NIFTY Trading Strategy: November 2011

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Option Traders can Sell November contract of NIFTY 5700 Call at the current market premium of Rs. 13.

Considering the fact that NIFTY has had very sharp runup of more than 12% in a very short span of time it is highly unlikely that the index will jump another 6% in a month without spending time in consolidation. Also 5650 would be a significant resistance for the index considering the fact that the index has been making lower tops and lower bottom since 5th November 2010 and 5650 was the recent top made by the index (see the nifty ladder analysis here).
Return from this trading strategy:

Assuming 2 lot of NIFTY (1 lot = 50 NIFTY) is sold at Rs. 13
Total premium collected = 100 * 13 = Rs. 1300
Total Transaction cost assuming Brokerage cost including STT and other taxes at Rs. 50 per lot = Rs. 100
Margin money required: Rs. 39,900 (7% of total call value)
Total return = 1200 / 39,900 = 3.0 % in 25 days


Ujjwal Chakraborty said...

Dear Amit,
Your Nifty Trading strategy has been good enough. I have been following it from the time you started posting it, but I haven't implemented it as personally I go with individual stocks rather than going for Nifty. The recent pull back looks like a technical pull back rather than fundamental pull back. It has been a jump becoz of few good news which I don't think are sustainable

Amit Agarwal said...

Thanks Ujjwal,

You are very right, the recent pull back is indeed a technical pullback and might fizzle soon..

Amit Agarwal said...

The premium has come down to 1.50 level. The trade has gone successful. Let the trade expire on 24th Nov and pocket the entire premium received.

Congratulation for yet another successful strategic trade.

Amit Agarwal

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