DLF BUTTERFLY STRATEGY

DLF is highly volatile stock but as expiry in due in almost a week. Volatility will show sharp decline in coming week. DLF butterfly strategyis an attempt to encash this volatility.

Butterfly strategy have 3 legs and four option contract are involved.

BUY DLF 190 CALL @ 12

SELL TWO DLF 200 CALL @ 5.3

BUY DLF 210 CALL @ 1.90

TOTAL RISK 3300

MAX PROFIT 6700

Maximum profit generated when DLF expired @ 200

LOWER BREAK EVEN POINT : 193
HIGHER BREAK EVEN POINT: 207

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PAY OFF TABLE

Closing price	Lot size	Total Investment	Return from call	loss from II call	return from	gross return	net return
184	1000	3300	0	0	0	0	-3300
186	1000	3300	0	0	0	0	-3300
188	1000	3300	0	0	0	0	-3300
190	1000	3300	0	0	0	0	-3300
192	1000	3300	2000	0	0	2000	-1300
194	1000	3300	4000	0	0	4000	700
196	1000	3300	6000	0	0	6000	2700
198	1000	3300	8000	0	0	8000	4700
200	1000	3300	10000	0	0	10000	6700
202	1000	3300	12000	4000	0	8000	4700
204	1000	3300	14000	8000	0	6000	2700
206	1000	3300	16000	12000	0	4000	700
208	1000	3300	18000	16000	0	2000	-1300
210	1000	3300	20000	20000	0	0	-3300
212	1000	3300	22000	24000	2000	0	-3300
214	1000	3300	24000	28000	4000	0	-3300

BUTTERFLY STRATEGY SYNOPSIS

 Long butterfly spreads are entered when the investor thinks that the underlying stock will not rise or fall much by expiration. Using calls, the long butterfly can be constructed by buying one lower striking in-the-money call, writing two at-the-money calls and buying another higher striking out-of-the-money call. A resulting net debit is taken to enter the trade

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