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Markets
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Commentary
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On the hedge
Write calls on Satyam and Reliance Ind
B. Venkatesh
MONDAY's trading in the derivatives segment at the NSE saw most equity calls shed value. Here are some trading strategies based on the day's trading:
Equity options: The January 260 calls on Satyam clocked the highest volumes with 718 contracts.
The immediate outlook on the stock appears negative. Dealers who share similar view on the stock can consider writing the January 260 calls, which fetched 4.5 points at the day's close. The option will expire in four days time. The time decay is, hence, high, and works in favour of the writer.
Dealers can also consider writing the February 320 calls on Satyam. The option fetched 7.35 points at the day's close. The time decay is slower than the front-month option, but the writer may profit if the spot price falls.
The January 320 calls on Reliance Industries clocked the highest volumes with 162 contracts.
The immediate outlook on Reliance is negative. Dealers who share the same view can consider writing the January 320 calls on the stock. The calls fetched 4 points at the day's close. The calls are OTM, and the entire premium consists of time value. As the option is due for expiration in 4 days, the time decay is very high, and works in favour of the writer.
Dealers can also consider writing the February 340 calls on Reliance. The calls fetched 7.1 points at the day's close. The time value is slower than the front-month contract, but dealers can close their position profitably if the stock moves down.
Index options: The January 1080 calls on the Nifty clocked the highest volumes, with 188 contracts.
The immediate outlook on the market appears negative. Dealers can consider writing the January 1080 calls, which fetched 5.85 points at the day's close. The time decay is high, and works in favour of the writer. Dealers can also consider writing the February 1080 calls, which fetched 24 points at the day's close.
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