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.

OPTION TRADING STRATEGY: WHAT IS CALL OPTION

OPTION TRADING STRATEGY: WHAT IS CALL OPTION

OPTION TRADING STRATEGY: OPTION VALUATION

OPTION TRADING STRATEGY: OPTION VALUATION

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.

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 …..


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