|
|
Markets
-
Derivatives Markets
Columns
-
On the hedge
Immediate outlook on L&T negative
B. Venkatesh
TUESDAY'S trading in the derivatives segment at the NSE saw puts on equity and index options end in the positive territory. Here are some buy/sell strategies based on the day's trading:
Equity options: The March 190 calls on L&T clocked the highest volumes on that stock, with 105 contracts.
The immediate outlook on L&T appears negative. Dealers can, hence, consider writing the March 190 calls, which fetched 5 points at the day's close. The entire premium consists of time value, as the calls are near-ATM.
The time decay is slow, and does not quite benefit the writer. Dealers should note that the option's gamma is relatively high compared with other strikes on the stock. This means that the short calls could loose more money if the stock moves up.
The March 300 calls on Reliance Industries clocked the highest volumes on the stock, with 351 contracts.
The immediate outlook on Reliance remains negative. Dealers can, therefore, consider writing the March 300 calls, which fetched 7.30 points at the day's close.
The time decay of the option is slow, and does not quite favour the writer. The implied volatility (vols) on the option is, however, higher than the stock's historical vols- a factor that is in the writer's favour.
Index options: That the spot market was bearish was clearly evident in the trading pattern in this segment- all calls on the Nifty were down and all puts were up.
The immediate outlook on the market remains negative. Dealers can consider writing the March 1200 calls, which fetched 6 points at the day's close. The calls are deep OTM and the entire premium consists of time value. The time decay is high, and favours the writer.
Dealers can generate higher profit points by writing the March 1180 Nifty calls, which fetched 9.6 points at the day's close. The time decay is higher than that of the March 1200 calls, but the implied vols is somewhat lower.
Follow-up: The outlook on Satyam remains negative. Dealers who are short on the March 300 and 320 calls can hold their positions.
The immediate outlook on Reliance Industries also appears negative. Dealers who are short on the March 300 calls can keep their positions open. Those who are short on the March 320 calls can, however, reverse their positions, as the downside from the current levels appears capped.
Those who are long on the March 140 and 150 calls on Sterlite Opticals can hold their positions, with stop-loss limits as the positive outlook on the stock could weaken.
Dealers who are short on the March 1200 calls on the Nifty can hold their position, as the outlook on the broad market remains negative.
Send this article to Friends by
E-Mail
|
Stories in this Section
UTI undertakes audit of its investments in Essar group
Mutual funds hope to gain from RIL merger -- Await Crisil rating upgradation
Bear onslaught
HLL drags Sensex down; sentiment subdued
Escorts volumes spurt
Immediate outlook on L&T negative
Search & seizure by SEBI may be tied to court approval
|
