In this blog, we are going to learn balanced calendar spread. In the previous calendar spread blog, you understood classic calendar spread, but balanced calendar spread is a strategy that can give you more profit. So if you want more profit, you have to read this blog till the end. And whatever you learn today, you have to share this blog so that it can help more people. The purpose of this blog is to help more people to learn free education that they need. So the main base of the calendar is to use WIX well.
We will discuss in detail how to make it, what the deployment is, and what time to make it, what day to make it, how much margin will be required and what can be the adjustment. We are going to discuss all these things at the same place today. So read the blog in detail. You will see something till the end.
This strategy is going to be deployed on very low capital. So there is nothing like you are going to spend 2-4 lakhs. It is deployed in only 40,000 per lot. If you have 2 lakhs, you can easily do it with 2 lots and there is no need for any extra margin. The name of the strategy is balance calendar spread. What does balance mean here? Balance means that we will keep the balance of Vega and Theta. Theta means basically what we earn on a daily basis if volatility does not increase. So in this strategy, we have to take a balance of Theta and Vega. If VIX increases or volatility increases, then Theta also increases. So we will take this balance.
The second balance here means that we will take the delta balance. We will never let the delta be here and there. So the concept of VIX is also in this and the concept of Greeks is also in this. So basically in balance, we will learn to control Theta and Vega and to control delta. We have read the meaning of calendar in the last blog. Calendar means that if we are selling this week, then we are buying next week. If we are selling this month, then we are buying next month. We do not complicate this much. And spread means where more than one leg is used. Spread means that we hit one buy and one sell. Simply where two legs are used and more than two legs are used, we call them spreads. Spreads can be created in many ways. We have also seen the spread of three legs. It can be of four legs or six legs. Some people can even make 50 legs. But here we are going to see simply in two legs and we will take the call side and put side together. That’s why balance calendar spread.
Now let’s go one by one. We will come straight to deployment. We will discuss bi-weekly in this, if I explain to you bi-weekly, for instance today is Monday, there is an expiry after three days. So this is of this week. This is not bi-weekly. I say that we will sell the expiry of the next week instead of the expiry after three days. Now many people will ask what the reason is for this. The reason for this is that if we deploy something in four days and I take a small range on a weekly basis. Suppose this range is of 200-200 points. And to break that range, Nifty or Bank Nifty took only one day and broke it. You must have seen many times that the reason for the failure of the people who are straddle is that they made this range. The market went here today and then came here.
After going, what do they do? They think that they close it or they leave from here. Or they are not able to bear the loss. So in all these scenarios, 90% of the time the trade closes. But we will try here that our range should remain big. So for instance we take our expiry after three days, then we will not get a big range. So what one has to do is to keep it in bi-weekly. In bi-weekly, the chances increase that it went up in three days. We will get two more chances that it may come back and the trade closes in between and it has been very beneficial. I will tell you by back testing it once or twice and you also do it. And I have seen it many times. You will see on my channel that there is a lot of back testing of this strategy. So I don’t need to prove it so much, but I am still going to explain it in detail. So I have tried the deployment that we will do it on Monday. If we look at the deployment date or day, then on Monday, the time of deployment is where there is 3 to 4 lakh involvement.
If you say low volume, then leave the time of the scalper people, leave the time of the new entry people and leave the time of the exit people at the last. You can say that from 11.30 to about 12.30 or 1 o’clock, you can deploy at any time. This one and a half hour period has a low volume. Mostly, there is no problem with the algo people, but many people take the entry in the morning and mainly take the exit at the last. Scalper people are also more in the morning. This is the low volume area. So we will take the entry in the low volume area.
