Option Traders can sell september contract of NIFTY 5600 Call at the current market premium of Rs. 8.5. Since NIFTY has already rallied 8% in past 4-5 trading sessions on the back of short covering, it seems highly unlikely that it will cross 5600 by the end of this month expiry on 29th SEP 2011.
The return from this strategy is:
Assuming trader writes 2 lot of NIFTY (1 lot = 50 NIFTY) at Rs. 8.5
Total premium collected = 100 * 8.5 = Rs. 850
Margin money required: Rs. 28,000 (5% of total call value)
Total return = 3.0% in 20 days
Past NIFTY Trading Recommendations:
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