Japanese Stock Market fall of more than 7% and quick appreciation of Yen vs USD on the back of fear of inflation in Japan has led to a very high conviction trade that can generate more than 1.2% return in 5 days.
The trade is to sell 1750 May call option of Maruti at current market premium of 3.2 expecting that Maruti should not cross 1750 levels in next 5 days.The recent month closing high for the stock was around 1742.
Total return from the strategy
Total premium collected = 250 * 3.20 = Rs 800
Total Transaction cost assuming Brokerage cost including STT and other taxes at Rs. 50 per lot = Rs 50
Margin money required: Rs. 61,000
Total return = 750 / 60000 = 1.25% in 5 trading days
Risk: If the stock moves above 1753 and closes above this level then there will be a loss of Rs.250 for every Rs.1 beyond 1753.
Trade went successful, as expected maruti closed well below 1750.ReplyDelete
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