You answered it yourself 🙂
Adjustment cost is way too high for bnf. Sometimes bnf does exceed nifty in vol crush, but nifty overall is more consistent.

More from Sarang Sood

THREAD ON IRONFLY

These days the most preferred strategy for option sellers due to improved margins is IRONFLY. It's essentially a short straddle with long strangle. Long strangle acting as 'WINGS', which help in capping the unlimited risk associated with a short straddle.(1/n)

You can also view the position as a combination of Cal & Put credit spreads, if that makes it more easy for you.

There are 3 important things to understand while trading this strategy:

1) Initial size of the Wings
2) Risk Management
3) Adjustments

(2/n)

Since we are selling an ATM straddle, the 1st question is how far our wings should be? Ideally i sell .50 delta straddle & buy .20 or .10 OTM strangle, depending on my view on volatility. So the distance of wings depends on the IV setup. Higher the IVs, greater the distance.(3/n)

If you don't understand greeks, then ideally with 30 days to expiry (dte), wings should be around 300pts either side. If your trading in weekly then it should be not more than 200pts. Higher the premiums, higher the distance as we have more cushion of theta. (4/n)

It is important to understand that we need to reduce the distance of wings with time so as to manage our RISK in gap openings or sudden volatile move. So for eg. if you started with 300pt wings with 30dte, the wings wouldn't give the same protection when there is 7dte. (5/n)

Sarang Sood
@SarangSood

A THREAD

Topic: Why triple straddle has no real benefit.

A triple straddle is essentially an ATM Straddle & one or two step away straddle on either side. The position is almost neutral strategy just like any other neutral straddle or strangle.

1/

We can also view the position as an ATM straddle, a strangle & inverted strangle.

For example

Nifty: 14700

Triple straddle: 14600,14700,14800

Another view:

14700 straddle
14800-14600: strangle
14600-14800: Inverted strangle

2/

So the real question is what is the advantage of an inverted strangle over it's otm counterpart?

The answer is none.

They both have same premiums/theta. Only that slippages will be high in inverted strangle when we do the required adjustments plus liquidity issue.

3/

So isn't it better that instead of a triple straddle, we can just do ATM Straddle & 2* OTM strangle.

So in the above eg. the position will be

14700 ATM straddle
2* 14800-14600 otm strangle.

Same premium received, similar range just that there's no nuisance of ITM options.

4/

The question arises:

Why trade in an ATM straddle & 2* OTM Strangles? Why over-complicate?

Options are in itself a complicated instrument. Wouldn't it be better to stick to one straddle or a strangle & adjust accordingly?

Lesser the strikes, more there will be clarity.

5/

Sarang Sood
@SarangSood

Low VIX doesn't necessarily mean ideal time for option buyers. If premiums aren't falling consistently during the day in low VIX, it usually gives those small delta & IV spikes, just enough to irritate both option buyers & sellers. Same happens when VIX is ultra high.

@SarangSood Sarang bhai according to you what number of vix is ideal for option buyers and what is that for option sellers? And is there any common number which is ideal for both?
— Dhaval bhatt (@Dhavalb55011726) July 14, 2021

Sarang Sood
@SarangSood

Understanding HIGH & LOW VIX

VIX at 16: If you check today's IV behaviour, they were not spiking much even with decent delta move in BNF. The movement was subtle, giving some time to adjust. So someone having good adjustment mechanism can stay in the game longer.

1/

VIX at 20: The same delta move will be more fierce, coupled with rise in premiums. When premiums rise with movement, then the adjustment cost increases exponentially. The premiums can fall back at EOD, but the damage is done if caught in the spike.

2/

After talking to few traders, their backtest result was in favor of high VIX of 2020, rather than 2017-19. The key flaw in the backtest were the adjustments which are not easy to calculate. Combination of high theta & fixed SL during high VIX, the IV crush is cashed at EOD.

3/

Neutral option sellers who don't adjust & have fixed SL on a static straddle will not be able to benefit highly in low VIX. The straddle which moves away from ATM will increase no matter what. But if we keep on rolling our strikes, then we get good realisation of theta.

4/

I have made majority of my profits in option selling when VIX was at 13-15, mostly just relying on my adjustments. Since 2020 with high VIX, adjustments stopped working because of increase in the frequency of delta + IV spike combos & so had to shift to directional trading.

5/

Sarang Sood
@SarangSood

10 mistakes in my 14 years of trading as an option seller 🧵

1. Staying neutral all the time. Majority of the years i have been a neutral option seller. I now realise that having a little sense of direction would have given me an added advantage with better utilisation of capital & also leverage (till the time it was available).

2. Too much importance on adjustments. Initially like most of the new option sellers, i had this notion that i can perfect my adjustment skills for any market conditions. Ofcourse i was wrong. Market is supreme & we need to respect it at times.

3. Not giving importance to greeks. For initial 6 years i didn't even know the existence of greeks. Since i started using them, option selling has become rather less complicated on the contrary of what most people believe.

4. Having too much confidence on the certainty of theta decay. Enough is said about it already. Theta decay is not an edge.

More from Trading

$Emperor\U0001f451$

Emperor👑
@EmperorBTC

Technical Analysis Masterclass- Part 2

'Entering the trade'

Entering a trade without ascertaining a certain things is gambling.

In this masterclass we will learn the pre-requisites to enter a trade.

DON'T ENTER A TRADE WITHOUT DETERMINNG THE FOLLOWING.

Please share.

We understand what reward to risk (popularly called risk to reward) is.
It will be denoted by R:R.

We will also try to bust a few myths about R:R and how to avoid losing trades.

Before entering a trade, you need to determine 3 things.

1. Entry trigger
2. Stop loss
3. Target

1. Entry trigger = Reasons for entering a trade. There could be multiple reasons or a single reason for entry.

Generally a set of reasons AKA confluence is a higher probability trade and a generally a safer entry.

Example of an entry trigger.

2. Stop Loss.

The price in the opposite direction of the trade where the trade is exited, at a loss.

At this level, the reason for the entry becomes invalidated according to TA and the price can then move in the opposite direction, probabilistically.

3. Target is the possible price level that the asset might touch based on previous trends or confluence AND where a possible reversal could occur.

Target is the next path of least resistance from where the price might reverse.

We will always ONLY use TA to determine all 3.

Aditya Todmal
@AdityaTodmal

A THREAD:

BEST OPTIONS STRATEGY FOR CONSISTENT INCOME -

OPTIONS WHEEL STRATEGY

Everything to know about this strategy I'm posting in this thread.

(1/12)

Step 1: Stock Selection

1. For this strategy you're going to have to choose some stocks that you think will be doing well in the future/long term.

2. Stock must be in an uptrend.

3. Stock options should be liquid enough to trade in.

4. List of stocks attached

(2/12)

Step 2: Which option to sell?

1. Sell put at a support according to charts.

2. Sell put at a strike far away from the spot where you think the probability of the stock falling will be very very low.

3. Sell put at a price where you're willing to buy the stock at.

(3/12)

Step 3: What to do when in profit/loss?

1. If in profit you can just roll up the puts thereby increasing the ROI or shift to other stocks to make more profit.

2. If in loss take delivery of the shares equivalent to the lot size in cash market.

(4/12)

Step 4: What to do after taking the delivery?

1. Sell calls to lower your cost price of the stock. For eg, you took delivery of Reliance at 1900, sell 2100 CE which is about 10% away.

2. Keep doing this till your CE expires ITM and then give delivery of your stock away

(5/12)

Abhishek Kar
@Abhishekkar_

FREE MINI STOCK MBA
If you wish to learn abt trading,psychology,options,business etc
You can go through this thread.
Other than this I do post videos on my YT channel : -Abhishek Kar & Tradiostation
-Intraday views on FREE telegram : Abhishek Kar Official
RT will be appreciated

1. Threads to learn Options
https://t.co/wabkek43I8

2. https://t.co/OIDenHKdWN

3. Some core rules to investing
https://t.co/37d1pygp7P

4.Summing up 2020 Trading lessons
https://t.co/jSUb1lSGbQ

5.Effects of margin change on

\U0001d413\U0001d421\U0001d42b\U0001d41e\U0001d41a\U0001d41d \U0001d41f\U0001d428\U0001d42b \U0001d40e\U0001d429\U0001d42d\U0001d422\U0001d428\U0001d427\U0001d42c
The entire thread will have some quick pointers on options trading. These bullet points are based on experience and learning and even if you are completely new,will help you to build some perspective. So,lets go :
— Abhishek Kar (@Abhishekkar_) December 29, 2020

6. Exciting story about a trader who destroyed a Bank
https://t.co/CsEEhIsD3q

7. Some Thought Provoking facts about stock markets
https://t.co/IjxpX5Wx24

8. A dose on Trading and investing

\U0001d413\U0001d42b\U0001d41a\U0001d41d\U0001d41e\U0001d42b \U0001d430\U0001d421\U0001d428 \U0001d41d\U0001d41e\U0001d42c\U0001d42d\U0001d42b\U0001d428\U0001d432\U0001d41e\U0001d41d \U0001d401\U0001d41a\U0001d42b\U0001d422\U0001d427\U0001d420\U0001d42c \U0001d401\U0001d41a\U0001d427\U0001d424
This thread is about the trader who with his reckless trading destroyed the entire Barings bank. In case you would like to read more such informative threads,do not forget to retweet and share as acts as encouragement
— Abhishek Kar (@Abhishekkar_) October 11, 2020

9. Top 5 resources to learn everything about stocks
https://t.co/6KnIySBGIG

10. Some Pro Tips on Trading
https://t.co/EiSGikt7jv

11. Wisdom on stuffs you should not do
https://t.co/bI2dH0XTSS

12. Reasons why you are losing the

\U0001d5e7\U0001d5db\U0001d5d8 \U0001d5e7\U0001d5e2\U0001d5e3 \U0001d7f1 \U0001d5e7\U0001d5db\U0001d5e5\U0001d5d8\U0001d5d4\U0001d5d7
The following thread will have top 5 for everything you need in the world of stock market and as learner who wants to REALLY grow. Make sure you #retweet the thread and let it reach the maximum number of people as sharing is caring.
— Abhishek Kar (@Abhishekkar_) July 21, 2020

13. The DARK side of stock market
https://t.co/qsteGcbquI

14. Stocks where you should NOT invest
https://t.co/2tD5q0K3UQ

15. Lessons from MILLIONAIRE trader
https://t.co/Pec6LmUtGa

16. Lessons from my

\U0001d5e7\U0001d5db\U0001d5d8 \U0001d5d7\U0001d5d4\U0001d5e5\U0001d5de \U0001d5e6\U0001d5dc\U0001d5d7\U0001d5d8 \U0001d5e2\U0001d5d9 \U0001d5e6\U0001d5e7\U0001d5e2\U0001d5d6\U0001d5de \U0001d5e7\U0001d5e5\U0001d5d4\U0001d5d7\U0001d5dc\U0001d5e1\U0001d5da
In the following thread you will understand a few dark truths about stock trading as a profession.
Sadly everyone touches the only green side but there has to be a balance. Don't forget to #retweet for wider reach.
— Abhishek Kar (@Abhishekkar_) July 6, 2020