Learn How To Trade Options Like A Pro!
Sign Up Now And Get Instant Access To The Personalized Emails:
- What are options and how I'm generating my Monthly Cheque with options strategies?
Hello Guys. Hope you are doing good. Today I’m sharing the CATIC options strategy in BHARTIARTL for December 2021 expiry.
CATIC or “Cat ear” options strategy is a limited risk options strategy with 6 legs. It’s an advanced strategy that required a proper understanding of option pricing and other greeks.
So before you deploy this strategy, you should practice with some basic limited risk strategies like an Iron condor options strategy or iron butterfly options strategy.
In this article, I will share the not only CATIC options strategy in BHARTIARTL but I will share why I choose BHARTIARTL for this strategy. So read the post till the end for proper understanding.
What is the CATIC options strategy?
CATIC options strategy is a limited risk range-bound strategy that involves 6 legs. Its payoff chart looks like a cat face. Look at the below chart to understand:
It involves 3 – 3 legs on both sides with a ratio of 1:3:2. This means we are buying one lot of OTM Call strikes, selling 3 lots of further OTM call strikes & 2 lots of Deep OTM call strikes. Same as put. Look at the below example of BHARTIARTL to understand better.
CATIC options strategy in BHARTIARTL
In the above strategy, we are buying one lot of 720 CE (OTM Call), Selling 3 lots of 730 CE (further OTM call) & buying 2 lots of 750 CE (Deep OTM Call). Same as on the downside we are buying 660 PE (OTM Put), Selling 3 lots of 650 PE (Further OTM Put) & buying 2 lots of 630 PE (Deep OTM Put).
I hope you have understood the strategy. In case if you have any queries, feel free to ask in the comment box.
Now lets us talk about why I choose BHARTIARTL to choose this strategy:
Ideal stocks for CATIC options strategy
CATIC options strategy is a credit spread option strategy. So a Range-bound stock with a little high IV is an ideal script for this strategy. High IV will give you good credit and the range-bound trend will give you theta decay which is the return-generation greek for this strategy.
Now look at the chart of BHARTIARTL:
After making a high of 781.80 we saw a sharp decline in BHARTIARTL. Now 670 is a good support level for BHARTIARTL, Second support level is 640. On the upside, 740 is playing a good resistance zone. So we can consider this range (640 – 740) as the monthly range for the December expiry.
Highest OI on the PUT side also indicates that 680 & 650 are the two important support levels for the current expiry. And 720 & 750 are the two resistance levels. So can we consider that 640 – 740 is our range for this expiry? and BhartiArtl is a good candidate for the CATIC options strategy?
Adjustments for CATIC options strategy in BHARTIARTL
If you look at the above strategy, you can find that 742 & 637 are the breakevens for the December expiry. So we can keep these two levels as the stop loss and close the strategy if BHARTIARTL is giving breakout or breakdown from these levels.
If you need to adjust the strategy, you can shift your sold PUT strike to higher levels if there is a successful breakout from 742 while keeping your both bought strikes as it is.
The same you can do with the sold call strike if there is any successful breakdown from 637. This means move your sold strike to lower levels while keeping your bought call strikes as it is.
If you want to learn these strategies and adjustments with proper handholding support from me, can enroll in our Mentorship program.
I hope my articles are helping to trade with these options strategies. Which strategy you are using to generate your monthly paycheck? Do let me know in the comment box.