When I sell 2 months away I feel I get better premium at same strike. The law of averages catches up. It will be ITM and OTM so many times and ultimately usually the returns over 2 months will not exceed 5 percent. If it does I can still sell futures against underlying and make 8 percent return per annum. Will also be selling puts against these futures. When futures come to my original call ka strike I will again push my strike higher. Ah. I do a lot of adjustments.
You didn’t get the point. I’m sure you’re working on a larger capital but still, you shouldn’t be calculating your xirr on the margin deployed , but the capital invested in the underlying.
Just to be clear, suppose you have 100 crs capital invested, you can sell around 1000 lots of nifty (deploying about 10cr margin, let’s assume it’s coming from pledged holdings). Now, you can’t calculate your xirr on 10cr base but on 100 cr invested in the index. Just by doing this, the returns don’t look that pretty anymore (5% monthly becomes 0.5%). Miss one major index rally and you’ll be underperforming the index for a long long time.
Let me find my excel sheet where I did some scenario analysis. And that’s the catch at the end of the day, right? No option strategy can give risk free return.
I calculate it at the account level. This is how I calculate.
Totally agree.
I went through this a few weeks back and found it very useful (have bookmarked it as well). So selling covered calls will keep giving you market beating returns, till it doesn’t (the black swan event we discussed). I only replied to your comment to pick your brains on the strategy & check if I was missing something, and am clear now
And as long as we agree to this ultimate truth, we can keep playing our hands.
It can give lesser returns in bear market because my underlying will be going down and my calls won’t give me enough premium. But it will still be outperforming index since I get small premiums on weekly expiry day. Thanks to a separate day finnifty expiry. I hope they change bank nifty expiry day also. Lol.
Anything which gives more than GOI bonds is risky. Bank FDs included. Ultimately there is no free lunch. Higher your returns higher is your risk.
Many people don’t think of this, they think and are the same
If you’re willing to go that far out, rolling in time may save you a lot of trouble instead of adjusting. Only other option is if you’re selling 1sd options, you’ll have to sit out 30% of the time.
Adjustments are with weekly options.
Let’s say I have sold 18500call for Jan expiry to cover my niftybees value, and if the position is currently in red, then I can sell weekly puts of 18k.
Both the positions can’t be in red. And then if the market falls I will sell weekly calls to cover that.
May look like a lot of work but with a decent capital even 0.1percent per day is also good enough.
Okay, i sorta figured. This works too, if you’re willing to deploy capital as market moves. I sorta do the opposite, i take off positions as market moves. This way, i can take advantage of vol crushes and stay out while expansions.