Riskless Algo Strategy : Short Box is an Algo Strategy which is executed when options are overpriced than their expiry Values.
Strategy :
BUY OTM Call
SELL ITM Call
SELL ITM PUT
BUY OTM PUT
Formula : Net Premium Received-Higher Strike Price of Call/Put – Lower Strike Price of Call/Put
Let me Explain with this an Example : Lot Size NIFTY Index in India is 50
NIFTY FUTURES 16705
BUY OTM CALL NIFTY 16750 Premium Rs. 61 Paid
SELL ITM CALL NIFTY 16650 Premium Rs.116 Received
SELL ITM PUT NIFTY 16750 Premium Rs. 121 Received
BUY OTM PUT NIFTY 16650 Premium Rs.73 Paid
So According to Formula : ITM CALL Premium Received 116 -OTM CALL Premium Paid 61 +ITM PUT Premium Received 121 -OTM PUT Premium Paid 73 -16750 ( Higher Strike Price ) – 16650(Lower Strike Price )
= ( ( 116-61+121-73)-(16750-16650 )) 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 : SHORT BOX
ALGO Software Available :
Greek Soft : https://www.greeksoft.co.in/
Refinitiv : https://www.refinitiv.com/en/trading-solutions/nest-india-trading-platform#