Financial Daily from THE HINDU group of publications
Wednesday, Apr 27, 2005
Financial Daily from THE HINDU group of publications Wednesday, Apr 27, 2005 |
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Markets
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Derivatives Markets Columns - On the hedge Outlook may turn negative for Nifty B. Venkatesh
THE following strategies are based on Tuesday's trading in the derivatives segment on the NSE: Nifty: The May futures contract closed at 1,938. The outlook may turn negative if the contract trades below 1,931.50. The downside target range is 1,885-1,875 Sell May futures after the contract trades below 1,931.50. Initiate the position with protective stop at 1,962. Trail the stop to control the upside risk. The margin on the futures position is approximately 10 per cent of the contract value. The minimum order size is 100 units. Traders can alternatively construct long put calendar spread. This position can be initiated with long May 1,950 puts and short April 1,950 puts. The spread can be set up for 40 points debit. If the Nifty spot index declines to the target level of 1,900 on or before April 28, the payoff will be 19 points not including the spread cost. If the Nifty spot index declines to the target level after April 28 but before May 6, which is 7 days from the position initiation, the net payoff could be 25 points. The objective is to let the near month call expire worthless to capture the premium. i-flex Solutions: The May futures contract closed at 584. The outlook appears negative. The downside target range is 555-550. Sell May futures. Initiate the position with protective stop at 595. Trail the stop 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 300 units. The open interest position is about 20 per cent of the market-wide limit. Note that the contract size increases to 600 units from June. No alternative strategies are available, as options on the stock are not actively traded. (The opinion expressed in this column is based on technical analysis. There is risk of loss in trading)
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