Follow-up - Nifty Trading Strategy

Nifty Trading Strategy, as posted on this blog on 25th of Nov, recommended selling a 5700 December Put option @ 95. Assuming you managed to sell it lower @ 90, the returns for 1 lot for 1 week weren't too bad...close to Rs. 3200...considering the current price is around 24. 

Here is a chart depicting how the price of that option and profit or loss on this strategy moved between that day and today...

(click for larger image)

The profits should still go further from here (meaning, this value of 24 should eventually - by 30th Dec - that's when this option expires, should go down to 0), giving a further upside of 24*50 = 1200 (50 is the lot size of Nifty options, so if nifty option prices move by Rs. 1, you stand to gain or lose Rs. 50 from that move).

The point I was trying to make in my earlier post was, selling index options although risky (theoretically, if Nifty went to zero, the above position would have resulted in a loss of 5700 * 50 = Rs. 2,85,000, while the max the above position can earn under any circumstance is 90 * 50 = 4500), but if taken with a view on Nifty, and played even conservatively, can yield decent profits with a fairly high probability of success. From here, even if nifty were to move down from current 6000 levels, to nearly 5700 points over the next 20 days, you'll still end up keeping the entire 90 bucks that you got by selling the option.

That said, selling options is not an easy game to play, the risks are huge and profits small...but it holds a far better profit potential than buying an option. But do understand the game first before you sit down to play it...