Monday, 2 January 2012

IFCI STRANGLE STRATEGY

OPTION CALL PUT STRATEGY

IFCI  is extremely volatile these days. Annulized volatility of IFCI is above 91.We suggest strangle strategy in IFCI to make most of this situation.
                      
The long strangle, also known as buy strangle or simply "strangle", is a neutral strategy in options trading that involve the simultaneous buying of a slightly out-of-the-money put and a slightly out-of-the-money call of the same underlying stock and expiration date.
IFCI STRANGLE STRATEGY

LEG1: BUY IFCI 25 CALL @ .75
LEG2: BUY IFCI 20 PUT @ .85
COST =12800     
 RISK PER LOT = (.75+.85)*80000=12800
RETURN = UNLIMITED
LOWER BREAK EVEN POINT :18
HIGHER BREAK EVEN POINT 27

Pay off table


Closing price
Lot size
trading cost
Total Investment
Return from call
return from put
Payoff
17
8000
12800
0
24000
11200
17.5
8000
12800
0
20000
7200
18
8000
12800
0
16000
3200
18.5
8000
12800
0
12000
-800
19
8000
12800
0
8000
-4800
19.5
8000
12800
0
4000
-8800
20
8000
12800
0
0
-12800
20.5
8000
12800
0
0
-12800
21
8000
12800
0
0
-12800
21.5
8000
12800
0
0
-12800
22
8000
12800
0
0
-12800
22.5
8000
12800
0
0
-12800
23
8000
12800
0
0
-12800
23.5
8000
12800
0
0
-12800
24
8000
12800
0
0
-12800
24.5
8000
12800
0
0
-12800
25
8000
12800
0
0
-12800
25.5
8000
12800
4000
0
-8800
26
8000
12800
8000
0
-4800
26.5
8000
12800
12000
0
-800
27
8000
12800
16000
0
3200
27.5
8000
12800
20000
0
7200
28
8000
12800
24000
0
11200
28.5
8000
12800
28000
0
15200
29
8000
12800
32000
0
19200
29.5
8000
12800
36000
0
23200
30
8000
12800
40000
0
27200
30.5
8000
12800
44000
0
31200
31
8000
12800
48000
0
35200
31.5
8000
12800
52000
0
39200



The long options strangle is an unlimited profit, limited risk strategy that is taken when the options trader thinks that the underlying stock will experience significant volatility in the near term. Long strangles are debit spreads as a net debit is taken to enter the trade.




3 comments:

  1. very good strategy given.keep giving such calls

    ReplyDelete
  2. I can here the new knowledge trading in new field option call put .
    Thanks for the great reference post.looking for low risk option tips

    ReplyDelete
  3. Today IFCI share price open at 24.80 with the gain of +0.70 (2.90%) point. please tell me either to buy or sell this share price.
    Nifty Tips on mobile by SMS

    ReplyDelete