just say that the market will not
go to 18000 or the market will not go to 16500,
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then now you have made your view that it will
not reach 16500 and will not go to 18000.
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You have seen the price action and you have
done this analysis that it will not go till the expiry.
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If it will not go till the expiry then can
you make money between these two, the answer
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is yes, you can earn.
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You can earn and here I will tell you.
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I have given the example here.
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We have taken a little bit of Far Out of the
Money.
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And for example, the market is at 17300, so
can I do an analysis that the market
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will not go to 17100, or suppose the expiry
is tomorrow or after two days, then I say
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that market will not go till 17609, here I
have taken this example, so it will not reach
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to 17100 and it will not go to 17600 if my
view will be correct then I will make money.
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And if you have doubts, then you can earn
money far out of the Money.
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So strangle works at both the places.
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So I show you, so we come on sensible and
when we will go to the strategy builder, so
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you can use this strategy.
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Now we are talking about short strangles.
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As I said here that we are carrying the difference
of 400 points, so that market will stay in
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between it, then see here out of the money,
the market is almost around 17300 in the put,
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so here you can see 17277.
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So out of 17100 and call of 17500, call of
500 is out of the money and here put of 17100
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is also out of the money.
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We sold them both, now after selling both,
we are earning a maximum profit of 3600, but
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if you want to go safer and safer.
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This means you say that the Market will not
go to 17000 examples.
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Now you say that the market will not go to
17000 then you can also do this but there
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your maximum profit will be reduced, but you
say that Market will not go to 17600, so your
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max profit will be reduced.
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As it will reload, you will see it.
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I'll just do it, it is reloading right now.
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So your profit will be a little hamper here.
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Profit can be reduced, otherwise, nothing
will be changed.
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If you want to increase the profit here, then
you can also bring in the money, I'll explain
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it to you here.
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Here your profit is less by going out of the
money.
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But profit can be a sure shot, if your view
is correct, then you will get ₹2200 on expiry
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if ₹2200 is written here.
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If you will come in the money, it is out of
money now, but we talked about 17100 and we
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came in 17150.
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We talked about 17500 and we came to 17450,
so we will increase our Maximum Profit.
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We will reduce our pitch.
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But with it, you will earn money in the Sideways
Market.
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If your breakeven changes according to your
market view and if it goes to 17058, even
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then you will earn money on expiry and it
will come here, even then you will earn money.
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I'll just show you if the market stays between
17150 to 17450 because I changed the out of
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money options.
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So the market can close somewhere in between.
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You will get full money, ₹4500 for which
the funds you will need will be almost ₹ 113000.
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If you are selling, then you will have more
requirements for funds.
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So here we talked about starting at 17100
and 17500, we sold both the option of put
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of 17100 and call of 17500, you can see it's
a premium of ₹49 and 24.47.
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here if you want to trade, if you want to
paper trade on sensible then click on virtual trade
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If your trade will be correct then you will
get to know by virtual trade how much profit
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is coming.
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And if you want to trade in real, because
you can log in on sensible by your demat account.
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If you have an account on upstox, then you
can log in by it
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and if you have an account on Angelone then
you can log in from it, and you can also log
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in on 5Paise.
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As you will click on trade all, then you can
place your trade directly from here.
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So if you are understanding the strategy,
my view for the market is that the market
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can be closed anywhere and I want to earn
money for sure short.
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Then the strategy which you are going to use
is Short Strangle, so I hope that you understood
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Short Strangle, but there is an unlimited
risk on both sides.
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If the market breaks down too much and or
the market rises too much then you will lose
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but if your view is correct only then you
will earn money, I hope you are clearing the concept
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Here the probability of profit is only 72%,
so who are buying the options, the premium
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of their options is reduced as you will see
theta decay here.
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You have short it and you have long theta.
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As time passes, you will go into profit, but
understand one thing, we are talking about
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expiry, so now as I am recording this video
on January 26, then if there is no expiry
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today, you can see a loss here on the same
day.
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Because time has not passed here, if we will
come on the expiry then we can see a sure
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shot profit.So you have to keep one thing
in mind.
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When you strangle, you will feel that your
position is going into loss.
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It is going to lose because theta decay has
not happened enough.
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As time passes, you will make a profit.
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It is important to have your view correct,
then when you are going to use this strategy
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when you feel that the market will remain
sideways.
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But if you feel that the market will not remain
sideways, there can be too much volatility
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in the market, or the market may break too
much or it can rise too much, then which strategy to use
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I will tell you, now our view for the market
is Sideways, then which strategy to use for that
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Now we are covering that, but I'll tell you
that if your view of the market is that you
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are feeling that too much movement can come
in the market.
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The strategy to use for that, you are going
to learn in the upcoming videos.
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in the next video, till the time you go self-made.
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