Sell Infosys 2000 PUT at 6.40

With so much noise about Infosys having delivered pathetic set of numbers, here is an opportunity to pocket quick 1.7% return in 8 trading days by being just contrarian and selling Infosys 2000 put at CMP of 6.40. 

The stock had fallen 25% in two days and is approaching very attractive valuation levels. At 2000 Infosys will be valued at 11.5 times FY-14 EPS, above that cash based buyers will get at least 45 bucks as dividend next year and 27 bucks this year which is total dividend of 72 bucks in 1 year time frame. Also 2000 should act as very strong psychological support. Apart from that with 22000 crores in cash the company is available at an enterprise valuation of just 1,05,000 crores which is almost 2 times FY-14 sales.

All these factors makes a strong case of Infosys to not go down below 2000 at least in this series.

Total Return from the trade:

Considering one is able to sell the FEB PUT option of INFY 2000 strike price at current market premium of 6.40 he can generate following return from this trade:

Assuming 1 lot of INFY (1 lot = 125) 2000 Put option is sold at Rs 6.40
Total premium collected = 125 * 6.40 = Rs 800
Total Transaction cost assuming Brokerage cost including STT and other taxes at Rs. 50 per lot = Rs 50
Margin money required: Rs. 45000
Total return = 750 / 45000 = 1.67% in 8 trading days.


Amit Agarwal said...

The premium has come down to 3 bucks in 3 hours as the stock has bounced back sharply from the lows of 2220 to 2320...

Amit Agarwal said...

The contract expires worthless. Congrats to those who took position based on this reco.


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