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Tuesday, Jan 22, 2002

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Reliance turning positive?

B. Venkatesh

MONDAY's trading in the derivatives segment at the NSE saw good demand for equity puts. Here are some buy/sell strategies based on the day's trading:

Equity options: The January 320 calls on Reliance Industries clocked the highest volumes on the stock, with volumes of 113 contracts.

  • The immediate outlook on Reliance Industries appears positive. Dealers who share similar view can consider buying the January 320 calls. The calls cost 6.60 points at the day's close. As the calls are OTM, the entire premium consists of time value, and works against the buyer. The probability of the calls ending ITM is 0.40.

  • A more rewarding strategy will be to buy the January 300 calls, which cost 17.5 points at the day's close. The calls have an intrinsic value of 12 points. The time decay is high, and works against the buyer. The probability of the options ending ITM is 0.72.

  • The January 120 calls on Tata Engg clocked the highest volumes on the stock, with 83 contracts.

  • The immediate outlook on Tata Engg appears negative. Dealers who share similar view can consider the buying the January 120 puts. The puts cost 6.90 points at the day's close. The positive factors are that the puts have an intrinsic value of 4 points, and slow time decay. The probability of the puts ending ITM is 0.61.

  • Dealers can also consider buying the January 110 puts, which cost 2.55 points at the day's close. The puts are OTM, and the entire premium consists of time value. The time decay is slow, and the probability of the puts ending ITM is just 0.29.

    Index options: The January 1100 calls on the index clocked the highest volumes, with 69 contracts.

  • The market appears to have a further downside from the current levels. Dealers who share similar view can consider buying the January 1080 puts, which cost 9.70 points at the day's close. The entire premium consists of time value, and works against the buyer. The time decay is very high.

    Follow-up: Dealers who are long the January 170 and 180 calls on ACC can consider holding their positions, as the outlook on the stock appears positive.

  • The outlook on L&T also appears positive. Those who are long on January 200 and 210 calls can consider holding their positions.

  • The positive outlook on Digital appears to be weakening. Those who are long on the January 570 and 600 calls on the stock can consider reversing their positions.

  • Dealers who are long on the January 120 and 130 calls on Tata Engg can consider reversing their positions, as the positive outlook stock on the stock appears to be weakening.

  • The outlook on Satyam also appears to be weakening. Dealers who are long on Satyam 260 and 280 calls can consider reversing their positions.

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