Strategy for Mild Bearish to Range Bound Market Conditions

This item was filled under [ Option Strategies ]

For mild bearish market, with above normal volatility, following 2 are suitable strategies.

1) Short Beaish Ratio Spreads – Here we sell 2 lot, Lower Strike CALL, and buy 1 lot 4800 Higher Strike.. This gives us the ratio of 2:1.. We can also create any other ratio.
Time decay is working in our favour at comparatively higher pace (due to 2 short position against 1 long position)
This is a CREDIT startegy where we get rewarded first and pay later to close the position.

Because it is range bound market, Going ahead with Long bearish spread (Buy 2 Lower strike PUT, Sell 1 Higher Strike PUT) is not suggested.This would be DEBIT startegy where we pay first and get rewarded later.

2) Short Strangle/Straddle which has the center point shifted below current market price.. i.e. not ATM straddle but lower strike straddle..Due to this shift of strike price, we remain in breakeven range for any mild upswing but get larger protection for downside.

As always, feel free to post your comment / question below.

Happy Trading

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