I am sure you read our previous thread on SS where you sell slightly OTM options in a sideways market.
To create an IC
Create an SS first
Buy the next OTM CE
Buy the next OTM PE
Let’s clear with an example
IRON CONDOR (IC)
If Short Strangle’s margin and unlimited loss potential is too much for you then the Iron Condor option strategy could be a perfect fit for you. It's not as complex as it sounds
A thread 🧵
#options #trading
I am sure you read our previous thread on SS where you sell slightly OTM options in a sideways market.
To create an IC
Create an SS first
Buy the next OTM CE
Buy the next OTM PE
Let’s clear with an example
If Nifty is trading at 16300 and you expect it to trade in a narrow range of 200 points till expiry then
Sell 16400CE
Sell 16200PE
This is SS, right?
Now Buy 16500CE
Buy 16100 PE
That is IC
Sell 16400CE @117
Sell 16200PE @157
Premium received = 274
Buy 16500CE @ 80
Buy 16100PE @ 117
Premium paid = 197
Net premium received = Received – Paid = 274 – 197 = 77
This net credit is the max profit potential in an IC
Max profit potential in case of IC (77) is much less than SS (274), but consider this as cost for capping the risk
We know that there is unlimited risk in SS, in case market makes sharp move. This risk is capped with two long options in case of IC
Our sold strike = 16400
Our bought (protective) strike = 16500
Spread = 16500 – 16400 = 100
Max Loss = Spread – Net premium received
Spread = 100 – 77 = 23
Thereby our maximum loss reduces (from unlimited in SS) to 23 points
From the above Ex
Max profit = 77
Max Loss = 23
Risk/Reward potential = 1:3 which is good
In most cases RR will be favorable, that is more than the risk involved
I have put the above figures in Zerodha margin calculator and came up with following results:
a/ For the following Short Strangle
This seems high for a strategy that is open-ended so it has to be covered as follows
We added 100 points spread to the SS (long 16500CE & 16100PE)
Now Margin required = Rs37,693
We need significantly less margin in this 4legged IC than a 2-legged SS. This is because our short options have been funding our long options
There are two breakeven points in IC
Upper BE = Short CE strike + Net premium received
Lower BE = Short PE Strike – Net Premium received
In the above Example
Upper BE = 16400 + 77 = 16477
Lower BE = 16200 – 77 = 16133
From the diagram you can see that you will have max profit if market expires within the short CE and PE strikes
The profit reduces as market expires between the short strikes and BE points
Outside the BE points, there is limited loss
IC is an improvisation over SS
It makes money when market expires in the expected range
Has Narrower BE points
Has lesser margin requirements than SS
Got limited risk at the cost of less profit potential than SS
Don’t forget to like and retweet
Thanks for reading
More from Finkarma
10 threads that will teach you more than any Course on Trading🧵
1/ Lies that you've been told about trading.
From:
2/ Pitfalls that every discretionary trader faces, and how to overcome them.
From: @KillerTrader_
3/ The only trading psychology post you need to read.
From: @indian_quant
4/ A thread on Trading mistakes.
It's inevitable that you will make a lot of mistakes in your trading career, what's truly important is if you learn from those mistakes or keep repeating them.
From:
1/ Lies that you've been told about trading.
From:
Which are the biggest lies told by well meaning people in trading?
— Anandable Conservative Trader (@AnandableAnand) December 29, 2021
I will list the ones I heard and believed initially, which was detrimental to my progress
Lets do this and you add one LIE u heard many times
First
1. Its impossible to make money in intra-day trading
+
2/ Pitfalls that every discretionary trader faces, and how to overcome them.
From: @KillerTrader_
What are the pitfalls I faced as a discretionary trader and how I overcame them:
— Killer Trader \U0001f4c9\U0001f4c8 (@KillerTrader_) October 10, 2021
A thread \U0001f9f5#StockMarketindia
3/ The only trading psychology post you need to read.
From: @indian_quant
The only trading psychology post you need to read:
— Indian Quant \U0001f1ee\U0001f1f3 (@indian_quant) October 28, 2021
===========
This guy gets appreciation and possibly makes money only after he reaches from one point to another.
But if his entire focus is on :
1. Not falling down the rope.
2. Keeps on thinking to reach the other end
..contd pic.twitter.com/YQCEnnU7iR
4/ A thread on Trading mistakes.
