Weekly Strategy, January Week 1 | Stocks and Commodities

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December 29, 2013
Time: 6.30 pm

Weekly Strategy: Sell Auro Pharma 340 Put option and 470 Call option.

1. Auro Pharma has appreciated from the level of Rs 300 to Rs 400 in the last one month.
2. Since the rise is too huge and in very short time, the stock is expected to consolidate around this level for few more weeks.
3. But option premiums shoot up only when stocks rise like this.
4. The lot size is 2000, that translates into a contract size Rs 8 Lakh per contract.
5. So margin requirement will also be very high.
6. So only high risk takers with deep pocket (in case you need to sell more options for hedging) can consider following this this strategy.
7. Since the stock is expected to consolidate, we advice selling 340 Put option which closed at Rs 3.70 on Friday and 470 Call option which closed at Rs 2.50 on Friday.
8. Combined premium of Rs 12400 is the maximum profit in this strategy.
9. Risk will be when Auro Pharma closes below 340 or above 470 by January end.
10. Review the situation one day before result declaration day.
11. We are not giving any Nifty idea as Volatility index is very low, below 15.
12. This is not right time to sell options.