This month's trading idea could generate around 1.9% in 10 days or 69% annualised return and has huge probability of success considering the buoyancy in the markets and the developments happening around iron ore mining in Goa.
Even after Supreme Court's ruling the stock refuses to go below 180 which indicates stronger long term hands might be accumulating stocks as things can go only better from current situation as far as iron ore mining in India is concerned.
Sesa Goa was our investment pick as well in November when we recommended buy on the stock in the range of 165-175.
Considering one is able to sell the DEC PUT option of Sesa Goa's 170 strike price at current market premium of 0.50 he can generate following return from this trade:
Assuming 1 lot of Sesa Goa (1 lot = 1000) 170 Put option is sold at Rs 0.50
Total premium collected = 1000 * 0.50 = Rs 500
Total Transaction cost assuming Brokerage cost including STT and other taxes at Rs. 50 per lot = Rs 50
Margin money required: Rs. 23,800
Total return = 450 / 23,800 = 1.9% in 9 trading days.
Risk: If the stock goes below 170 and closes below this level then there will be a loss of Rs.1000 for every Rs.1.00 below 169.50.