Hey folks, every month I’m trying to share some options strategies to show how we can create these option strategies that are not only helping to keep our risk on the limited side but giving decent return too. Today I’m sharing a result-oriented options strategy in IBULHSGFIN to show how one can choose this strategy ahead of financial results.
Before we go further let us understand which strategy you should choose ahead of results? and the steps you should choose that strategy?
As we know, Implied volatility is the most important variable for Option pricing. if there is a change in Implied volatility (IV), it put a big impact on option pricing. Means if IV increases Option price will also increase and visa-versa.
- Read more about options and it’s variables here: How to trade options?
Now, whenever we go closer to the date of the result announcement, We can see IV starts increase. And once the result has declared IV falls sharply. Now, when IV is high that means option prices should also be high. It gives us a good chance to sell options at a higher price. Once results will be declared, we will get the benefits of IV drop which can give us a good profit in just a few days.
Means: Sell options when IV is high and cover it once IV drops with a good profit in just 2-3 days. Sounds good? Looks very simple?
It’s not that simple as it looks. The reason is: as soon as the results will declare we can see a sharp movement on either side which can hurt you badly if you are having naked short positions in options. One bad trade can hit you very hard and the loss you will be unlimited.
So to avoid this unlimited risk I suggest you should go with credit spreads with limited risk. This means you should hedge your naked short positions with some options buying. Some of the strategies are Iron condor, Iron butterfly, Calendar spread. Today I’m sharing Iron condor as a result-oriented options strategy. Let us look at the next steps:
Best result-oriented options strategy in IBULHSGFIN
Now we have our result-oriented options strategy. The next step is to select strikes and initiate a trade. In the below article I have shared all the necessary steps we should follow to initiate an Iron Condor options strategy. You can go through it if you don’t know what is an iron condor options strategy.
Now ;ets come to our rest-oriented options strategy in IBULHSGFIN. If you look at the below chart you will find that IBULHSGFIN is trading in a range, which is the first rule to select an iron condor options strategy.
As per the chart, IBULHSGFIN is trading in a range of 200 – 260, which is a good candidate for our Result-oriented option strategy. On 3rd July 2020, IBULHSGFIN will declare it’s the result that the reason right now IV is also high.
High IV means more credit and less risk. So it can be good candidate for our result-oriented options strategy. Now let us look at the Open interest to find a confirmed range for the July expiry. We can use that range to select our strikes for our options strategy.
IBULHSGFIN Option chain analysis
As per current option chain data you can see the highest Open interest is at 200 PE and 250 CE. That means 200 is acting as the immediate support level and 250 as an immediate resistance level.
So, OI is also verifying the range we are getting on charts. We can use this range to select our strike for a result-oriented options strategy.
Best result-oriented options strategy in IBULHSGFIN
Here is the Best result-oriented options strategy in IBULHSGFIN based on the range we are getting on the chart and open interest analysis. Now our breakevens are 175 – 265 which means we don’t need to do until IBULHSGFIN is trading between this range. If you got any breakout or breakdown from these breakevens, you can follow the below adjustments.
Possible adjustments for result-oriented options strategy in IBULHSGFIN
You can follow these adjustments:
First, you can follow these breakevens as a stop-loss means you can close your strategy after a breakout or breakdown from this range.
If the loss is more then 8000₹, close this strategy.
Shift your call spread to 240 after a breakdown from 175. Means book profit in existing call spread and initiate a new call spread with 240 CE SELL and 250 CE BUY.
Same thing you can do with PUT spread after a successful breakout from 265. Means shift your put spread to 40 points higher.
I hope my articles are helping to trade with these options strategies. Which strategy you are using as a result-oriented options strategy? Do let me know in the comment box.
Options Strategies – A Mentorship Program
On the 1st of September 2019, We have launched a new mentorship program for Option strategies, in which we are discussing how can we deploy these strategies? What rules we should follow before taking a trade? and what should be our adjustments if the script is moving against your direction?
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DISCLAIMER: – we are not a SEBI research analyst. Views posted here only for educational purposes. There is no liability whatsoever for any loss arising from the use of this article or its contents. This product is not a recommendation to buy or sell, but rather a guideline to interpreting specified analysis methods. This information should only be used by investors and traders who are aware of the risk inherent in securities trading.