Weekly Strategy, May Week #5 | Stocks and Commodities

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May 25, 2014
Time: 6.15 pm

Weekly Strategy: Sell Adnai Enterprises Limited 450 Put option and 600 Call option.

1. Adani Ent. reached a high of 585 on May 16 and started correcting after that.
2. Now it is trading closer to 500.
3. Since this company is closely associated to BJP and it is a Gujarat based company, the downside will be limited.
4. So it will be safe to sell 450 Put option.
5. Since the markets are not likely to cross the high reached on May 16 in the near future, the upside in this stock also seems to be limited.
6. So selling 600 Call option also safe.
7. Adani Ent. 450 Put closed at Rs 2.50 on Friday and 600 Closed at Rs 2.05.
8. There are only four days for the expiry and hence the time value will work in favor of sellers.
9. The total premium is about Rs 4500, the span margin required is around Rs 83000.
10. This works out to be a return of about 5% in four days.
11. Considering the low risk, this return is very good.