A low-risk options strategy in LICHSGFIN

A low-risk options strategy in LICHSGFIN

Successful trading is all about risk management. Options strategies are the perfect solution to manage your risk properly. Every week I’m posting one options strategy. Today I’m posting a low-risk options strategy in LICHSGFIN.

If you want to check the performance of the strategies we have posted earlier, you can click here.

Before going further, let me share something with you. Deploy a strategy is just one part. How you react with price movement and how you are managing your trade will only create a real difference. Your return will only depend upon your trade management. So focus more on trade management. If you need any handholding support to manage your trades, can join our Options Strategies – A Mentorship Program

A low-risk options strategy in LICHSGFIN

LICHSGFIN Chart today

Before going further in options strategy, let me share why I choose that stock?

After a big downside movement, LICHSGFIN is trying to sustain near its very crucial and strong support zone (355 – 350). So further downside we can expect only once it gave a breakdown and sustain below 350.

Till then it may consolidate here or we can see some upside movement due to short covering because we have monthly Expriry next week. So we can say that it will remain in the range of 350 – 390.

The second reason to choose that stock is: Whenever we saw such type of big movement, Normally IV starts increasing. When IV is high, That’s the best time to initiate a credit spread with -ve vega.

Open Interest analysis for LICHSGFIN

Open Interest analysis - LICHSGFIN

Based on options chain data, 350-340 is acting as the strong support zone while 370-380 is acting as a strong resistance zone. PCR of all strikes is at 0.33 which indicates an oversold region. Max pain is at 370, indicating expiry will be around 370 (keep tracking max pain level, it may change with price movement).

So Open interest is also giving us the same range we were looking for based on charts. Our range should be 350-380.

One more thing we need to keep in mind that, Next week is expiry and any breakout or breakdown will create a problem. Because due to theta decay we will not get enough credit with adjustments. That’s the reason I’m keeping a very low risk in this strategy.

A low-risk options strategy in LICHSGFIN

low-risk options strategy in LICHSGFIN

In this strategy, we have a low risk and our breakevens are 353 & 386. Now as you know next week is expiry and gamma will be more aggressive in the expiry week. So take this trade only if you can afford to lose that amount.

Possible adjustments

The first thing is, hold this strategy till LICHSGFIN is trading between 350 – 380. You can square off the entire legs once your it is sustaining below your brekevens.

You can follow these adjustments too. Roll down your Call spread to 340 after a breakdown from 350. Same thing you can do with PUT Spread. Roll Up your Put spread to 400 after a successful breakout from 390.

An important thing to keep in mind: I suggest better book some loss and close the strategy if stock is trading beyond your Breakevens.

I hope my articles are helping in your profitable trading. If you have any feedback or suggestions please type in the comment box. Your feedback will help me to do something better in the future.

Please type your queries related to this low-risk options strategy in the comment box. I will try to answer all your queries.

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Options Strategies – A Mentorship Program

On the 1st of September 2019, We have launched a new mentorship program for Option strategies, in which we are discussing how can we deploy these strategies? What rules we should follow before taking a trade? and what should be our adjustments if the script is moving against your direction?

DISCLAIMER: – we are not a SEBI research analyst. Views 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.

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