Weekly Strategy, June Week #2 | Stocks and Commodities

Sponsored by

Weekly Strategy: Sell Reliance Capital 580 Put and 720 Call option.

1. Reliance Capital has shot up by more than 00% in the last two months.
2. It is up by nearly 20% in the last few days.
3. Hence premiums in the options are so high.
4. Though the rise is fantastic we feel that at current levels most of the positives are factored in.
5. So the upside from here will be limited.
6. So we suggest selling 720 call option.
7. At the same time it is likely to fall below 600.
8. So we suggest selling 580 Put option.
9. On Friday 580 Put closed at Rs 8.60 and 720 Call closed at Rs 14.10.
10. The lot size is 1000.
11. So the premium is Rs 22700.
12. Span margin required to set up this trade is about Rs 1,31,000.
13. If Reliance Capital trades in this range of 580 to 720 for the next three weeks, we get a return of more than 17%.
14. This is a very good return.
15. But this share tends to move violently during bull phase and hence you should know how to delta hedge the positions and you may need more money for delta hedging.
16. So this is a high risk - high reward trade.
17. Only those who have deep pocket and high risk appetite should enter into this trade.
18. Better avoid if you are a risk averse trader.