What is the day of entry? Monday. This means that what were we going to sell on the day of entry, we have to sell next Thursday. We are going to sell that thing next Thursday. And there is a calendar. So if we have sold this, then we will buy the next Thursday. This is the first step that on Monday, you have to deploy things between 11.30 to 1 o’clock. What strikes do you have to choose for selling? Which day do you have to choose? Next week. Now I am going to say one thing very clearly. I always put it on nifty because we can involve a lot of money in it. There is less margin use. In this, if you understand the MTM swing, then the profit loss that increases or decreases day by day, which we call MTM, is very low in this. Very low means that if your profit is running for 5000, then it will come to 4000 slowly. Or it will go to 5000 to 6000. It will never happen that it comes directly to 1000 from 5000. So this thing has also been kept in control. The reason to keep it in control is this, because I have to involve a lot of money in it.
I have to put a lot of money in it and I get a better return from it. Because if I have been doing a strategy for a long time and I have trust on it for 2 years, then I am not doing it for 1-2 lakhs. If you are also starting from 1-2 lakhs today and you have done it for a year, then you have a little more money. You will involve it with a little more money. I would like my MTM swing to be low. So what I did in this matter is that why I did not put it in bank nifty. Because in bank nifty, when we go to the calendar in the next week, first buy weekly, and then buy, then in bank nifty, you will get a very low chance of getting liquidity. And liquidity will also be in a round figure.
You will have to follow the option chain, not according to your own. So we want that its adjustment should also be according to us. The trader can use nifty, because in nifty one can get liquidity throughout the week and throughout the month. There are a lot of people who trade on a weekly basis and on a monthly basis. What will happen in this matter? When we buy weekly, then the simple thing is that two trades will be made in a month. The first trade in the first two trades will be on the 15th. The second trade will be the monthly one. So when we make the trade on the 15th, the simple thing is that we will be in the monthly one to buy, so both will be liquid. We cannot get the same thing in bank nifty. So this is a note point that you have to deploy this thing only in nifty. If bank nifty becomes more liquid after 6 months or 1 year, and we get the right calendar, then we can deploy it there too. There is no such limitation.
Nifty is also straight on the option chain. Let’s take an example of the divergence of WIX; we have a range of WIX, which is 10 to 25. We have to divide it in such a way that if WIX is running anywhere in the range of 20 to 25, then we will simply sell anything from Rs. 35 to Rs. 42. The trader can sell at the money at whatever the strike of this premium is, sell it on this expiry. So one can sell at Rs. 35 to Rs. 42 & in 20 to 25 if it is running in the range of 16 to 19, then you can sell anything from Rs. 28 to Rs. 35. If it is running below that, then you have to sell anything between Rs. 20 to Rs. 28. So we mostly sell around Rs. 25. It is a very usual target. If you deploy this thing, then it will come around Rs. 20 to Rs. 25, which is safer side to trade.
Let’s say what is running now are 11, 12 which is below 15, 16. So we will sell something around Rs. 25. So we got this at Rs. 18, 250 on the put side. This is Rs. 25. I tell everyone to do the lowest lot from 2, but we are going to show it from the freeze point normally that lot size 36. I have put 1800.I did this, 36 lot done. I sold this at Rs. 25 put side. I go to the call side. See, this is 32, 22. I will choose the 22 one because I don’t want to take unnecessary risk because we are going to shift it again and again. So you can see here that the basic we have made is a naked strangle. We have already studied how to handle naked strangle in delta neutral. So we will pick up the concept from the beta part. But after doing this, as we will see now, you are getting Rs. 37 lakhs.
After this blog, you must read the blog of delta neutral. If we talk about strangle only, and then you will see here from Rs. 18, 200 to Rs. 18, 900. We have a range of around 700 points by weekly. For 8 trading days, we can get a range of 700 points & your profit can be around 85,000 probability of profit is 75,000.
Back testing and adjustment is also very important if you are learning any strategy. The balance calendar spread is a very profitable strategy for those who don’t want to take a lot of headache. They want to sit, relax and earn money from the share market. Share this blog to people so that more people get this valuable information. We will meet you in the next blog. Till that time, if you have any questions do comment and go Self-made.