In this post we are going to see how we can create low risk high reward calendar spread nifty option selling strategy. A calendar spread in options trading involves selling an option with a shorter expiration date while simultaneously buying another option of the same type (call or put) with a longer expiration date but the same strike price. The strategy is designed to capitalize on the differing rates of time decay (theta) between the two options. The short-term option decays faster, allowing the trader to potentially profit from the difference in premiums as the expiration date approaches. Calendar spreads are typically used in low-volatility environments where traders expect minimal price movement in the underlying asset.
Calendar spread nifty option selling strategy
To create this strategy we have to sell current month expiry 100 rs premium call and put of nifty and buy next month expiry call and put around 200 rs premium. There is no hard and fast rule about premium you can choose near premiums. The way we are selecting this combination is becuase we are getting good range and atleast 4-5% return on monthly basis. Remember this is monthly strategy and you need not to be infront of screen all the time in market hours. In a day once or twice you can check whether we are in a zone or going outside of our range, then only we have to make decision otherwise just wait and watch. for this strategy we require approximately 40,000/- margin.
Lets consider nifty trading at 25000 and we have to sell call and put of current month expiry 100 rs premium options, then select next months call and put of near 200 rs premium options. lets see below image you will get more clearity.
As displayed in strategy picture, we are getting 11% return on deployed capital but once we achieve 5% return then we are going to book it and will wait for fresh entry in next month. As per strategy maximum loss is showing around 30% but we are not going to wait till maximum loss, once we see maximum 4% loss or when this strategy breaks our range that time we will square off/exit from this strategy. Initially the probability of profit is around 70-75% but when we get near to expiry it will definitly increase till 95-98%. Note one thing, we will deploy this strategy when volatility is going down or in low volatility. In this strategy we can make adjustment also but if you are beginner then don’t make adjustment, if you are having some knowledge of options greeks and all then you can make adjustment to make some extra amount of money.
Adjustment in Strategy
After creating strategy if market moves rapidly in one direction then we have to make adjustment in our strategy. when we sold current month expiry call and put, consider the difference is doubled between both premiums then we square off the half one with same next expiry buy position and will try to sell same premium as opposite side side premium. I know you all get confused but wait i will give one example and you will get it what exactly we are going to do here. So consider after deploying strategy sell side call premium goes to 125 and sell side put goes to 60 then this means call is double than put so we have to shift put to near to call premium. To do this, square of 60 rs put and also next expiry put position, then sell current month expiry put at near to and less than 125 premium (which call holds this premium currently), consider 115 put premium sold and then buy next month expiry near 200 rs put premium. This will goes till expiry. when we are near to monthly expiry, and you already holds good profit then better to exit the trade instead of making more adjustment. Near expiry we don’t have much premium to gain so better will exit from position. To track nifty current price please visit to official site. Personally i have used calendar spread nifty option selling strategy and it works very well but only you have to do is exit your position once your loss limit hits. Otherwise this calendar spread nifty option selling strategy is best strategy i ever worked and it helps me to make more profit for me without taking lots of load.
I hope you understood the concept and please first do some backtesting and forward testing so you will get confidence. for more updates keep visiting sites, you will get good information and it will help you to build your wealth. Thank you for your valuable time and if you are interested to know more about banknifty trading, please click here.