Comment on Greek Interactions

Avinash Punjabi commented on 22 Jan 2016, 06:23 PM

Dear Karthik,
I started reading the options theory 10 days back and read all the modules twice during this period.
Today I decided to execute a virtual trade in F&O. Options calculator is available on my online trading portal.
I was slightly bullish today morning as world markets were suggesting, I decided to buy 1 lot of NIFTY Futures JAN28 @7346/-. Since the market has been highly volatile I decided to hedge the trade at the same time by buying 2 lots of options [email protected]/- at 9:51 am.( The DLETA at that level was 0.4, combined DELTA 0.8)
In the event of NIFTY going up,from your teachings I could calculate that for every point gained in NIFTY (ie for every 1 Delta earned I would lose approx 0.6 delta ie the combined delta of 2 lots of 7300PE, after taking into account the reduction in delta as the Nifty moves up 80-90 points .
The trade worked exactly that way and by EOD NIFTY futures were at 7466. ie 90 points up and the 7300PE was trading @22/- ie 26/- down and as calculated for a 90 point profit in NIFTY I lost 0.6 DELTA X 90 on the put options ie 54(in actual 52 points) point loss combined. Net profit for the trade was 90-52= 38 points it remained that at EOD.(Profit 0.4 DELTA X 90 =36 points almost correct calculations)
I was feeling FANTASTIC and thought I can now be confident about this kind of trade and trade it regularly, UNTIL tonite when I sat to review my trade I was Shaken.
What Surprised me was when I tried to apply the similar trade on FEBRUAY contract the results were bad and it was disturbing. The strikes were exactly similar ie 7300PE but I lost , for the same 90 point upmove in NIFTY I lost a total of 80 points by EOD on the combined PUT position, compared to the 52 point loss in JAN trade. The NET profit turned out to be only 10 points (90-80).
The IV were almost similar at EOD 7300 JAN was 22.4 , FEB 20.29.
Can you please explain what went wrong , why did the results vary for FEB and what would be a better trade for FEB if executed today.
My question is too long , your answer will be appreciated and will help me improve the next trade.

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