Tuesday 1 May 2012

OPTION CALL PUT STRATEGY


OPTION CALL PUT STRATEGY

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Nifty is being trading in a range bound session since a long time, a break out is  at this point. We suggest nifty strangle strategy  is as follows
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NIFTY STRANGLE STRATEGY

LEG1: BUY NIFTY 5200 PUT @ 70
LEG2: BUY NIFTY 5400 CALL @ 45
COST =115          
 RISK PER LOT = 5750
RETURN = UNLIMITED
UPPER BREAK GIVEN POINT=5515
LOWER BREAK GIVEN POINT=5085
Pay off table


Strike Price
Call Option Price
Strike Price
Call Option Price
Strike rate
Closing price
Lot size
net investment
Total Investment
Payoff
5400
45
5200
70
50
4550
50
5750
5750
26750
5400
45
5200
70
50
4600
50
5750
5750
24250
5400
45
5200
70
50
4650
50
5750
5750
21750
5400
45
5200
70
50
4700
50
5750
5750
19250
5400
45
5200
70
50
4750
50
5750
5750
16750
5400
45
5200
70
50
4800
50
5750
5750
14250
5400
45
5200
70
50
4850
50
5750
5750
11750
5400
45
5200
70
50
4900
50
5750
5750
9250
5400
45
5200
70
50
4950
50
5750
5750
6750
5400
45
5200
70
50
5000
50
5750
5750
4250
5400
45
5200
70
50
5050
50
5750
5750
1750
5400
45
5200
70
50
5100
50
5750
5750
-750
5400
45
5200
70
50
5150
50
5750
5750
-3250
5400
45
5200
70
50
5200
50
5750
5750
-5750
5400
45
5200
70
50
5250
50
5750
5750
-5750
5400
45
5200
70
50
5300
50
5750
5750
-5750
5400
45
5200
70
50
5350
50
5750
5750
-5750
5400
45
5200
70
50
5400
50
5750
5750
-5750
5400
45
5200
70
50
5450
50
5750
5750
-3250
5400
45
5200
70
50
5500
50
5750
5750
-750
5400
45
5200
70
50
5550
50
5750
5750
1750
5400
45
5200
70
50
5600
50
5750
5750
4250
5400
45
5200
70
50
5650
50
5750
5750
6750
5400
45
5200
70
50
5700
50
5750
5750
9250
5400
45
5200
70
50
5750
50
5750
5750
11750
5400
45
5200
70
50
5800
50
5750
5750
14250
5400
45
5200
70
50
5850
50
5750
5750
16750
5400
45
5200
70
50
5900
50
5750
5750
19250
5400
45
5200
70
50
5950
50
5750
5750
21750
5400
45
5200
70
50
6000
50
5750
5750
24250
5400
45
5200
70
50
6050
50
5750
5750
26750
5400
45
5200
70
50
6100
50
5750
5750
29250
5400
45
5200
70
50
6150
50
5750
5750
31750
5400
45
5200
70
50
6200
50
5750
5750
34250

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.

Wednesday 25 April 2012

WHAT IS PUT OPTION



What is PUT OPTION

If you think a stock price is going to go down, then there are 3 trades that you can make to profit from a rising stock price: 
  1. you can sell the stock
  2. you can buy put options on the stock, or
  3. you can write call options on the stock
Selling stock  huge capital investment i.e.your total capital is @ risk plus u need to cover it cover intraday or supply delivery
Writing call option also need huge margin and risk associated with it is unlimited
Buying put option give u unlimited profit upside and limited risk downside.
Only enemy of put option is time so u should book your profits as early as possible.



Let’s understand using an example. Suppose, today’s date is 25-APR-2012 and you BUY a RELIANCE PUT option (strike=700, EXPIRY  MAY 31) @ Rs. 10  per contract when RELIANCE stock was getting traded at 740. Let’s see what happens after options expiration.

Case I : Reliance stock price greater than the strike price  on expiry day cut-off time

Net loss = Premium paid = Rs. 10 per contract


Case II : Reliance stock price less than strike price (700) on expiry day cut-off time i.e. 640
Net profit = (current price – strike price) - premium = (700-640 ) -10= Rs. 50 per contract


So when you buy a put option you have unlimited profit potential but limited risk or downside.

Monday 23 April 2012

OPTION CALL ROCKING!!!

Nifty MAY 5100 PUT given on 19 april 2012(http://niftytipsniftylevels.blogspot.in/2012/04/nifty-outlook-for-tomorrow_18.html) is rocking now!!!.call given @56  TG 86,target achieved enjoy your profits ! keep reading …..


For Nifty Daily Outlook and free intraday nifty tips please visit Nifty Tips