Sell Nifty 5750 Put Option of Sep expiry at 7.00

Considering the setup of options data on Nifty where in the maximum open interest of around 10 million shares are built at 5900 strike, it seems Nifty is likely to close between 5850 to 5950 in September expiry. Put call ratio of 1.07 at 5900 strike all suggest equilibrium of perception at this level. Accommodating the margin of safety one can write 5750 put option of Nifty at current premium of 7.00 thereby generating a return of around 1.5% in 2 days. 

Total Return from the trade:

Considering one is able to sell the Sep Put option of Nifty 5750 strike price at current market premium of 7.00 he / she can generate following return from this trade:

Assuming 1 lot of Nifty (1 lot = 50) 5750 Put option is sold at Rs 7.00
Total premium collected = 50 * 7.00 = Rs 350
Total Transaction cost assuming Brokerage cost including STT and other taxes at Rs. 50 per lot = Rs 50
Margin money required: Rs. around 20,000 (7% of total value)
Total return = 300 / 20000 = 1.5% in 2 trading days.

Risk: Since the above trading strategy is naked put writing, if the Nifty closes below 5743 then there will be a loss of Rs.50 for every point below 5743.


Amit Agarwal said...

As explained above market closed precisely between 5850 to 5950 in Sep series. Congratulations to those who profited from the above trading idea.

Warm Regards



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