Wednesday, June 4, 2008
Amazing Opportunity with Nifty Long Term Options Contract - Update 2
Posted by Saurabh Mangal at 3:23 PMRead parent blog here
Today an opportunity in Nifty 2011 Expiry 5000 Strike Put is available. You can write it at 1021 i.e. Cash inflow is Rs. 50,000 per lot and Cash outflow (Margin) is Rs. 50,000 only. Now, I would recommend to write 10 lots of this Put option at 1021. Thus, you will get a cash inflow of Rs. 500,000 on a cash outflow of Rs. 50,000. I assume that the market would not go below 4450 so keep around 10,000 per lot for cushioning the open position if the market goes to that level. i.e. for 10 lots you have to keep Rs. 100,000. These margin can be in the form of Securities also after a haircut.
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2 comments:
how can margins be same for one lot and 10 lots?
when nomber of lot increases there will be an increase in the margins too?
kindly throw light on this.
Hi Shikha,
Sorry for replying late. The market has gone down like anything and if somebody would have worked on this strategy he/she would have got bankrupted by now. Anyways the point that i made was that for the 1st lot yuo require a margin of 30k now when you write the option you get around 30k for the option as the premium was quoting around 600 so 600*50 is what u get on one lot. This way you could have written unlimited number of options but as the market went down you would have required margin payments to keep yuor positions but you would have failed to do that and all the positions would have unwound by your broker and finally you would have ended up having crores in liability rather than the profit :).
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