Hello folks! I’m trying to share one strategy every week so that we all can earn together. Today I’m sharing a high probability option strategy in axisbank. Read this post till the end to know, why I choose this strategy and what should be the adjustments if the script is moving beyond our breakevens.
Before going further let me share a few things that we need to keep in mind before initiating a strategy. First and the basic thing is: Options of that particular script must be liquid. How to find whether options are liquid or not?
Go to NSE Option Chain and check the Bid/Ask spread. If the difference in Bid/Ask is high that means options are not liquid and you will lose so much money just by taking entries and exits. Let me share an example:
Above Picture is the SBIN option chain, You can see on every strike, the difference in Bid/Ask is very low, which means you will not get any issue when you are going a place an order in this script. Now look at the below picture:
The above screenshot is EQUITAS Option Chain. Now look at the difference in Bid/Ask, Difference is around 0.50, and lot size is 4900, which means 2450₹ you will pay just by placing an order of only one leg in Equitas. Now I think you calculate yourself, what could be the cost for a four legs strategy?
Where in SBIN its just 0.05 – 0.10 i.e 150₹ – 300₹. and plus look at the volumes that are very low in EQUITAS compared to SBIN. This indicates that SBIN is more liquid compare to EQUITAS.
So select a stock that is highly liquid. This is first and the basic thumb rule to select a stock for an option strategy. Now let’s come to our high probability option strategy in AXISBANK:
A high probability option strategy in AXISBANK
The second thing is, nowadays volatility is high in the market which is giving a good opportunity to initiate a credit spread option strategy. Today our High probability option strategy in AXISBANK is basically a credit spread.
The third thing we should keep in mind that we should select a script which is trading in a range. Now, look at the chart of AXISBANK. Based on the chart, 460 – 340 is the range in which AXISBANK is trading nowadays. So we have to select a strategy which can give us a good return between this range.
We can confirm this range with the help of Option chain analysis. Let’s look at Open interest of AXISBANK:
AXISBANK: Option chain analysis
We can see good open interest between 340 – 460. 420,440 & 460 are acting as the resistance levels for this expiry and 380, 360 & 340 are acting as the support levels.
So it’s confirmed that OI too giving us the same range of 340 – 460 in AXISBANK for June expiry.
A high probability option strategy in AXISBANK
As you can see our breakevens are 350 – 470, so this option strategy will give you good return if AXISBANK expires between 350 – 470.
You can follow 350 & 470 as your stop-loss levels. means if AXISBANK hit and sustaining beyond these levels you can close this trade. The second thing you can keep 7000₹ as a stop loss, if you are loosing more than 7000₹, book loss and close this trade.
Possible adjustments: If AXISBANK gave a breakdown from 350, You can shift your sold call (460 CE) and bought call (480 CE) to 400 CE and 420 CE respectively. The same thing you can do with Put Spread i.e If AXISBANK gives a breakout from 470, Shift your Sold PUT (360 PE) and bought PUT ( 340 PE) to 410 PE and 390 PE respectively.
You can join our Options Strategies – A Mentorship program to learn these strategies and their adjustments in a practical way.
I hope my articles are helping in your profitable trading. If you have any feedback or suggestions please type in the comment box. Your feedback will help me to do something better in the future.
Please type your queries related to a high probability option strategy in AXISBANK in the comment box. I will try to answer all your queries.
Much Check this also- Best Option strategy for a sideways movement in TITAN, A high probability options strategy in YESBANK, Option Buying vs options selling, Modified Condor Option Strategy in VEDL, Bull Call Ladder in ZEEL, Iron Condor in SBIN, Why People Lose Money & Nifty and Bank nifty index analysis with Option Strategy,
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?
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DISCLAIMER: – we are not a SEBI research analyst. Views posted here only for educational purposes. There is no liability whatsoever for any loss arising from the use of this product 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.