Weekly Strategy, February Week 1 | Stocks and Commodities

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February 2, 1014
Time: 1 pm

Weekly Strategy: Sell Auro Pharma 530 Call option and 400 Put option.

1. Auro Pharma has been in the bullish mode for the past many months.
2. Last month, they have announces some European acqisitions.
3. After that the share price did not fall below 400.
4. Even when it came in "Ban Period" in F&O trade, it did not fall below 400.
5. So there is a strong support at 400.
6. So selling 400 Put option is safe.
7. At the same time, overall market is expected to trade with negative bias.
8. There are no positive triggers in the near future and problems of other emerging markets continue to trouble the markets all over the world.
9. So possibility of Auro Pharma rising beyond 530 is also not that easy.
10. Also implied volatility is so high due Q3 results on Thursday.
11. After the volatility is expected to fall and hence the premium on the options.
12. On Friday, 400 Put option closed at Rs 4.30 and 530 Call option closed at Rs 6.20. Total premium is Rs 21000, which is the maximum profit if Auro Pharma trades between 400 and 530.
13. The total span margin required for this is Rs 1,40,000. This strategy gives a return of 15%.
14. Caution: This is a high risk and high reward strategy. Suitable only for those who can take high risk and having sufficient extra cash to sell additional put or call option for delta hedging in cash share price moves violently.