Option Trading Risk Free Strategy - Long Straddle

So before you dig in you need to understand Long Straddle strategy. Here is the definition of Long Straddle.

A long straddle is a combination of buying a call and buying a put, both with the same strike price and expiration. Together, they produce a position that should profit if the stock makes a big move either up or down.

Ok so if you have read and understand above line you may have got little or complete idea about what strategy we are going to use.

Let's take an example.

Nifty Spot is trading around 7300 Spot
7300 March CALL  is trading around Rs. 167
7300 March PUT is trading around Rs. 124.

What we need to do is we need to buy both CALL and PUT at the same time. Market will move either direction and in this case either CALL will rise or PUT will rise depending upon market will go.

BREAKEVEN = 167 + 124 = 291.

We can get rewarded if one of the call go beyond 291 which will likely to be happen if market will rise 100-200 points in same direction. Or total value of CALL + PUT strike price will be grater than 291 we are in profit.

I suggest to use this strategy before 10th of each month. As you may already know that as we move towards expiry the overall value of CALL/PUT will start decreasing.

Happy Trading!!! 

Nifty Day Trading Using RSI

When you day trade you need to put your sentiments aside. So to do so you need to find most probable trade and that could be possible only using technical indicator. Now the question is "which technical indicator to choose?". I normally trade using RSI and Candlestick 2 Min. Chart on Nifty Index. I mostly trade options and according to my strategy RSI is best fit to find most probable trade. Keep in mind that no indicator is perfect so you just need to maintain your win/loss ratio around 60% and that would be good enough. Even if you achieve 50% w/l ratio that would also take you in the profit zone. 

Now, what about stop loss? Of course, to protect your losses you need to and you have to maintain strict stop loss. It's completely up to you but when I trade options I put 5 rupee stop and profit if I get 10 rupees move.  

Now have a look at chart below.

In the chart I have drawn 2 green circles. 1 in the candlestick chart and another circle in RSI indicator. To read single you first have to see that whether RSI is in overbought/oversold position. I normally prefer to trade when RSI go above 80/85 and below 20 for sell and buy respectively. Now, wait for the signal being generated in candlestick chart. If signal already been generated before few minutes then initiate trade and  trail your stop loss when you enter in profit zone.