Monday, 31 August 2015

HDIL OPTION STRATEGY

Buy HDIL 70 CALL @ 3
Buy HDIL 50 PUT @ 2.2
COST=5.2
TOTAL RISK  = 10400
RETURN = UNLIMITED
UPPER BREAK GIVEN POINT=75.2
LOWER BREAK GIVEN POINT=44.8
Pay off table:

Friday, 21 August 2015

Long Call Butterfly


Long Call Butterfly is one of the sideway strategies employed in a low volatile stock. It usually involves buying one lower strike call, selling two middle strike calls and buying one higher strike call options of the same expiration date. Typically the distance between each strike prices are equal for this strategy.
Combining two short calls at a middle strike and one long call each at a lower and upper strike creates a long call butterfly. The upper and lower strikes (wings) must both be equidistant from the middle strike (body), and all the options must have the same expiration date.
You may also execute the Long Butterfly strategy using all puts options. When all puts options are used, it is referred to as the Long Put Butterfly strategy. As to whether a butterfly strategy should be executed using all calls or all put options depend on the relative price of the option. The premium of both puts and calls option should be taken into consideration to achieve the optimum trade
Market Outlook
 Neutral around Strike

Summary
This strategy generally profits if the underlying stock is at the body of the butterfly at expiration.
Breakeven:

· Upside Breakeven = Higher Strike less Net Premium Paid

· Downside Breakeven = Lower Strike add Net Premium Paid.


Advantages and Disadvantages
 
Advantages:

·         Ability to make profit from a range bound stock with relatively lower cost outlay.

·         Limited risk exposure compare to Short Straddle strategy when the underlying stock moved beyond the breakeven point on expiration date.

Disadvantages:

·         The profit potential only come from the narrow range between the 2 wing strikes.

·         Bid/Ask spread from the various option legs may adversely affect the profit potential of the strategy




Wednesday, 12 August 2015

Saturday, 8 August 2015

Friday, 7 August 2015

Thursday, 6 August 2015

TATAMOTORS STRANGLE STRATEGY FOR AUGUST 2015

BUY 1 LOT TATAMOTORS 350 PUT @ 4.7
BUY 1 LOT TATAMOTORS  410 CALL @ 4.9
COST=9.6
TOTAL RISK  = 4800
RETURN = UNLIMITED
UPPER BREAK GIVEN POINT=414.9
LOWER BREAK GIVEN POINT=346.3
Pay off table: