I have summarized the reasons for the strategy below
I had decided to short 3200 Put and 3700 Call with an inflow of 80.
Reason is the ITM probability of 3200 Put and 3700 is 22 % and will give me a levarage of +- 10 %.
Lower BEP is 3120 and Upper BEP is 3780.
For Infosys last three quarters have had its own set of fireworks so people are expecting the implied volatilities and the risk premiums on the Options at least to go up which are not up so much. Somewhere there is a feeling as well as the option prices are indicating the fact that we might not see a lot of activity in terms of price action. And the same view is articulated into this strategy.
Last quarter, traders went into Infosys numbers with the options pricing a 13 percent move on either direction. Brave option writers would have made a lot of money while the straddle or strangle buyers would have lost out. The traders have learnt their lesson and this time around, the options are much cheaper. Picture this: Last time the combined premium of 3000 Call and Put was Rs 400. This time, despite the stock being at 3400, the combined premium of 3400 Call and Put is around 35 percent lower at Rs 265. So if someone has bought both the Call and Put, they just need a move of 6 percent to be profitable. What is that telling you about the numbers? The sense one gets looking at the data this time is that the stock may not collapse even if the numbers miss estimates. That’s because the market now has high hopes since NR Narayana Murthy’s return and is not willing to see Infosys trade below teens in terms of price multiple. On the other hand, if the numbers do meet expectations or deliver a marginal positive surprise, there is good chance of stock moving a move towards 3800, thereby trimming some valuation gap between itself and TCS .
INFY Change in OI Clearly shows that the downside is limited as the Puts ( 3400 - 3000 ) have been written with good confidence. On the other hand the calls have been written aggressively only at 3800.
INFY is surely going up after the results.
Looking at the Max pain chart. The Market makers would want INFY to be around 3500 or go up since the pain on the up side is more.
INFY is sure to go up after resuts
INFY 3800 Probability 13.76 %
INFY 3100 Probabaility 12.16 %
So we are within 1 Standard Diviation
I had decided to short 3200 Put and 3700 Call with an inflow of 80.
Reason is the ITM probability of 3200 Put and 3700 is 22 % and will give me a levarage of +- 10 %.
Lower BEP is 3120 and Upper BEP is 3780.
For Infosys last three quarters have had its own set of fireworks so people are expecting the implied volatilities and the risk premiums on the Options at least to go up which are not up so much. Somewhere there is a feeling as well as the option prices are indicating the fact that we might not see a lot of activity in terms of price action. And the same view is articulated into this strategy.
Last quarter, traders went into Infosys numbers with the options pricing a 13 percent move on either direction. Brave option writers would have made a lot of money while the straddle or strangle buyers would have lost out. The traders have learnt their lesson and this time around, the options are much cheaper. Picture this: Last time the combined premium of 3000 Call and Put was Rs 400. This time, despite the stock being at 3400, the combined premium of 3400 Call and Put is around 35 percent lower at Rs 265. So if someone has bought both the Call and Put, they just need a move of 6 percent to be profitable. What is that telling you about the numbers? The sense one gets looking at the data this time is that the stock may not collapse even if the numbers miss estimates. That’s because the market now has high hopes since NR Narayana Murthy’s return and is not willing to see Infosys trade below teens in terms of price multiple. On the other hand, if the numbers do meet expectations or deliver a marginal positive surprise, there is good chance of stock moving a move towards 3800, thereby trimming some valuation gap between itself and TCS .
INFY Change in OI Clearly shows that the downside is limited as the Puts ( 3400 - 3000 ) have been written with good confidence. On the other hand the calls have been written aggressively only at 3800.
INFY is surely going up after the results.
Looking at the Max pain chart. The Market makers would want INFY to be around 3500 or go up since the pain on the up side is more.
INFY is sure to go up after resuts
INFY 3800 Probability 13.76 %
INFY 3100 Probabaility 12.16 %
So we are within 1 Standard Diviation
Sir , thanks for taking the time out and explaining this in so much detail and that too so quickly !!!
:clap::clap::clap:
