Free Money - Premium Skew

Well, nothing is free, but this is a setup with a very low risk of losing money. Nifty Index is currently (July 14 EOD) at 8565. The derivative premiums are ridiculously bullish. 9000 deep in-the-money (ITM) Puts have almost nil Theta (time value).

Nifty Option Chain - Strike Price 9000

December 2016 8500 and 9000 strikes are liquid at the moment. It is time to buy the December deep ITM strikes.

Nifty Option Chain - December

Near month at-the-money (ATM) or nearby strikes can be sold again and again. You have time until December to own a free 9000 put. If the price, moves to 9000, the 9000 December Put will still be above 200 - see the current price of 8500 December Put, but the near month puts will lose value. Even if the price moves down, the December deep ITM Puts will have a higher Delta than near month ATM puts. And you can always roll over the near month to the next month.

Nifty Option Chain - July

Nifty Option Chain - August

And given the crazy premiums on the Call side, if you want to play a Calendar Spread, you should buy the near month Calls and sell the far month Calls. Markets are about to open, so posting this in a hurry....


Also read:
Super Stupid Option Premium Skew

Spike & Ledge, could not handle - Day Trading: July 1, Intraday

Today, after the initial spike, I suspected a ledge. It did turn out to be a ledge, only not a good one. I would expect the ledge to finally breakout upwards. That did not happen. The price was in a 30 point range all day.

Again, I overtraded. The first trade entry was a good one for a spike and ledge. Trailing it was tricky. If I had held on to my initial stop, I could have ended the day with just that one trade. But, I tried to lock in a small profit. Not just that, I reversed the position, when I could have waited for it to go under 8350. What followed is the usual story of getting whipped in the small range.

Click here for the story in live tweets at @BakwaasTrading.