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On the hedge
Selling Satyam call may pay
Anup Menon
SELECT call options lost value during the day's trading in the derivatives segment on the National Stock Exchange.
Top traded options included Satyam Computer, Digital GlobalSoft and Sterlite Opticals among others.
The April 300 call on Satyam Computer was actively traded with volumes close to 360 contracts. As recommended on Wednesday, a short position in the contract could have been closed out profitably. It is OTM. It was last priced at 1.50 points. Investors can consider selling the option. The probability of the trade being profitable works out to around 93 per cent.
The April 320 call on Satyam Computer was also actively traded. It clocked volumes of around 241 contracts. It is OTM. It was last priced at 0.45 points. The premium consists of purely time value and works in favour of the seller. Investors can consider selling the option. The probability of the trade being profitable works out to around 98 per cent.
Trading in the April puts on Satyam Computer could also be a profitable strategy. Investors can consider buying the April 300 put on Satyam Computer. It is ITM. It was last priced at 27 points. The implied volatility on the option works out to be lower than the average statistical volatility, which favours the buyer. The probability of the trade being profitable works out to around 48 per cent.
Investors can also consider selling the April 240 put on Satyam Computer. It is OTM. It was last priced at 0.40 points. The premium consists of purely time value and works against the buyer. The probability of the trade being profitable works out to around 95 per cent.
Investors can also consider a put spread by buying into the April 280 put and selling the April 300 put on Satyam Computer. The probability of the trade being profitable works out to around 77 per cent.
Investors willing to take a risk can consider selling a straddle using the April 320 call and the April 240 put on Satyam Computer. The probability of the trade being profitable works out to around 88 per cent.
As has been the case over the last few trading sessions, options on Digital GlobalSoft continued to remain active. The April 630 call was actively traded clocking volumes of around 113 contracts. It was last priced at 54 points. As recommended on Wednesday, investors who had sold the option could have closed out their position profitably. It is ITM. Close to 95 per cent of the option premium consists of intrinsic value. The implied volatility on the option is lower than the average statistical volatility. Investors can consider buying into the contract. The probability of the trade being profitable works out to around 48 per cent.
Investors can also consider creating a call spread by buying into the April 660 call and selling the April 600 call on Digital GlobalSoft. The probability of the trade being profitable works out to around 87 per cent.
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