INSUBCONTINENT EXCLUSIVE:
To make money in such an environment, derivative analysts are advising their clients to utilise the so-called iron condor that allows
traders to place four different bets on the same instrument.
The iron condor, utilising both the put and call spreads and four different
strikes, limits the loss risks to Rs 31 while promising gains of up to Rs 69 on each trade
(10,700) and put (10,500) to cap upside or downside risks if indices break out of the 200-point range, either side.
Options contracts
expiring April 28 clearly show that markets face resistance at 10,700 and have support at 10,500
The 10,700 call has the highest open interest (OI) among calls at 51.11 lakh shares
The 10,500 put has the highest put OI at 55.2 lakh shares.
The Nifty closed up two-fifths of a percent at 10,565.3 Thursday
straddle fetches the trader Rs 121 a share (75 shares equal one Nifty contract)
Buying the strangle involves the trader paying a combined Rs 52 a share
This means the trader gets a credit of Rs 69 a share (121-52), ex-brokerage and taxes, at initiation
faced is Rs 31 since the trader purchased a 10,700 call
Say, the Nifty expires at 10,750, the payout to the straddle buyer is Rs 81 (10,750-10,669)
However, since the trader purchased a 10,700 call, he receives Rs 50
That means the net loss faced is Rs 31 (81-50).
Similarly, the lower breakeven point is 10,531 (10,600-69 inflow)
Say, the Nifty closes at 10,450 on expiry
Here again the trader suffers a maximum loss of Rs 31 as the straddle seller will have to pay the straddle buyer Rs 81 (10,531-10,450)
However, since the straddle seller purchased a put (as part of the strangle) at 10,500, she receives Rs 50, reducing her net debit (to the
He said he will be advising his clients to initiate the strategy.
Chandan Taparia, derivatives analyst at Motilal Oswal Securities, said the
iron condor aimed to capture the premium due to theta (time) decay amid a rangebound market
