Now we said that strangle is short strangle but you can choose different expiry and collect more premium. What does it mean? You understood strangle that you get a range. In the middle of this range, the market closes anywhere, you make money. You already know how much money you will get. Now how much money will come till expiry is one thing. There are two concepts here.
Understand both the concepts. If you are the current expiry, which is the expiry of this week, you will see that the current expiry, its premiums are eroded very quickly but the premiums are very lessen it and if you talk about the far expiry, then in the expiry of the far month, you see that the premiums are more but the premiums in it are very slowly melting. But I will tell you a wonderful concept. You check it.
I will show you now. For example, you are 45 days near about, this is an example,45 days after expiry, you talk about it. If you are standing for example on 15 January, then we will talk that you go 45 days ahead, then put 15 days on January, January is overland put the remaining 30 days on February. So the last Thursday of February, the expiry of that, for example, you see that it is 23rd of February, thesis the expiry.
So what I want to tell you is that if you are standing on 15 January, then the contract of 23rd of February, the expiry of 23rd of February, go there and make strangle. What will happen is that you will get more premiums. Now I will show you first and then I will explain you. I will show you on the screen.
You will understand what want to say and when you will get more money. So here we come to the Obstacle so that can show you. Here I take the date which we can see in front of us. The date has come in front of us. So on November15, you try that you have followed my strategy and you think that I should make such a strangle with which I have money. Now what is the benefit of strangle? We do not predict how far the market will go.
We just have to see how far the market will not go. What are the parameters for that? Now we will address it in the next blog that you can calculate practically that in which range the market is going to be. And according to that range, you can make strangles in fact iron condors. We will talk about that in the next blog. But now you have chosen the 15th for example. And what did you do? You saw the expiry that the 29th is the monthly expiry of December.
So you took the last Thursday of the month. You have also chosen its expiry from here. Now what do you do? You go to the option chain and at that time you see how much Nifty is. Nifty is at 18365. If it is at 18365, then you say that Nifty is, you will calculate it. I will tell you in the calculation, but you have picked random for example.
You have picked a random that Nifty will not go below 17700 and Nifty will not go above 19100. You have picked up a random. So I agree with you. I went to the option chain and what I did? I went to the option chain and agreed with you. What saw on the call side, 19100? 19100 on the call side, you went and sold it. You sold it.
For example, I have put the default at 36. So here 36 lot, what did we do? We added the default. We sold it. We feel that above 19100, the market will not go and we have17700. Now see one more thing here. The premium that we received on 19100 is approximately9900 rupees. Assume that it was received and there is a delta of 21. So we have to Sella similar delta. So we will also see 17700 here.
So we are getting similar delta and the premium is also getting similar. Here I am getting a premium of around 99 rupees. So I sold it here. So I added the position. So my payoff graph came here. Now see how much I can earn maximum. I can earn 358000 rupees from this position. Now here you will say that you talked about 36 lot.
It will take 1 lakh rupees in 1 lot. We are talking about 36 lot. So in 36 lot, it will take about 40 lakh rupees. So you are right. It takes money. You can make it by investing 1 lakh rupees in 1 lot and if someone works in 36 lot, then definitely more money. If you have to earn, then you have to put in more money. Now you have returns here, but I say you do not want 3500000.You see 3500000. You say that I just need 1.5 lakh rupees.
If I get 1.5 lakh rupees, Theni will not stop in the market till the end. Who will stop till 29th December. I am making this position on 15thNovember. I am making it on 15th November and I do not want to stop in 45 days. I am telling you that within 7 and 10 days, you should receive a premium of 1.5 lakh rupees and you will see that it will happen and you can easily come out of the market with 1.5lakh rupees and can make a new position because the time you will stay in the market with your position, you can face that much volatility.
So now we see what would have happened if you had executed this strategy. Let’s see. Here you see, now will show you from here. We move forward one day and what happens on 16th, we are getting profit of 5000 rupees. How much do we want? We want 1.5 lakh rupees. We see the next day that we are getting loss of 8000. There is a strangle. Here, if the market goes in any direction, then you will see a loss. Remember this. But now it is within your range. There is nothing to worry about.
Next day you see that you are getting a profit of31000. Okay, this is Avery good strategy for the sideways market. Okay, let’s see ahead and if the market is within your range, then you will also get a profit. Now the market has moved, but the premium has started to erode, so you are getting a profit of64000-65000. Okay, so now we have reached to 21st. We executed this on 15th. On 22nd, we are getting a profit of77000.
Okay, we will still wait. On 23rd, we are getting a profit of 1.5 lakh. Now you see, on 15th, we executed this strategy. We have reached to 23rd.You have given the market for about 8 days. In 8 days, the market gave you 1.5 lakh rupees. Now you want, youkan see that your position is good. You can stop if you want because the maximum profit is 3.5 lakhs.
But I told you that a strangle that is earning you 1.5 lakh rupees, is earning you quickly, then you can book this and move ahead. Now it is totally your choice. If you want to stop, then see what happens next. The next day, instead of 1.5 lakh, there Isa profit of 1.4 lakh. If the market moves in any direction, then you can earn a profit.
There is still a profit of 1.36 lakh. The next day, there Isa profit of 1.61 lakh. The next day, you see a profit of 1.36 lakh in the market. The next day, there is a profit of 1.35 lakh. Then you see a direct loss of 4000 rupees. The market will move suddenly; your profit will stop being seen. The profit is not visible, but the loss is visible.
Now what is there to be afraid of here? The fear starts when the market starts reaching around your break-even, then we will think that it has not reached yet. So you still do not need adjustment. When will the need for adjustment come? We will understand that in the blog of adjustment because it can also fail completely. It can fail, if the market goes beyond your break-even, then you can get scared.
Next, the next day the market is seen in its range. You see a profit of 81,000. Then suddenly you see a profit of 1.43 lakh. From where it started, its near about will reach, suddenly the profits will increase because the next day you will see a profit of 1.69 lakh and then you see profit of 1.74 lakh.
You have come up to 7th December, so you have come in the same month in which the expiry is. So now the premiums will be seen eroding very fast. 2.23 lakh and 2.37 lakh. Now see, after so many days, now it is 12th December, you are definitely seeing 2.77 lakh, but you got 1.5 lakh rupees in the starting 8 days.
After that, you can reuse that capital and make money many times. When a good move was coming in the market, the moves that depends is on which timeframe, for how much time you are using which strategy. So that’s you can catch because you have learned more strategies. So what why I told you that strangle can give you a profit very quickly.
If you have made it after45 days or 2 or 3 months, then sometimes you will see that you will get a profit of up to 10% in that month. Okay275 291 now you see 3 lakh rupees on 16th. Within almost a month, you are seeing a profit of 3 lakh rupees here, but in 8 days you saw a profit of 1.5lakh rupees. So again you will stop till the end and if the market remains within your range, then you see we move forward3 lakh 22000 3 lakh 33000 3 lakh 4000 2 lakh 79000 suddenly the market fell.
If it falls, there will be a difference in your profit. Okay, but it is in your range, then there is no need to worry. You see the market is reaching from this end to that end. 257 3 lakh36000 because the market is in your range. On 27th, 3 lakh 40000on 28th and the market closes in your range. You had to get almost 3.5 lakh rupees. You got 3.5 lakh rupees.
So this is what you have understood that if you make a strangle, then how do you get profiting strangle. You definitely get the benefit of a wide range of profit, but now you say that you do not get profit, but you get more money. You saw more money. We get more profiting straddle.
Here you can see that it is 9% and there is 3% if you talk about weekly, if we talk about 45 days ahead, then what you will see if you make straddle, then youkan see that it can be a profit of up to 31% and if you would have made strangle, I am giving an example of similar expiry.
So you get 26% here. So you say that there is a percentage more in straddle, but you see I do not make straddle myself, but if you would have made it, then what would have happened. I will show you this too. So we take option change on15th. Let’s select it again. So on 15th, you are seeing the same, which was nifty, it was around 18,365. So what you did, you took 350, you saw add the money and you sold it by adding the money. You sold 350, on 29th of expiry. So you see some payoff graph in this way.
Now what you see here, the next day you are directly losing 34000. Next day you are losing 4000. Next day you are making a profit of 59000and you can earn a maximum of 12 lakh rupees here. You are making a profit of 1,29, 000.You are making a profit of 1,80, 000.You are making a profit of 2,72,000. You are making a profit of 2,41,000. You are making profit of 1,82,000. You are making a profit of 2,14,000.
When will you make a maximum profit? When you came to the point where you made and the market closed. Now see the markets soon as it goes to one side, it will go to any of its break-even, then it will start to go to the other side. 5000, 1,19,000, 1,87,000, 2,11,000,3,22,000 which you have got till8th December. 2,68,000, we are talking that if you will stay till the end, in this straddle period, you have got a profit of 5 lakh rupees.
So here you are seeing 4,40,000, 3,19,000,4,27,000, 6,72,000. Why is this happening? Because if the market will reach where you made it, then you will get a profit of 7,28,000. There will be very few people who will stay till the end and let the premiums erode completely.
If they use the strategy, then see now itis going in one direction, then the profit will be less. As long as it will be in this range, you will see a big profit. Alright, so if you would have stayed till 29th and you would have made a straddle here, then you would have earned6.5 lakh rupees and how much maximum you could have earned, you could have earned12,57,000 rupees. So why didn’t you get 12,57,000 rupees? Because the market did not closet its peak.
Here at the peak, you sold it, you would have got premium from both sides. So if it will close little bit from there, then you will not get the exact max profit. You will get them ax profit only when the market is completely closed in the middle.
So I told you that if you use the straddle and strangle and earn in the sideways market, then how do you get the maximum profit? Here the profits are in fact loss.
But now which strangle I have told you, which can earn you more money, that if you think about the expiry of at least 45days ahead and for that you make a strangle for a good range and now don’t think that want full profit.
If you think that I am happy with 40% profit or the profit that am showing, I get 40-50% profit, so you just book the profit and you create a new strategy looking at the market.