NIFTY STRANGLE STRATEGY

OPTION CALL PUT STRATEGY




NIFTY is extremely volatile these days.On account of RBI policy this volatility can be to its peak . further on account of global turmoil We expect this volatility to continue. To encash this volatility we suggest u strangle strategy in nifty.



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.



NIFTY STRANGLE STRATEGY



LEG1: BUY NIFTY 4900 CALL @ 65

LEG2: BUY NIFTY 4700 PUT @ 65

COST =145

RISK PER LOT = (65+65)*50=6550

RETURN = UNLIMITED





Pay off table

Call Option Price	Strike Price	PUT Option Price	Closing price	Total Investment	Return from call	return from put	Payoff
65	4600	65	3900	6500	0	35000	28500
65	4600	65	3950	6500	0	32500	26000
65	4600	65	4000	6500	0	30000	23500
65	4600	65	4050	6500	0	27500	21000
65	4600	65	4100	6500	0	25000	18500
65	4600	65	4150	6500	0	22500	16000
65	4600	65	4200	6500	0	20000	13500
65	4600	65	4250	6500	0	17500	11000
65	4600	65	4300	6500	0	15000	8500
65	4600	65	4350	6500	0	12500	6000
65	4600	65	4400	6500	0	10000	3500
65	4600	65	4450	6500	0	7500	1000
65	4600	65	4500	6500	0	5000	-1500
65	4600	65	4550	6500	0	2500	-4000
65	4600	65	4600	6500	0	0	-6500
65	4600	65	4650	6500	0	0	-6500
65	4600	65	4700	6500	0	0	-6500
65	4600	65	4750	6500	0	0	-6500
65	4600	65	4800	6500	0	0	-6500
65	4600	65	4850	6500	2500	0	-4000
65	4600	65	4900	6500	5000	0	-1500
65	4600	65	4950	6500	7500	0	1000
65	4600	65	5000	6500	10000	0	3500
65	4600	65	5050	6500	12500	0	6000
65	4600	65	5100	6500	15000	0	8500
65	4600	65	5150	6500	17500	0	11000
65	4600	65	5200	6500	20000	0	13500
65	4600	65	5250	6500	22500	0	16000
65	4600	65	5300	6500	25000	0	18500
65	4600	65	5350	6500	27500	0	21000
65	4600	65	5400	6500	30000	0	23500

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.

SBIN STRANGLE STRATEGY BOOK PROFIT

You can book profit in one leg of strategy i.e. SBIN 1800 Put near 60 and continue to Hold 2000 call which is now free of cost to u.

OPTION CALL PUT STRATEGY


SBIN is extremely volatile these days. We expect this volatility to continue. To encash this volatility we suggest u strangle strategy in SBIN.



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.



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.



SBI STRANGLE STRATEGY



LEG1: BUY SBIN 2000 CALL @ 32

LEG2: BUY NIFTY 1800 PUT @ 28

COST =60

RISK PER LOT = (32+28)*50=7500

RETURN = UNLIMITED

NOTE: This is closing rate as on 07/12/11

BEAR  SPREAD IN HINDUNILVR

Here we present you bear spread strategy in options. This strategy seeking maximum profit when the price of the underlying security declines. The strategy involves the simultaneous purchase and sale of options; puts or calls can be used. A higher strike price is purchased and a lower strike price is sold.

We take prices as today’s closing price.

As soon as HINDUNILVR moves towards 360 levels profit will be increasing and will be maximized as soon as it reaches 360 and below.

Strategy can be closed before settlement by creating offsetting positions.

LEG 1:BUY HINDUNILVR 380 PUT @ 8-8.25

LEG 2:SELL HINDUNILVR 340 PUT @ 3-3.25

LOT SIZE =1000

NET INVESTMENT(RISK)= 5*1000=5000

RETURN = UNLIMITED

Closing price	Lot size	trading cost	net investment	Total Investment	Return per share	Total Return	Payoff
290	1000	130	5050	5180	20	20000	14820
300	1000	130	5050	5180	20	20000	14820
310	1000	130	5050	5180	20	20000	14820
320	1000	130	5050	5180	20	20000	14820
330	1000	130	5050	5180	20	20000	14820
340	1000	130	5050	5180	20	20000	14820
350	1000	130	5050	5180	20	20000	14820
360	1000	130	5050	5180	20	20000	14820
370	1000	130	5050	5180	10	10000	4820
380	1000	130	5050	5180	0	0	-5180
390	1000	130	5050	5180	0	0	-5180
400	1000	130	5050	5180	0	0	-5180
410	1000	130	5050	5180	0	0	-5180

LONG CALL

Components

A long call is simply the purchase of one call option.

Risk / Reward

Maximum Loss: Limited to the premium paid up front for the option.

Maximum Gain: Unlimited as the market rallies.

Characteristics

When to use: When you are bullish on market direction and also bullish on market volatility.

A long call option is the simplest way to benefit if you believe that the market will make an upward move and is the most common choice among first time investors.

Being long a call option means that you will benefit if the stock/future rallies, however, your risk is limited on the downside if the market makes a correction.

From the above graph you can see that if the stock/future is below the strike price at expiration, your only loss will be the premium paid for the option. Even if the stock goes into liquidation, you will never lose more than the option premium that you paid initially at the trade date.

Not only will your losses be limited on the downside, you will still benefit infinitely if the market stages a strong rally. A long call has unlimited profit potential on the upside.