With Infosys q1 result scheduled on 12th July, the Implied Volatility across deep in the money Puts and far out of the money calls are very high resulting in reasonable premiums for even 1700 Put or 3200 calls which are almost 30% away from current market price of 2540.
In our view 1700 Put option is highly safe considering the current valuation of the company and expectation from N. Murthy.
Traders can sell Infosys 1700 put at current premium of 6.5 thereby earning a return of almost 2.5% in 14 days.
Total Return from the trade:
Considering one is able to sell the July Put option of Infosys 1700 strike price at current market premium of 6.50 he/she can generate following return from this trade:
Assuming 1 lot of Infosys (1 lot = 125) 1700 Put option is sold at Rs 6.50
Total premium collected = 125 * 6.50 = Rs 812.50
Total Transaction cost assuming Brokerage cost including STT and other taxes at Rs. 50 per lot = Rs 50
Margin money required: Rs. 30000 (14% of total value)
Total return = 762.5 / 30000 = 2.54% in 14 calendar days.
Risk: Since the above trading strategy is naked put, if the stock goes below 1693 and closes below this level then there will be a loss of Rs.125 for every Rs.1.00 below 1693.