Weekly Strategy, May Week #2 | Stocks and Commodities

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May 04, 2014
Time: 7.45 pm

Weekly Strategy: Sell Nifty December Expiry 5000 Put option and 8500 Call option.

1. Markets are likely to be highly volatile ahead of election results.
2. So it is not a good idea to sell options in the current month.
3. Despite volatility, markets are expected to move higher in the medium to long term.
4. But upside will be limited due to poor monsoon forecast.
5. There are few states ruled by BJP blocked bills like GST and now the same thing will be done by Congress ruled states if BJP comes to power.
6. So Nifty is not likely to go beyond 8500 by the end of the year.
7. At the same time down side is also limited.
8. In the last year bear run, Nifty took support at 5100.
9. So Nifty is not likely to fall below 5000 even if there disappointing poll outcome.
10. So we suggest selling both 5000 Put option and 8500 Call option expiring in December 2014.
11. Nifty 5000 Put closed around Rs 36 and 8500 Call option at Rs 41.
12. This translates into a return of more than 25% on annualised basis for the span margin of Rs 20000.
13. Considering the low risk, this return is good.