Weekly Strategy, February Week 2 | Stocks and Commodities

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February 9, 2014
Time: 10 am

Weekly Strategy: Sell Tata Motors 330 Put option and 400 Call option.

1. Tata motors facing stiff resistance at 400.
2. Even when the markets reached all time high,Tata Motors faced resistance at 400.
3. Tata Motors local sales keep disappointing.
4. Tata Motors touched a low of 332 last week when the markets fell below 6000.
5. Tomorrow, Tata Motors is declaring results which is expected to be very good due to stron JLR sales.
6. There is some expectation that during vote on account on Feb. 17, excise duty on commercial vehicles will be reduced and if that happens then it is positive for Tata Motors.
7. Next week markets are expected to be bullish.
8. So in our opinion, Tata Motors is expected to trade between 340 and 400 in the next two to three weeks.
9. So we suggest to sell 330 Put option which closed at Rs 3.70 and 400 Call option which closed at Rs 3.05.
10. Total premium is Rs 6750 which is the maximim profit if Tata Motors trades between 330 and 400.
11. This works out to be a return of 12.5% for the span margin requirement of Rs 54000.
12. Important: After the results if Tata Motors move significantly higher or lower, you need to sell extra Put option or Call option. This strategy is called Delta Hedging. Option selling is only for those who have deep pocket.