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Thursday, Jun 27, 2002

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Consider put spreads in Nifty

Anup Menon

THE cash market ended the day on a negative note. On the penultimate day of the current near month contract, call options lost value. Traders who were short calls or long puts would have seen their position move in the money.

The following trading recommendations were based on Wednesday's closing prices at the derivatives segment on the NSE.

June maturity index options attracted trading interest during the day. The contract matures on Thursday. The June 1060 was the most actively traded June call clocking volumes of around 108 contracts. It is OTM. It was last priced at 1.30 points. The premium consists of purely time value and works in favour of the seller. Traders can consider selling the option. The probability of the trade being profitable works out to around 70 per cent.

Alternatively, traders can also consider selling the June 1050 call on the index. It is OTM. It was the second most actively traded contract on the Nifty clocking volumes of around 107 contracts. It was last priced at 2.60 points. The premium consists of purely time value and works against the buyer. Traders can consider selling the option. The probability of the trade being profitable works out to around 60 per cent.

Traders can also consider trading in put options on the index. The June 1060 put was the most actively traded put contract on the index. It clocked volumes of around 223 contracts. It was last priced at 13.50 points. It is ITM. Nearly the entire premium consists of intrinsic value. Traders can consider buying the option. The probability of the trade being profitable works out to around 53 per cent.

Traders can also consider taking a position in the June 1040 contract. It was the second most actively traded put contract on the index. It clocked volumes of around 158 contracts. It is OTM. It was last priced at 3.10 points. The premium consists of purely time value and works in favour of the seller. Traders can consider selling the option. The probability of the trade being profitable works out to around 60 per cent.

Traders can also consider put spreads using the index put options. Traders can buy the 1060 put and sell the 1040 put. The probability of the trade being profitable works out to around 85 per cent. Alternatively, traders can also engineer a put spread by buying into the June 1050 put and selling the June 1060 put. The probability of the trade being profitable works out to around 94 per cent.

Alternatively, traders can also consider creating a call spread by buying into the June 1050 call and selling the June 1030 call. The probability of the trade being profitable works out to around 88 per cent.

Traders can also consider selling strangle on the Nifty index by selling the June 1060 call and the June 1040 put. The probability of the trade being profitable works out to around 90 per cent. Traders should note that selling strangle is a comparatively risky strategy.

Traders can also consider selling a straddle on the Nifty by using the June 1040 call and the June 1040 put. The probability of the trade being profitable works out to around 81 per cent.

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