Hello Guys, I hope you are doing well. Through this blog, I try to share a few option strategies that I have initiated in my account. These are limited risk high probability strategies to make some money through monthly expiry.
Today I'm sharing a Collar option strategy in SUNPHARMA to make some money through the upside movement in the stock.
I have written a detailed article on collar option strategies, their formation and when to use them. You can read here: The Collar Option Strategy - An In-Depth Guide [+ Examples]
Before we move to our collar option strategy in SUN PHARMA, let us find, why I choose this strategy in Sun Pharma.
Collar Option Strategy in SUN PHARMA
The first step to choosing any strategy is to find a stock for that particular strategy. For a collar strategy, we need a stock with a directional trend. Let's look at the chart of Sun Pharma.
You can see on the chart, that Sun Pharma has given a breakout from its all-time high levels. After some consolidation again we saw it is trying to tough new levels in the coming session.
I don't simply see the green picture while selecting a stock. I constantly consider the possibility that my analysis will be flawed and I will lose money on that trade. Therefore, if my analysis is incorrect, how much risk should I accept and what actions can I take to minimize the loss in that specific strategy?
Now as we are approaching monthly expiry, I need a strategy where the risk-reward is high and I have minimum risk with the trade. That's why I choose this strategy. By looking at the strategy, you will understand better.
Collar Option Strategy in SUN PHARMA
Before I share why this collar strategy, let's look at the strategy first:
Now you can see the risk is around ₹3300 and the reward is ₹10000 with 1 lot in the above strategy. We can mitigate that ₹3000 loss also by doing some adjustments.
Few things to keep in mind before initiating this strategy:
- Although the Risk is low, but need to do certain adjustments if Sun Pharma started a downside movement.
- Before initiating any strategy, you must have a proper understanding of its behaviour. So, Learn the strategy first and trade with small lots until you have a proper grip. Visit the below link to know more about this strategy:
Adjustments of Collar Option Strategy in Sun Pharma
In case there is any downside movement in Sun Pharma, you can do the below adjustments to mitigate loss:
- Book profit in Call and bring it to lower levels. By doing so, you will collect more premiums that will reduce your loss on the downside.
- If you see that there is a sharp decline and expect some more downside levels, you can sell one more call option and convert it into a delta-neutral strategy.
I have created a detailed course on how to make a delta-hedging strategy. You can click on the below button to learn the strategy.
I hope it saws you a clear picture of how to create option hedging strategies. If you have any queries or feedback, feel free to type in the comment box.
If you want to learn these strategies with proper handholding support for one whole year, you can check out our Option Strategies: A Mentorship Program.
In this program, I will not only teach you how to design and adjust these strategies, but I will also teach you how to manage them. Because management is required to profit from various options strategies.
So if you are interested to learn all these strategies with one-to-one live sessions, hit the below button and enrol in the Mentorship program.
DISCLAIMER: – we are not a SEBI research analyst. Views or option strategies are posted here only for educational purposes. There is no liability whatsoever for any loss arising from the use of this product or its contents. This product is not a recommendation to buy or sell, but rather a guideline to interpreting specified analysis methods. This information should only be used by investors and traders who are aware of the risk inherent in securities trading.