Untitled (R4UdZmJ3wDs)

Pairing options through strategies have two benefits. First, it guides the trader on what kind of trades should be taken. And secondly, it always keeps your risk very defined. In our earlier videos also, we had shown that okay, to make 1 lakh rupees per month, maybe you need to divide your capital of 30 lakh rupees into three buckets of 10 lakhs each. We have shown how to make that money even in a very low VIX environment. Now, let us say if the VIX is sufficiently good, can we produce those kind of results in these markets also? And then, adjustments can have two different purposes. One can be used to reduce the loss in the strategy. Another purpose can be it can be used to increase the profit in the strategy also. Welcome to another video by The Options School. This is your friend, Pradeep Singha. We talk about very safe and hedged option trading strategies in this channel. You can join our YouTube WhatsApp community. Link is given in the description. We give you a pre-market report every morning. In today's video, we will be talking about how we should avoid doing over adjustments. Now, if you know the adjustment, that doesn't mean at just a drop of a hat, we need to do that adjustment. Adjustment needs to be done only when it is required. Let me take you to backtesting software on 4th of May. 4th of May is the first trading day in the month of May. At morning 9:30, I'm choosing a strategy which is a very popular strategy. All of you know this. So, please write in the comment section what is the name of the strategy. So, I'm going on monthly expiry 26th of May. The monthly expiry is always give you a lot of time and space to do the adjustments, right? For choosing a trade, let us say I'm going somewhere close to 25,000 and I'm selling this call, and I am buying 25,100 call. So, somewhere close to 2020 delta, I will do on put side also. So, if I see this option chain, I can sell this and I can buy 25,400, right? So, this is a very balanced trade. Although risk reward is not very strong, but we will do some adjustments so that the risk reward during the series can also be improved. And as I said, okay, let us say we have three buckets of 10 lakhs each. So, we are deploying our first bucket here, and let us see what is the maximum possible risk. So, I'm doing 10 lots. I'm not using full 10 lakh rupees because in case there is a substantial increase in the VIX, the margin requirement also increases. So, we are just keeping some cushion of 1 to 1.5 lakh in this bucket. And we know now the maximum loss in this trade is 38,000 rupees whatever happens. Now, this is the best thing about these risk defined strategies. You know, whatever happens to the market, this is my maximum loss. And one adjustment we will do, and this loss will get drastically reduced. And obviously, we have lot of time and space. Even if the market goes into any kind of a red zone, we should not panic in this strategies because risk is defined, and we know there are good adjustments. For better reach and visibility, please like the video and subscribe to the channel. All your like and subscriptions are very precious. Now, let me run this trade quickly, and let us see in case any break even point, which is 2 3 4 5 9 and 2 5 0 4 1. I really do not know which side the market will go. So, any side the market will go, in case it reaches the break even point, then only we will adjust the trade. Now, break even point as of now, if you see this green line and this red line, these are expiry break even points it is showing. But the blue line keep on blue line. Every passing day, the blue line keeps on expanding, and it crosses the green line. So, the actual break even is much better than what is shown by the green line. I'll show you when we move into this trade. So, first day, market has gone down a bit, not much of a damage. Next day, slight improvement in the market, very very small profit. Next day, now see the blue line. Now, blue line has started coming up in in green box of this payoff diagram. Slowly slowly it can even it will expand to such a level that okay, it will cross the boundaries of the green box in the payoff diagram. I don't know if you're making only 2,000 rupees in this trade. Break even points are still intact. Nothing to worry about that. 3964, okay. Now it has made a downward move. Again, still we are having 3,900 rupees. And only thing you keep an eye is that okay, on put side it is still okay. On call side, most of the profit is already there. 45 rupees is the value of the sold call. 35 is the value of the purchased call. So, only 10 rupees are there. If it goes below 7-8 rupees, it is always better to bring the call side down. We will see for maybe some more time. Okay, now if you see it is only 24 and 19, only 5 rupees. And market has tanked down on the lower side. Although my break even point is not breached, but on call side now I have nothing much left. Most of the premium, whatever was available on the call spread, has already melted. So, we should definitely close this trade and bring the call side down. That will drastically reduce my maximum possible loss also in the trade. So, this adjustment is not to protect my loss on the downside. This adjustment is to increase or improve my risk-reward ratio. So, I will close this and I will close this also. Right? And