Weekly Strategy, April Week #3 | Stocks and Commodities

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April 13, 2014
Time: 3 pm

Weekly Strategy: Sell Axis Bank 1400 Put option and 1600 Call option.

1. Axis bank stake sale happened at around Rs 1320.
2. But now it is trading around 1500.
3. There are only 6 more trading sessions for this expiry.
4. Banking stocks are still much lower than all time high, but Nifty is hitting all time high almost everyday.
5. So Banking stocks have some more steam left.
6. So Axis Bank is not likely to go below 1400 in the next 6 trading sessions.
7. At the same time, since the stake sale took place just few days before at 1320, Axis Bank crossing 1600 in the next 6 trading sessions is also difficult.
8. So we suggest selling Axis Bank 1400 Put and 1600 Call option.
9. On Friday, Axis Bank 1400 Put closed at Rs 5.90 and 1600 Call closed at Rs 3.40.
10. The lot size is 250, so the total premium works out to be Rs 2320 which is the maximum profit, if Axis bank trades between 1400 and 1600.
11. The span margin requirement is Rs 60000, so the maximum profit will give a return of about 3.8%.
12. This is a good return, considering the low risk and only 6 trading sessions for expiry.