Financial Daily from THE HINDU group of publications
Tuesday, Aug 17, 2004
Financial Daily from THE HINDU group of publications Tuesday, Aug 17, 2004 |
||
|
|
||
|
Markets
-
Derivatives Markets Columns - On the hedge Outlook negative for M&M, OBC B. Venkatesh
THE following strategies are based on Monday's trading in the spot and the derivatives segment on the NSE: M&M: The stock closed at Rs 426 in the spot market. The outlook appears negative. The downside price target is Rs 411. Sell August futures. The near-month contract trades at 2-point premium to the spot price. Initiate the position with spot-market-stop-loss at Rs 434. The position has to be traded with trailing stop-loss to control the upside risk. The margin on the futures position is approximately 17 per cent of the contract value. The minimum order size is 625 units. Traders can construct bear put-spread as an alternative strategy. This position can be initiated with long August 430 puts and short August 410 puts. The position can be set up for a net debit of 7 points. Note that the spread will lower initial outlay but may not help in volatility capture. The position will pay off handsomely even if the stock reaches the downside price target on option expiration. The reason is that the long put will be deep in-the-money when the stock reaches the downside target and will, hence, carry low time value. Oriental Bank: The stock closed at Rs 234 in the spot market. The outlook appears negative. The downside price target is Rs 215. Sell August futures. The near-month contract trades at one-point premium to the spot price. Initiate the position with spot-market-stop-loss at Rs 241. Cautious traders can initiate the short futures position after the stock trades below Rs 230. The initial stop-loss will still be at Rs 241. The position has to be traded with trailing stop-loss to control the upside risk. The margin on the futures position is approximately 22 per cent of the contract value. The minimum order size is 1,200 units. No alternative strategies are available, as options on the stock are not actively traded.
More Stories on : Derivatives Markets | On the hedge
Article E-Mail :: Comment :: Syndication :: Printer Friendly Page
|
Stories in this Section |
|
The Hindu Group: Home | About Us | Copyright | Archives | Contacts | Subscription Group Sites: The Hindu | Business Line | Sportstar | Frontline | The Hindu eBooks | The Hindu Images | Home |
Copyright © 2004, The
Hindu Business Line. Republication or redissemination of the contents of
this screen are expressly prohibited without the written consent of
The Hindu Business Line
|