Riskless Algo Strategy : Short Box

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#

Also See : https://financeloaninsurance.com/algo-trading/