Riskless Algo Strategy : Conversion is an Algo Strategy which is executed when options are overpriced than underline Stock or Future Contract.
Strategy : To Buy an Underline Stock or Future Contract and Square off it with a Synthetic Short Stock or Future
Long/Buy Stock or Future Contract and Buy an ATM Put and Sell an ATM Call ( Synthetic Short )
Formula : Strike Price of Call/Put – Underlying Share Price/Future Price + Call Premium-Put Premium
Let me Explain with this an Example : Lot Size NIFTY Index in India is 50
Future Price of NIFTY Index in India : 15780
Strike Price ATM NIFTY Index in India : 15800
Call Premium ATM NIFTY Index in India : 190 ATM 15800
Put Premium ATM NIFTY Index in India : 200 ATM 15800
So According to Formula : 15800 ( Strike Price ) – 15780 (Future Price ) + 190 (Call Premium ) – 200 ( Put Premium)
= 20 +190-200 = 10
So Rs. 10 is Riskless Profit
Total Profit Rs. 10 X Lot Size 50 = Rs. 500 per Lot .
So Now you are ready to execute the your First Riskless Algo Strategy : Conversion
ALGO Software Available :
Greek Soft : https://www.greeksoft.co.in/
Refinitiv : https://www.refinitiv.com/en/trading-solutions/nest-india-trading-platform#
Also See : https://financeloaninsurance.com/algo-trading/
ALGO Member : https://www.myfindoc.com/services/algo-trading