Limited risk Batman option strategy in DLF for August Expiry

Discover the power of the Batman Option Strategy: learn how to create and adjust with the examples featuring DLF.

Limited risk Batman option strategy in DLF for August Expiry

Options trading is a versatile investment tool that can help you generate income, manage risk, and even hedge against market volatility. Among the many options strategies available, one that stands out is the Batman Option Strategy. In this article, we’ll explain what the Batman Option Strategy is, why you should consider using it, and when the best times are to trade with this strategy.

Before we move directly to strategy, let us learn what is Batman option strategy.

What is a Batman Option Strategy?

The Batman Option Strategy is a neutral options trading strategy that involves selling two verticle ratio spreads with the same expiration date but different strike prices. In this strategy, one option is sold out-of-the-money (OTM), which is the option closest to the current price of the underlying asset, and the other option is sold further out-of-the-money (OTM), which is the option furthest from the current price.

By selling these options, the trader can generate income from the option premiums and limit their potential losses while keeping a neutral view. The strategy is named “Batman” because the ATM option is often referred to as the “mask” and the OTM option is referred to as the “cape”.

Why Trade with a Batman Option Strategy?

There are several reasons why you should consider trading with a Batman Option Strategy:

  1. Risk Management: The Batman Option Strategy is a neutral strategy, which means that it can help you manage risk by generating income while also limiting your potential losses through range-bound activity in the script.
  2. Income Generation: By selling two verticle ratio spreads, you have the potential to generate income from the premium received as credit by selling a high premium compare to bought.
  3. Volatility Neutral: The Batman Option Strategy can also help you neutralize the effects of market volatility on your portfolio. This is because the strategy profits from the options premiums regardless of market direction.

When to Trade with a Batman Option Strategy?

The best times to trade with a Batman Option Strategy are when the script is relatively stable and volatility is high. This is because when volatility is high, the options premiums are also high, and you can utilize that net credit received to keep your range broad. Additionally, it’s also best to trade with this strategy when the underlying asset is not expected to move dramatically in either direction.

In conclusion, the Batman Option Strategy is a versatile and effective strategy that can help you generate income, manage risk, and neutralize the effects of market volatility. If you’re considering trading with this strategy, be sure to consider the market conditions and volatility levels before executing your trades.

If you want to learn how to trade with these option strategies with proper entry/exit and adjustments rules, then you can join the Option Strategies: A Mentorship program where I teach you all the strategies that I’m trading to generate monthly income through proper handholding support in the live market. In this Mentorship program, I will teach you everything from the very basics to advanced, everything you need to know about option hedging strategies.

Option Strategies: A Mentorship Program 3.0
Mentorship Program for those who wants to learn how to trade with option strategies.

Batman option strategy in DLF

The first step to create this strategy is: to select a script. It should be range-bound and volatility must be high. High volatility will assure you get a decent premium while keeping a broad range.

So after scanning many stocks, I choose DLF because DLF is trading in a range. and premium is also impressive. Let’s look at the chart first.

DLF chart for BATMAN OPTION STRATEGY

If you look at the chart, you can clearly see that DLF is trading in a range of 480 – 520. which looks fine to create a range-bound strategy. We can expect further levels only after a breakout or breakdown from the above range. Now to confirm this range, let us look at the OI data:

DLF Open Interest

OI also indicates that 480 is the immediate support while 520 is acting as an immediate resistance level. You can use the above range to create a Batman option strategy in DLF.

There are a few more parameters that I’m checking in the script. You will get more clarity about the script selection when you attend live market sessions and I scan and choose the script to deploy these strategies. (Live market session is available in Mentorship Program)

Batman option strategy in DLF

batman option strategy in dlf

To manage this strategy, you can keep 470 & 530 as stop loss and if there is any breakout or breakdown from the range, you can close this strategy.

₹10000 is the Maximum risk (1 lot) I’m keeping for this Batman option strategy. This means, anytime I’m getting lost more than ₹10000, I will square off this strategy. I will do some advanced adjustments also like reverse buying to reduce the overall maximum risk.

This advanced strategy along with other monthly income strategies is part of our Option Strategies: A Mentorship Program. If you want to learn how one can make passive income through option strategies, must enroll in this unique program.

Option Strategies: A Mentorship Program 3.0
Mentorship Program for those who wants to learn how to trade with option strategies.

I will share the adjustments in my premium telegram channel also. To get access to that telegram channel, either you can join the mentorship program (use coupon code "REP20" for 40% off, valid till August 05, 2023) or can buy a monthly subscription for the premium channel where I’m sharing all the option strategies I’m creating every month with timely updates about adjustments. Checks the links below:

Below is the strategy that we created in July 2023 Month that ends up with ₹25000 profit (after some adjustments), which is like a 2.5% monthly return.

batman option strategy in DLF

Below is the strategy we created in March 2023 Month that ends up with ₹25000 profit.

Batman option strategy in DLF

Below is the strategy we created in February 2023 Month that ends up with ₹14000 profit.

batman option strategy in DLF

In case if you have any query related to this strategy, can type it in the comment box.

Thank you for reading this post. Have a profitable trading!


DISCLAIMER: We are not SEBI research analysts. Views and trading strategies are posted in this weekly market newsletter 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 for interpreting specified analysis methods. This information should only be used by investors and traders aware of the risk inherent in securities trading.

Loading comments...