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On the hedge
Selling Satyam calls may fetch good yields
Anup Menon
TUESDAY'S trading in the option market for individual stocks on the National Stock Exchange saw most of the calls gaining in value.
The top traded equity call was on Satyam Computers. The February contract, which moves into the one month trading range shortly, also, attracted some market interest.
The near maturity contracts on Satyam Computers figure in the top five traded contracts during the day. The January 260 call remained the most actively traded with volumes of 895 contracts. The option costs around 5.20 points. It is ATM. The option value is purely time value. Investors can consider selling the contract. The probability of the trade being profitable is fairly high at 67 per cent.
The January 260 put also attracted market interest. The option is ATM. The put was last priced at 5.65 points. The probability of the put being exercised is relatively lower. Hence investors can consider writing puts as the probability of the trade being profitable is reasonably high at 64 per cent.
The February 260 call was also active during the day with close to 190 contracts being traded. The call costs around 25 points. Investors with a short time trading horizon can consider selling the option. The probability that the trade will be profitable works out to around 90 per cent.
Options on ACC were relatively active during the day.
The most actively traded contract on ACC was the call with expiration in January and a strike of 160. The option was last priced at one point. Around 66 contracts were traded. The option is OTM and hence consists purely time value. Investors can consider selling the option. The probability of the trade being profitable works out to around 72 per cent with a one day trading horizon.
The put option on ACC with expiration in January and a strike of 160 was also traded. Around 62 contracts were traded. The put costs around 2.6 points. The option is ITM. The probability that the option will be exercised looks weak. Investors can consider selling the option at current levels. However the probability that the trade will be profitable is lower as compared to writing a call at 57 per cent.
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