Outstanding Strategies and their current status


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Thursday, May 31, 2007

Out look for tomorrow and next month

" Nifty is making all time high regularly after crossing previous top of 4245.30 touched on 08.02.07; while Sensex is yet to clear earlier top of 14723.88 touched on 09.02.07; June Nifty futures are at steep discount of 20 points as on 31.05.2007, which indicate short positions created as a hedge. sensex and nifty closed positive for may'07 over april'07 which is positive, in view of lot of sceptism among majority of analysts predicting a fall or bottom formation in May as it was happening earlier in this bull run. However, markets are markets and they behave as they wish to; So, in such a situation it is better we follow the trend and technicals for making money rather fixing targets."

Strategy for June'07:
One can sell a strangle of 4150 put option at Rs.60.00 and 4350 call option at Rs.60.00; One needs to keep an initial margin of
Rs.50000/- and shall receives Rs.6000/- which works out to 12% return for the month.

Assumption:
Nifty shall move between 4150 and 4350 during the month of June and if settles in that range by settlement day i.e., 28.06.2007 the entire premium received shall be the profit earned. The position will have break even at 4030 on down side and 4470 on the upside, beyond which levels the loss shall be unlimited. Hence, once has to go long or short the nifty futures on crossing the threshold levels of 4150 on the down side or 4350 on the upside.

Second Strategy:
One can constuct a Bull Spread and Bear Spread around 4300 call option and 4300 put options where profits are limited no risk of unlimited losses.

Buy 4300 PE at Rs.112.00 and sell 4150 PE at Rs.60.00 Net out flow: Rs.2600.00.. Break even level on Nifty..4248 Max Profit..Rs.4900.00

Buy 4300 CE at Rs. 90.00 and sell 4350 CE at Rs.60.00 Net out flow: Rs.1500.00.. Break even level on Nifty..4330 Max Profit..Rs.1000.00

The initial margin requirement for both positions shall be Rs.50000/-.

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