Archive for the ‘Option Trades’ Category

Option Trade – Volatility expansion with bullish view

Wednesday, January 20th, 2010

Underlying: S&P CNX Nifty Index
Instrument: Option
Action: BUY
Expiry: Feb10
Option Type: Both call and put
Strike Price: 5400 call and 4900 put
Units: Buy 2 units of 5400 call  and 1 unit of 4900 put

Current Market Price: Rs. 66.50 for the call and Rs. 38.50 for the put. 
Total Investment : Rs. 8585
Target Price: Combined Premium reaches Rs. 245
Stop Loss:  Combined Premium reaches Rs. 95
Rationale: Volatility expansion with Bullish view

Analysis: -  
The market has been moving in a narrow range with the volatility remaining low for a long time.
The undercurrent is bullish and a momentum run is likely to happen anytime soon, the implied volatility of calls being much lower than that of puts.
To cash in on the above views, an additional call is added to the 5400 call and 4900 put strangle.

Happy Trading