Riskless Algo Strategy : Long Box is an Algo Strategy which is executed when options are underpriced than their expiry Values.
Strategy :
SELL OTM Call
BUY ITM Call
BUY ITM PUT
SELL OTM PUT
Formula : Higher Strike Price of Call/Put – Lower Strike Price of Call/Put -Net Premium Paid
Let me Explain with this an Example : Lot Size NIFTY Index in India is 50
NIFTY FUTURES 16705
SELL OTM CALL NIFTY 16750 Premium Rs. 63 Received
BUY ITM CALL NIFTY 16650 Premium Rs.115 Paid
BUY ITM PUT NIFTY 16750 Premium Rs. 120 Paid
SELL OTM PUT NIFTY 16650 Premium Rs.75 Received
So According to Formula : 16750 ( Higher Strike Price ) – 16650(Lower Strike Price ) + OTM CALL Premium Received 63 -ITM CALL Premium Paid 115 +OTM PUT Premium Received 75 -ITM PUT Premium Paid 120
= ( 16750-16650 + 63-115+75-120 ) X 50 (Lot Size of NIFTY) = 3 X 50 = 150
So Rs. 150 is Riskless Profit per Lot of NIFTY
So Now you are ready to execute the your First Riskless Algo Strategy : LONG BOX
ALGO Software Available :
Greek Soft : https://www.greeksoft.co.in/
Refinitiv : https://www.refinitiv.com/en/trading-solutions/nest-india-trading-platform#