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Wednesday, Mar 27, 2002

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Put spread on Satyam may be profitable

Anup Menon

PUT options gained in value during Tuesday's trading in the derivatives segment on the NSE. Most calls lost value.

The top traded options were on Satyam Computer, Reliance Industries and Infosys Technologies

  • The March 280 call on Satyam Computer was the most active among call options clocking volumes of 429 contracts. The option is OTM. It was last priced at 0.50 point. The premium consists of purely time value and works against the buyer. Investors can consider selling the option at current levels. Though the contract is highly liquid, gains from the contract will be relatively limited. The probability of the trade being profitable works out to around 76 per cent

  • A better strategy would be to use the medium maturity April 280 call on Satyam. The option clocked volumes of around 199 contracts. It was last priced at 10.50 points. It is OTM. The premium consists of time value and works against the buyer. Investors can consider selling the option at current levels. The probability of the trade being profitable works out to around 85 per cent.

  • Investors can also consider buying into the March 280 put option on Satyam Computer. It clocked volumes of 509 contracts and was the most active contract among stock options. It was last priced at 19 points. It is ITM. The option value represents the intrinsic value. Investors can consider buying into the option at current levels. The probability of the trade being profitable works out to around 53 percent.

  • Investors can consider creating a put spread using Satyam March options. Buying the 260 puts and selling the 280 puts could be a profitable strategy. The probability of the trade being profitable works out to around 83 per cent.

  • The March expiration 3900 call on Infosys Technologies can be traded profitably. It clocked volumes of 56 contracts. It was last priced at 8.5 points. The option is OTM. The premium purely consists of time value and works against the buyer. Investors can consider selling the option at current levels. The probability of the trade being profitable works out to around 77 per cent

  • Investors can consider selling the 320-strike call option with expiration in March on Reliance Industries. It clocked volumes of 83 contracts. The option is OTM. It was last priced at 0.40 points. The premium consists of purely time value and works against the buyer. The probability of the trade being profitable is around 84 per cent. But the gains will be rather limited.

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