Hey folks! I hope you are healthy and safe in this COVID-19 pandemic. Every week I’m trying to share one strategy so that we can earn together. Today I’m sharing a broken wing butterfly option strategy in AMBUJACEM for October Expiry. Read this post till the end to know the strategy and adjustments.
Before we jump to our strategy, let us understand a few things about the broken wing butterfly options strategy first.
As we know butterfly is a Non-direction limited risk strategy. But when we want to create a limited risk strategy with the directional view, we can choose this strategy.
So, basically, we are shifting our risk from both sides to one side and return from a range to a directional side. The direction could be any, Upside, or downside.
One thing you should keep in mind before deploy any strategy in your account that every strategy has its own limitation. Every strategy comes with its own rules and adjustments.
So, before you deploy any strategy in a live account, you should have a proper understanding of that strategy and its behavior. So spend some time to learn the strategy first. Try to implement with virtual money and once you got enough success and understanding then only you should start with real money.
Broken Wing Butterfly in AMBUJACEM
First step to choose a strategy is analyzing the chart of script. That chart will tell you about the trend and the important support or resistance for coming sessions. Let us look at the chart of AMBUJACEM to find it’s trend.
After gave a breakout from 230 -232 zone, AMBUJACEM is in a complete uptrend. We saw some good buying in this script. So, it can be a good candidate for our broken wing butterfly options strategy.
Based on the chart, 255 – 257 is the next resistance zone and 230 – 235 is the support zone in AMBUJACEM for the coming sessions. That means we can keep a long position until AMBUJACEM is holding 230. So, 230 can be our stop loss.
Let us look at the Open Interest to find the range OI is giving. Based on both the data, we can choose a range and the breakevens for our Options strategy.
Open Interest analysis of AMBUJACEM
Based on the Open interest chart, we can see that 250 – 260 is acting as an immediate resistance zone and 220 – 230 is acting as an immediate support zone.
Today we can see a huge OI buildup around 230 PE and 220 PE which indicates that people are shifting their positions and creating fresh shorts around 220 PE and 230 PE.
Based on the chart and OI data, we can keep 220 – 230 as our stoploss zone for our directional Broken wing butterfly stratagy in AMBUJACEM.
Broken Wing butterfly Options Strategy in AMBUJACEM
Possible adjustments for this Options strategy
You can follow the below adjustments for this Broken Wing butterfly options strategy.
- First, you can follow your breakeven i.e 232.90 as a stop-loss means you can close your strategy after a breakdown from this level. Or If the loss is more than 4000₹, close this strategy.
- Now if you get a breakdown from 233, You can shift your 240 CE to 230 CE to collect more premiums.
If you want to learn these option strategies with proper adjustments you can enroll in our Option Strategies – A Mentorship program.
I hope my articles are helping to trade with these options strategies. Which strategy you are using to generate your pay-check? Do let me know in the comment box.
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 and the Broken Wing Butterfly options strategy posted here only for educational purposes. There is no liability whatsoever for any loss arising from the use of this article 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.