Skip to main content

Featured

Shyam Metalics and Energy Limited IPO Detail, GMP, Key Dates etc

  Introduction : Incorporated in 2002 Metal Producer co, Such as  iron pellets, sponge iron, steel billets, TMT, structural products, wire rods, and ferro alloys Largest producers of ferro alloys in terms of installed capacity 4 th  player in the sponge iron industry.        Client List :      Jindal Stainless Limited, Rimjhim Ispat Limit are some of its domestic clients whereas Norecom DMCC, Norecom Limited, POSCO International Corporation, World Metals & Alloys, Traxys North America LLC, JM GLobal Resources, Vijayshri Steel Pvt Ltd, etc. are the international clients. Manufacturing plants  : located in Sambalpur in Odisha, Jamuria and Mangalpur in West Bengal.   Capacity to increase from 5.71 MTPA to 11.60  M TPA by 2025 Shyam Metalics and Energy Key Dates :   Date          :14-6-2021 To 16-6-2021   Fresh Issue    : Rs. 657 Cr.   OFS                : Rs. 252 Cr.   Total Issue Size   : Rs. 909 Cr.   Price Band     : 303 to 306   (Employee Discount

Option Strategies : Bullish View

Options Strategies :

We are Dividend Options Strategies in 3 Parts:

·         Bullish Strategy

·         Bearish Strategy

·         Neutral Strategy

Bullish Strategy :

1. Long Call :

View : Very Bullish on Nifty or Stock

Strategy : Buy call option

Risk : Limited to Premium

Reward : Unlimited

Break even : Strike Price + Premium

Profit When Nifty or Stock goes up and option exercised

Loss When Nifty or Stock doesn't go up and option expires un exercised

Example : 


Here, You can see from option chain Important details given in Black Box.

Nifty Index : 14744

Date : 19-March-2021

Option Strike : 15000

Option Type : CE

Expiry Date : 25-march-2021

Price : 51.80 - 52.95

Open Interest : 44434 Lots

Option Change : Unwinding 7790 Lots

Strategy Formulation : Buying Naked CE of 15000  @ 52 Rs

BEP : 15000+52 = 15052

Max Loss : 52 Rs + Expense

Profit : Unlimited Above 15052 till Nifty Expiry on or before 25-March-2021

Mostly such Strategy is consider as naked and having lot of risk of premium erosion by expiry. Such strategy should be used when some stock or index has given breakout or with view of expiry game only with low premium game. Like many times on expiry day nifty moves 200-300 Points and OTM CE becomes 10-20-50X in one day. But again it is risky chances of premium to becomes zero is 90% or more.

Best idea is to take position when some breakout seen in index or stock for short period of time with strict Stop Loss.

Mostly Premium doesn't includes any Intrinsic value, so need one side Big Move to gain from this strategy.

Better to find those stock trading near Support and having good set up on chart and Data like Open Interest etc can be big support to create position in this strategy. 

Most of new investor or option learner lost maximum money in this strategy without knowing benefit and disadvantage of such strategy.

2. Short Put :

View : not bearish on Nifty or Stock

Strategy : Sell Put option

Risk : Unlimited

Reward : Limited to Premium

Break even : Strike Price - Premium

Profit When Nifty or Stock doesn't go down and option expires un exercised

Loss When Nifty or Stock goes down and option exercised

Example :


Here, You can see from option chain Important details given in Black Box.

Nifty Index : 14744

Date : 19-March-2021

Option Strike : 14500

Option Type : PE

Expiry Date : 25-march-2021

Price : 73.10 - 75.10

Open Interest : 55035 Lots

Option Change : Short Buildup  14519 Lots

Strategy Formulation : Selling Naked PE of 14500  @ 74 Rs

BEP : 14500 - 74 = 14426

Max Loss : Below 14426 till Nifty close 

Profit : Max 74 Rs or close above 14426 will close position in Positive.

This is very useful strategy for Option Seller, Mostly people trading based on Chart formulation use such strategy where mostly position is made against trend. 

Good thing about this strategy is given continuous benefit of time expiration Called THETA value, most of Out of Money option expire worthless and seller pocket out premium.

Need huge margin to short Option, Over night risk on position any sudden Huge Gap down can create big Loss, etc

Thing to Watch : Need good Open Interest lots, chart formulation strong on upside, No event like FED decision or any data to announced, Strict Stop Loss

This is one the most easiest Strategy used by many trader for Intraday play or range bound market. Always Find open interest Highest and short below that level if anyone start with, again keep close track on option Unwinding.

Useful for Weekly Option but I prefer to use some Hedge based strategy rather than such naked selling.  

3. Call Spread :

View : Moderately bullish on Index or Stock

Strategy : Buying ITM call and selling OTM call thereby reducing cost and break even of ITM call.

Risk : Limited to net premium paid

Reward : Limited to the difference between the two strikes minus net premium paid

Break even : Strike Price of purchased call + net premium paid

Max Profit when : both options exercised

Max Loss when : both options un exercised

Example : 

Strategy : Buying ITM call 14700 CE @ 182 Rs selling OTM call Strike 14900 CE @ 82 Rs thereby reducing cost and break even of ITM call.

