Iron Fly Options Strategy gave 6% return (in one week)

Discussion in 'Must-Read Interviews, Articles & News Items' started by Arjun, Jul 8, 2021.

  1. Arjun

    Arjun Chief Executive Officer (CEO) Staff Member

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    Nithin Kamath, the visionary Billionaire founder of Zerodha, rightly advised us a few days ago that trading options strategies can increase the odds of winning.

    To test the veracity of the advice, an intrepid investor-trader implemented the "Iron Butterfly" Options Strategy.

    The mechanics of how the strategy should be implemented have been explained in detail by Seth Freudberg, an authority on the subject.



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    As one can see from the image, the strategy involves selling an ATM Straddle (15800CE and PE) and buying OTM Calls (16000CE) and Puts (15600PE) as protection.

    The strategy has a wide break even from 15673 to 15927.

    If the Nifty expires anywhere between the two extremes, there is a positive pay-off.

    The maximum gain of a whopping 14.29% is attained if the Nifty expires at the Straddle point of 15800.

    In the present case, the Nifty settled at 15728 on expiry, which yielded a return of 6.21% on the capital deployed by way of margin money.

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    Experienced traders are able to eke out more gains by making periodic adjustments to the trade.
     
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