Action Taken
Short PUT (Sold) INFY 1800 @ 6.80 expiring on 28-MAY
Short PUT (Sold) CANBK 350 @ 5.00 expiring on 28-MAY
Bought 16 shares of ANDHRA BANK from the profit earned last month @ 76 a piece.
Long PUT (Bought) CANBK 310 @ 3.60 to hedge my position
Status (3 days to go)
INFY spot @ 2020; option @ 0.10 {1800} [ last closing @ 0.10, probability of profit: 100% ]
CANBK spot @ 335; option @ 16.50 {350} [ last closing @ 7.50, probability of profit: 0% ]
Sold @ 0.50
CANBK spot @ 335[ last closing @ 0.30, probability of profit: 5%]
Assumptions & Analysis
As discussed in last month's blog, wanted to explore growth stocks which were beaten down like TCS, Infosys. With next earnings reports 3 months far, these stocks are going to operate in narrow range. Another major advantage with IT stocks is that they are going to benefit from depreciating rupee.
Benefiting from CANBK good returns due to high volatility which is carried over to this month, selling 1 SD from mean strike at high premium of INR 5.00; also 350 is a fair value for the stock, which in worst case breached is a good point to go long on stock. I would buy 1000 shares of CANBK at settlement price. I can then short strangle (Sell 1 OTM Call and Sell 1 OTM Put) thereby collecting double the premium.
Since CANBK stock price down really close to strike price, I wanted to buy lower strike option to hedge my risk. So I wanted to Long (Buy) 320 PUT, but due to low liquidity and huge gap in ask/bid price, could not buy the option at fair price (Rs 2 - 3); Hence my idea of doing a VERTICAL PUT SPREAD strategy is not going to work even in future because of unavailability of lower strike PUTS to buy. I am planning for another strategy to hedge my risk during deep sell offs.
Anyways have placed a bid to buy 310 PUT @ 0.20 which according to me won't trigger.
Getting ready for next month
With fed set to increase interest rate which will cause dollar to gain strength thereby reducing rupee strength, all IT companies will benefit from this. Planning to sell INFY 1900 PUTS next month.
Total: 84,336 INR (Invested/locked in amount)
Max Profit:
5.00 * 1000 = 5,000 - 30 (commission) = INR 4,970
6.80 * 125 = 850 - 30 (commission) = INR 820
Unlimited on CANBK PUT 310 (This might expire worthless)
Max Loss:
Unlimited on INFY PUT
Since I bought CANBK 310 PUT, max loss is limited to Rs. 40,000
Short PUT (Sold) INFY 1800 @ 6.80 expiring on 28-MAY
Short PUT (Sold) CANBK 350 @ 5.00 expiring on 28-MAY
Bought 16 shares of ANDHRA BANK from the profit earned last month @ 76 a piece.
Long PUT (Bought) CANBK 310 @ 3.60 to hedge my position
Status (3 days to go)
INFY spot @ 2020; option @ 0.10 {1800} [ last closing @ 0.10, probability of profit: 100% ]
CANBK spot @ 335; option @ 16.50 {350} [ last closing @ 7.50, probability of profit: 0% ]
Sold @ 0.50
CANBK spot @ 335[ last closing @ 0.30, probability of profit: 5%]
Assumptions & Analysis
As discussed in last month's blog, wanted to explore growth stocks which were beaten down like TCS, Infosys. With next earnings reports 3 months far, these stocks are going to operate in narrow range. Another major advantage with IT stocks is that they are going to benefit from depreciating rupee.
Benefiting from CANBK good returns due to high volatility which is carried over to this month, selling 1 SD from mean strike at high premium of INR 5.00; also 350 is a fair value for the stock, which in worst case breached is a good point to go long on stock. I would buy 1000 shares of CANBK at settlement price. I can then short strangle (Sell 1 OTM Call and Sell 1 OTM Put) thereby collecting double the premium.
Since CANBK stock price down really close to strike price, I wanted to buy lower strike option to hedge my risk. So I wanted to Long (Buy) 320 PUT, but due to low liquidity and huge gap in ask/bid price, could not buy the option at fair price (Rs 2 - 3); Hence my idea of doing a VERTICAL PUT SPREAD strategy is not going to work even in future because of unavailability of lower strike PUTS to buy. I am planning for another strategy to hedge my risk during deep sell offs.
Anyways have placed a bid to buy 310 PUT @ 0.20 which according to me won't trigger.
Getting ready for next month
With fed set to increase interest rate which will cause dollar to gain strength thereby reducing rupee strength, all IT companies will benefit from this. Planning to sell INFY 1900 PUTS next month.
Total: 84,336 INR (Invested/locked in amount)
Max Profit:
5.00 * 1000 = 5,000 - 30 (commission) = INR 4,970
6.80 * 125 = 850 - 30 (commission) = INR 820
Unlimited on CANBK PUT 310 (This might expire worthless)
Max Loss:
Unlimited on INFY PUT
Since I bought CANBK 310 PUT, max loss is limited to Rs. 40,000
