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On the hedge
Write Digital 660 put
Anup Menon
THE spot market ended Monday on a positive note setting a bullish undertone in select call options traded in the derivatives segment on the National Stock Exchange.
Options on Satyam Computer were actively traded. The May 300 call continued to attract market interest, clocking volumes of around 95 contracts. As recommended on Friday, traders with a short position in the contract could have closed out their position profitably. It was last priced at 1.20 points. Traders can consider selling the option. The probability of the trade being profitable is relatively high at 94 per cent.
Traders can also consider selling the May 280 option on Satyam. As recommended on Friday, a short position in the contract would have returned profits to the traders. It clocked volumes of 353 contracts. It was last priced at 3.55 points. The probability of the trade being profitable works out to around 81 per cent.
Traders can also consider taking positions in put options. For instance, the May 300 put on Satyam was relatively active clocking volumes of around 65 contracts. It is ITM. It was last priced at 41.50 points. The implied volatility of the option is far higher than the median implied volatilities of a portfolio of put options on Satyam, suggesting that selling volatility on the option may be profitable. Traders can consider selling the option. The probability of the trade being profitable is around 53 per cent.
Traders can also consider buying the May 280 put on Satyam Computer. It clocked volumes of 108 contracts. It was last priced at 20.5 points. It is ITM. Close to 94 per cent of the option value is intrinsic. The probability of the trade being profitable works out to around 48 per cent.
Traders can also consider a put spread on Satyam Computer by buying into the May 260 put and selling the May 300 put. The probability of the trade being profitable works out to around 72 per cent.
Traders can also consider selling a strangle on Satyam Computer using the 300 call and the 240 put. The probability of the trade being profitable works out to around 75 per cent.
Traders can also consider trading in options on Digital Equipment, which were quite active during the day. The May 660 put was among the relatively active option clocking 40 contracts. It was last priced at 3.65 points. It is deep OTM. The premium consists of purely time value and works in favour of the seller. Traders can consider selling the option. The probability of the trade being profitable works out to around 95 per cent.
Traders can also consider selling the May 720 put on Digital Equipment. It was the most actively traded put option on the company clocking volumes of 79 contracts. It was last priced at 14.6 points. It is OTM. The probability of the trade being profitable works out to around 86 per cent.
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