Option Buy Recomendations

[ranj_2k]

I have a query regarding covered calls being given by ICICIdirect. If I buy Reliance May Future @ Rs.2504 and sell 2800 call at Rs.6.3. How downside protection is 0.25% only, if price unchanged then there is gain of 0.25% and maximum gain of 12.25% if prices go up of underlying. My question is whether this covered call to be hold till expiry or to be settled in between. How down side protection, maximum gain has been calculated. Whether it is 100% safe and sure. Shall be grateful if any learned member can eleborate with example.

 

[ghosh_ak34]

I have a query regarding covered calls being given by ICICIdirect. If I buy Reliance May Future @ Rs.2504 and sell 2800 call at Rs.6.3. How downside protection is 0.25% only, if price unchanged then there is gain of 0.25% and maximum gain of 12.25% if prices go up of underlying. My question is whether this covered call to be hold till expiry or to be settled in between. How down side protection, maximum gain has been calculated. Whether it is 100% safe and sure. Shall be grateful if any learned member can eleborate with example.

Dear Ranj_2k,

It seems icicidirect has assumed some support level for RIL around 2450 with 7 days to expiry or so and have done the calc. This strategy looks okay and I think one can hold it till expiry.

Regards

 

[anjubhatia]

Dear sir, i hv tisco pa may 860 at 25, now at 16, wat to do??
thanks fr ur suggestion in advance

 

[AW10]

I have a query regarding covered calls being given by ICICIdirect. If I buy Reliance May Future @ Rs.2504 and sell 2800 call at Rs.6.3. How downside protection is 0.25% only, if price unchanged then there is gain of 0.25% and maximum gain of 12.25% if prices go up of underlying. My question is whether this covered call to be hold till expiry or to be settled in between. How down side protection, maximum gain has been calculated. Whether it is 100% safe and sure. Shall be grateful if any learned member can eleborate with example.

Ranj_2K,

I have come across creating covered call using futures but seems that it is pretty close the standard Covered call strategy.

You are writing too far out-of-the-money call. As there are 10 days to expiry, the option premium will be very low. If you write 2600 call then the premium is around 40 Rs. which is appox 1.5% in next 10 days.

If you want to square-off the whole position then better to close both legs at the same time. You can do this even before expiry. At expiry, if RIL is below 2800 then this option expires worthless and you can keep the premium.

Happy trading.

 

[AW10]

Dear sir, i hv tisco pa may 860 at 25, now at 16, wat to do??
thanks fr ur suggestion in advance

For your 860 put position bought with 25Rs, the breakeven price is 835 (i.e. 860 - 25 ). That means if tisco falls below 835 by 29-may, your position will give u profit.
So depending on your view on tisco, you should decide to close the option position. Remember, option will loose everyday as it approaches towards expiry.

Happy trading

 

[ranj_2k]

Dear Mr Ghosh,
Thank you for your kind advice. I still have some doubt and needs your advice. First if I sell call option, premium received will be my total profit after deducting expiry / square off price. Thats all or is there any linkage of price with underlying on expiry, if I wait for expiry. Secondally, if I buy today reliance future at 2575 and sell 2600 call at Rs.50. I will receive premium of Rs.3750. That means if future prices even fall by Rs.50, my position is hedged. What will be happen if prices go down by more than Rs.50. Is it only bullish strategy and will not work if market mood is bearish.

 

[ghosh_ak34]

Dear sir, i hv tisco pa may 860 at 25, now at 16, wat to do??
thanks fr ur suggestion in advance

Dear Anju,

According to charts, it gives a hold call.

Regards

 

[ghosh_ak34]

Dear Mr Ghosh,
Thank you for your kind advice. I still have some doubt and needs your advice. First if I sell call option, premium received will be my total profit after deducting expiry / square off price. Thats all or is there any linkage of price with underlying on expiry, if I wait for expiry. Secondally, if I buy today reliance future at 2575 and sell 2600 call at Rs.50. I will receive premium of Rs.3750. That means if future prices even fall by Rs.50, my position is hedged. What will be happen if prices go down by more than Rs.50. Is it only bullish strategy and will not work if market mood is bearish.

Dear Raj_2k,

1st one is okay. regarding 2nd one, But write 2800 call instead of 2600 Call.And buy 2575 future. At expriry if RIL remains below 2800 or is around that for a while then you will earn profit in writting call at 2800.

Regards

 

[anjubhatia]

Dear ghosh sir,
i hv r com 580 put at 13, closing at 10, wat shud i expect frm it????? may i expect 20 rs in it, means r com at 860 in this expiry fr once???

 

[atulfpe]

i have nifty put 4800 @ 60. what is your recommand for nifty?

should i hold ?

avg it?

sell it?