We have been updating the BankNifty Straddle and Strangle returns table on a daily-basis. Here’s a post on what it is and how it can be leveraged during the market hours.
Here’s a sample image generated at the end of day, 12th March 2019
1 – Represents a column with the strikes for PEs (28400 PE, 28300 PE, 28200 PE and so on. Their corresponding premiums will be in decreasing order
2 – Represents a row with the strikes for CEs (28400 CE, 28500 CE, 28600 CE and so on. Their corresponding premiums will be in decreasing order
3 – Let us take this combination – 28400 PE and 28400 CE. It represents a straddle and the expected returns when you write this pair and hold it to expiry is 4.98%. But this is very risky as the market is volatile
4 – Hence you can go for other pairs. Just for example – 28100 PE and 28700 CE. This combination will return 1.35%
5 – This pair – 28300 PE and 28800 CE – will return 1.82%
To pick the best strikes for selling single-side (naked) options, you can use our option writing tool here . The explanation for the same is available in the blog post.
As a thumb rule, you may want to write options at good 1 SD, 1.5 SD or 2 SD from the current spot price and hedge (buying equal lots of PE and CE at a suitable distance).
You can find the daily posts on banknifty straddle and strangle returns here.
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Please note – This tool/ output is only for educational purpose. Option writing may involve unlimited risk. Use it at your own risk!