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Wednesday
June, 19

LEAPS: Nifty 6-Month Options Expiry Strategy!

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All hardcore options sellers are aware of the fact that premiums on options are extremely low these days. is hovering around 11 for a long time now, making options selling very difficult. These times are good to switch to naked longs or debit spreads as the cost of option buying is quite low, which increases the profit potential.

But those having quite a long-term view of Nifty might want to take a look at LEAPS. LEAPS are essentially long-term options with an expiration of over 1 year. Most of you might not be knowing that Nifty 50 December options are always trading irrespective of the current month. As volatility is quite low, traders can explore Nifty 50 December 2023 expiry options on the long side.

These options are currently trading excessively cheap. For instance, 19,000 PE for December 2023 expiry is trading at 542. Let’s consider this put as slightly ITM as the far month Nifty August 2023 futures of 18,895. So going long on this put will essentially cost just INR 542 (x50) but the time you have for the index to establish a downtrend, is whole 6 months.

But you don’t need a 1,000-point crack in Nifty to be profitable. Since your premium paid is 542, even if the Nifty 50 expires below 18,458 (19,000-542), you will still not lose money, and below this, there is unlimited profit potential. The current spot price is 18,665, which simply means there isn’t much of a distance that needs to be traveled till the expiry if you consider spot-to-spot.

But here’s something more interesting way to execute this strategy. As you have 6 months for the expiry, traders can keep on selling put options be it weekly or monthly for 6 months to significantly lower their cost of buying, which will further improve the risk-to-reward ratio. As you have a far-dated long put option, you are always hedged on the downside (to some extent).

In a nutshell, as options prices are very cheap these days, it might not be a bad idea to take a long-term view on Nifty with LEAPS. This strategy is purely bearish. You can also make your own strategy with LEAPS as per your view.

Read More: Is Nifty 50 reversing? Market-Wide Selling Says Yes!



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