It's inevitable that you will make a lot of mistakes in your trading career, what's truly important is if you learn from those mistakes or keep repeating them.
From:
Trading Mistakes & Lessons Learnt \U0001f9f5
— Sourabh Sisodiya, CFA (@sourabhsiso19) September 30, 2021
1) I always keep my mistakes & lessons learnt in front of my screen while trading.
Bcz we as traders tend to commit the same mistakes everytime.
So seeing your learnt lessons everyday ensures that you avoid them.
#trading #mistakes pic.twitter.com/4MYFlCS9Hi
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A Mega Thread🧵
Concepts :
Relative Strength
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Retweet and Comment If you want to attend a live session on the same !
We have Got around 86 Stocks that became 5X in 2 years
These Belonged to various sectors and Groups
Excel Link for List of Stocks
https://t.co/jESOUM32b5
1/n
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90% stocks even gave all time high breakout after Stage 2
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Relative strength is a strategy used in momentum investing and in identifying value stocks.
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A Mega Thread🧵
Concepts :
Relative Strength
Stage Analysis
Retweet and Comment If you want to attend a live session on the same !
We have Got around 86 Stocks that became 5X in 2 years
These Belonged to various sectors and Groups
Excel Link for List of Stocks
https://t.co/jESOUM32b5
1/n
All stocks had few things in common :
Stocks doubled Before entering into Stage 2 Uptrend
52 week RS was positive in stage 2
90% stocks even gave all time high breakout after Stage 2
60 Stocks had market cap less than 1000 Cr
Examples : OLECTRA , PGEL
2/n
So What is Relative Strength ?
Relative strength is a strategy used in momentum investing and in identifying value stocks.
It focuses on investing in stocks or other investments that have performed well relative to the market as a whole or to a relevant benchmark.
3/n
How to Apply ?
Type
“Relative Strength”
Choose any
By bharattrader
By traderlion
By Modhelius
I use by bharattrader
In setting use 52 period
Use Weekly Chart
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I try to look for exhaustion of supply, drying down of volumes, & narrowing of daily/weekly ranges. Enter after an upmove, on the lowest volume & the smallest daily range, as the stock forms a low volume doji/inside bar while in pullback/retest at/in/near the zone of 10MA & 20MA.
I m watching your posts... amazing sir.... thanks for sharing.... can you share what is your trade set up
— Sahasra (@h_shanmugavelu) March 21, 2022
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Before I begin, it might be worth explaining the Malay conception of the spirit world. At its deepest level, Malay religious belief is animist. All living beings and even certain objects are said to have a soul. Natural phenomena are either controlled by or personified as spirits
Although these beings had to be respected, not all of them were powerful enough to be considered gods. Offerings would be made to the spirits that had greater influence on human life. Spells and incantations would invoke their
Two known examples of such elemental spirits that had god-like status are Raja Angin (king of the wind) and Mambang Tali Arus (spirit of river currents). There were undoubtedly many more which have been lost to time
Contact with ancient India brought the influence of Hinduism and Buddhism to SEA. What we now call Hinduism similarly developed in India out of native animism and the more formal Vedic tradition. This can be seen in the multitude of sacred animals and location-specific Hindu gods
i wonder if you can make a thread bout witchcraft in malaysia.. or list of our own local gods/deites..
— r a y a \U0001f319 (@lcvelylilith) February 20, 2020
Before I begin, it might be worth explaining the Malay conception of the spirit world. At its deepest level, Malay religious belief is animist. All living beings and even certain objects are said to have a soul. Natural phenomena are either controlled by or personified as spirits
Although these beings had to be respected, not all of them were powerful enough to be considered gods. Offerings would be made to the spirits that had greater influence on human life. Spells and incantations would invoke their
Animist ceremonies of a religious or magical nature were normally held for the purpose of divination or making a request. This would either be done at a keramat or at a shrine similar to the Thai spirit houses or Chinese roadside shrines pic.twitter.com/I1hliyi0x3
— \u2745\u1710\u170b\u1713\u170e (@uglyluhan) June 16, 2019
Two known examples of such elemental spirits that had god-like status are Raja Angin (king of the wind) and Mambang Tali Arus (spirit of river currents). There were undoubtedly many more which have been lost to time
Contact with ancient India brought the influence of Hinduism and Buddhism to SEA. What we now call Hinduism similarly developed in India out of native animism and the more formal Vedic tradition. This can be seen in the multitude of sacred animals and location-specific Hindu gods
