Bank Nifty Iron Fly 16th Sept

[Michael Gonsalves]

For the week ended 16th September 2021, I have entered into an Iron Fly Options strategy in the Bank Nifty.



As per Opstra, the breakevens are at 36222 and 37178.

[Michael Gonsalves]

I added more to the same positions. I now have 60 lots or 1500 nos of each strike. The MTM profits are Rs 40,000, which is about 1.15% of the margin.

[Michael Gonsalves]

Raghunath Reddy, an expert in options strategies and founder of Opstra, has given an excellent explanation of how to adjust an Iron Fly.

He advises that an adjustment should be made when the positional delta (per lot) goes beyond 25.

On 60 lots, which is my present holding, the adjustment should be made when the delta touches 1500.

I made a premature adjustment when the delta touched 1000 (assuming that I held 40 lots) by booking profits in the 36700CE and 37400CE spread and opening up a 36400CE - 37100CE.

The revised pay-off graph is as follows:

[Michael Gonsalves]

The Bank Nifty Iron Fly is now at a MTM profit of Rs. 1.43 lakh. The range-bound movement of the Bank Nifty coupled with a fall in the IV has led to the profit. The greeks are also in control.

[Michael Gonsalves]

As today is the penultimate day before expiry, I made a few adjustments by bringing the short CE at 36400 to 36700. I also brought up the long PE from 36000 to 36300 so as to make it tighter.

The result is as follows:

[Michael Gonsalves]

The Break out in the Bank Nifty eroded some of my profits. I moved the short call to 37900 and the long put to 36500. The result is that the trade is now risk-free. Tomorrow morning, I will move the short positions higher or lower to absorb more credit.

[Michael Gonsalves]

The ferocious rally in the Bank Nifty of 816 points put a lot of pressure. However, thanks to the adjustments made earlier of bringing the long call closer to the short call, I was in a position of some control. After a few adjustments, the position yielded a gain of Rs. 2.90 lakh.