Risk : Limited to net premium paid = 182 - 82 = 100 Rs

Reward : Limited to the difference between the two strikes minus net premium paid = 14900 - 14700 = 200 Max Profit Less Premium Paid 100 = Net Gain 100 Rs

Break even : Strike Price of purchased call + net premium paid, Here 14700 + 100 = 14800 

Max Profit when : both options exercised, Nifty close Above 14900

Max Loss when : both options un exercised, Nifty Close Below 14700

Use : This is useful when Market is moving in one range and play this strategy. Like Buying 14700 CE @ 182 Rs. while Nifty is trading at 14744 Level so, Option Premium Includes 44 Rs Intrinsic value and 138 Rs is Time Value for this Option, Where as For 14900 CE selling at 82 Rs is full Time Value, so in case Nifty Close Above 14800 onward will give Profit.

It is like more chances of Range Bound Movement and having Fix Loss of Max 100 Point, But Probability of turning position favor is more. you can take little far option to reduce risk and increase reward. Combination of any two Option buying costly Option and selling less cost compare to buy option form this strategy.

This is excellent frame strategy with limited Profit and Loss. Even Margin Requirement is also Limited. One can pocket more Premium by Selling OTM Option and Buying Bit ITM options.

one can see Open Interest on PE side and decide Buying ITM CE here you can check 14500 PE has huge OI so one can consider support level for this Expiry, but risk reward ratio will reduce but Probability of success will increase.

For Option trading if you find 1:1 Risk to reward by forming any hedged Strategy it will be good to play, as you can given chance to formed based on analysis with 50/50 Ratio so chancing of winning trade will be in your favor. 

4. Put Spread :

View : Moderately bullish on Index or Stock

Strategy : Sell OTM put and Buy Further OTM put to protect downside

Risk : Limited to the difference between the two strikes minus net premium received

Reward : Limited to net premium received

Breakeven : Strike Price of Short put - net premium received

Max profit when : both options unexercised

Max loss when : both options exercised

Example :


View : Moderately bullish on Index or Stock

Strategy : Sell OTM put @ 14700 and Buy Further OTM put @ 14500 to protect downside

Risk : Limited to the difference between the two strikes minus net premium received, here 135 Rs. - 75 Rs. = 60 Rs. so, Net Risk 14700 - 14500 = 200 - 60 = 140 Rs.

Reward : Limited to net premium received, 60 Rs.

Break even : Strike Price of Short put - net premium received = 14700 - 60 = 14640 

Max profit when : both options unexercised close above 14700

Max loss when : both options exercised close below 14500

Here, View is bullish and One can sell ITM Option and Buying OTM option also depends on view on market. Moreover, such strategy used when Nifty trading near Support Level and not looking much downfall.

Here you can see Risk reward is not 1:1, But very useful based on view, as Near OTM option has more time value compare to buy option and it is the main positive about this formation.

5. Synthetic call :

View : Conservatively bullish on Index or Stock

Strategy : Buy future and buy put option to protect against unexpected fall

Risk : Limited to future price + put premium - put strike price

Reward : Unlimited

Break even : Future price + Put premium

Profit when : Index or stock goes up

Max loss when : Index goes down and option exercised.


View : Conservatively bullish on Index or Stock

Strategy : Buy future @ 688 Rs and buy put option @ 700 Strike at 18 Rs to protect against unexpected fall, You can buy 680-690 PE also. Say bought 680 PE @ 8.50 Rs

Risk : Limited to future price + put premium - put strike price, 688 + 8.50 - 680 = 16.5 Rs

Reward : Unlimited close above 696.50

Break even : Future price + Put premium here 696.50

Profit when : Index or stock goes up

Max loss when : Index goes down and option exercised.

here, Anyone is bullish on stock and willing to take Limited and want to ride rally in stock. It is wonderful strategy for bullish view.

6. Covered Call With Futures :

View : Moderately Bullish on existing Long future in portfolio

Strategy : Sell OTM call option to earn premium

Risk : Unlimited if Index or stock falls. Benefit to the extent of premium

Reward : Limited to Strike Price - Future Price Paid + Premium Received

Break even : Future price paid - Premium Received

Max Profit when : Index or stock goes up and option exercised

Max Loss when: Index or stock goes down

Mostly, this set up is highly useful to Portfolio holder, when any person holding huge holding say ITC share, Mr. A is having 10000 share of ITC and he want to apply this set up to earn some Premium say ITC rate is 230 Rs and he sells CE of 250 @ 5 Rs, such position will reduced cost of share over a period and it is continuous 

7. Collar

View: Conservatively Bullish

Strategy: Buy futures, Buy put to insure downside, sell call option to partly finance put

Risk: Limited

Reward: Limited

Break even: Purchase price of future - Call premium + Put Premium

Max Profit, when: Index or Stock goes up and call option exercised

Max Loss, when: Index or Stock goes down and put option exercised

It is Special Strategy where Professional Institution form such strategy and cover up down side risk. Buying Nifty Future @ 14750 buy Put 14700 @ 50 Rs and selling CE 14800 @ 50, so such situation downside risk is 50 Rs and up side Profit is nearly 50 Rs. such strategy required Margin and having small Profit Margin.

8. Long Combo

View : Bullish on Index or Stock

Strategy : Sell OTM put and buy OTM call option  

Risk : Unlimited

Reward : Unlimited

Break even : Call strike + Net Premium

Profit  when : Index or Stock goes up and call option exercised

Loss, when : Index or Stock goes down and put option exercised

This is again Naked Position strategy where one sided risk is but is good strategy where stock or index is moving strong, such time Implied Volatility must be at pick and chances of upside look huge but when start lose strength that time such position will come in Profit. 

Hope you will enjoy and learn strategy. Don't Forgot to share with your Friends. 

Comments

Popular Posts