Week ended 3rd November: Bear Call Spread in the Nifty

[Michael Gonsalves]

Because the markets are weak and trending downwards, I decided to do a Bear Call spread in the Nifty with short calls at 18000, 18100 and the longs at 18300. If the market stays below 18000 for the next three days, I stand to make about 4% of the capital.

[Michael Gonsalves]

I got into a bit of soup with the Bear Call spread. When the Nifty surged and crossed 18000, I panicked and converted a part of the spread into a Calendar by buying the 17900CE of 11th October. However, this backfired because the Nifty thereafter plunged and caused the long call to show a hefty loss. I also made several other adjustments. At the EOD, I hopefully made about Rs. 1 lakh. If I would have left the spread alone and without adjustments, I would've pocketed the full profit of Rs. 2.10 lakh since the Nifty closed at 17829.