we'll go back to option chain and we will sell something like 24, 200 we can sell. Because market has really gone down to 23,637. Sell this and this is not going to increase your risk. Even if you feel that okay, the payoff diagram is shrinking a bit, but overall if you see from a loss of around 38,000 rupees, now the loss maximum is 25,000. So, we are able to reduce the loss by at least 20-30%. Let's move ahead and see next day. Okay, now the market has really gone down below our break even point. This definitely needs some attention. Even the blue line has not expanded much. So, we'll just wait for maybe another 30 minutes to see whether the blue line expands or not. Okay, it is still okay. We can sustain the trade. Okay, we are at a borderline of lower break-even point, so we can definitely wait in this state. Overall P&L is also nothing. Call side we have already shifted. We can shift the call side further. Our max loss is also very limited, but we should wait. That is what I'm trying to say. Don't just jump into adjustment as soon as the market has touched the break-even point. Now, the break-even point here is 20 3439 and market is 23466. Even if market goes to 23400 or 38390, we can still wait. Because if there is a decent fall in the market, there can be recoveries also. And there is sufficient time. It is only 13th May as of now. We have expiry on 26th May. Next 30 minutes, let's see. Okay, there is a little bit of recovery and it's good that okay, we have not done that adjustment so far. Okay, slightly better. Okay, if I see next 30 minutes, not much damage. So, we are we are quite safe. We are not required to do any adjustments and blue line is also expanding, which is giving me some profit also. So, let us see towards Okay, it is very difficult not to do an adjustment when you know that adjustment. So, you have to just keep yourself very very patient and calm. Next Okay, it's quite okay as of now and it's quite in the center itself. Next Okay, I'm just moving by slower time frame to see if we are required to do any adjustments. Again, market has touched the lower break-even point, which is perfectly okay. Blue line has expanded. Lower break-even point is slightly better than what is shown by this pay-off diagram. Let us see. Okay. And if you see on call side 63 minus 46, we still have 1670 rupees. You make it 930 to get better rates. Okay, as of now, things seem to be in control. Had we done adjustment, that would have not done any damage, but then maybe that would also require some extra transaction cost, right? Next day, again coming down. Okay. Okay. Keep an eye on this. This is only 7 8 rupees. It may be another 2 hours. Okay, this is perfectly okay. Now, we are making good 16,000 rupees in the trade. And our maximum loss is 25,000. We can in a very staggered way reduce the number of positions and book some profit or we can just go ahead and see that okay, if there is a breach in the break even point, then definitely we'll do adjustments. We are not doing any adjustment on call side also because now 13 14 rupees are there. If it comes down to 5 6 7 rupees, definitely it makes us to bring it further down. Next day, 18,000 rupees we are making. Next day, okay, we are making 20,000 rupees and it is Monday. 26th is the expiry. I think this is where we should definitely close the trade. And if I'm going on the expiry day also, uh not much of a difference. End of day, we are making a solid 39,000 rupees in this trade. So, will this happen every time? I'll say no. In case market is very very volatile, although this time also it was quite volatile, but in case market is very volatile and trade reaches this red area or this red area, depending on at what time it reaches that red area, how to protect your trade is really a very great skill. And there can be out of 12 months, maybe there can be three four months where the trade will stay within the break even points, but for 7 to 8 months, the trade will definitely breach the break even points and go towards the negative zone of the payoff diagram. How to adjust those trades? How to take care that okay, I am not losing any money in that For this, we have done a workshop on iron condor in which we have given you the complete framework of entry, adjustment, locking the profit, and exiting the trade. With this framework, we have tested 12 months in which we have done the back testing with the framework that okay, now we should adjust why now we should not adjust. So, that different kind of possibilities are covered in the workshop. If you're interested, you can definitely join this course. You can contact the numbers given on the screen. In addition to iron condor, we have also done iron fly and double calendar spread, which are also explained step-by-step with 12 months of back testing. If you're looking for some good broker with a very very dynamic trading platform giving you a lot of control on mobile screen itself, then you can open an account with a broker with whom we are also trading. Link is given in the description. I am leaving you with another very interesting video and we will come back on another video on how to use your second bucket of 10 lakh rupees to fulfill the target of making 1 lakh rupees per month. Do not forget to like the video and subscribe to the channel. See you in the next video. Thank you.